FinTech Innovation, Profitability, and Operational Efficiency in Banking: Evidence from Nigeria’s Digital Payment Transformation

Abstract This study investigates the relationship between FinTech innovation and banking sector performance in Nigeria, focusing on profitability and operational efficiency during 2018–2024. Using publicly available data from the Central Bank of Nigeria and bank financial statements, FinTech innovation is proxied by economy-wide digital payment indicators, while performance is measured through return on assets (ROA), return on equity (ROE), net interest margin (NIM), and cost-to-income ratios. Drawing on the Resource-Based View and Dynamic Capability Theory, the study examines how banks’ organizational dynamic capabilities and readiness mediate the performance effects of digital transformation. Empirical findings indicate that FinTech innovation significantly enhances both profitability and operational efficiency, but the magnitude of these effects depends on organizational capabilities and readiness, highlighting heterogeneous outcomes across banks. The study contributes to the literature by providing context-specific evidence from an emerging economy, advancing theory on the mechanisms linking digital financial technologies to bank performance, and offering practical guidance for managers and policymakers seeking to leverage FinTech for sustainable growth.