The Dark Side of Digital Finance: Cybercrime and the Performance of Deposit Money Banks in Nigeria

Abstract

This study examines the relationship between Financial Technology (FinTech), cybercrime, and the performance of Deposit Money Banks (DMBs) in Nigeria from 2013 to 2023. The rapid adoption of digital financial services including mobile banking, online payments, Automated Teller Machines (ATMs), and Point of Sale (POS) platforms has improved financial service delivery and operational efficiency within Nigeria’s banking sector. However, the expansion of digital finance has also increased banks’ vulnerability to cybercrime and electronic fraud. Anchored on McQuade’s (2006) Technology-Enabled Crime Theory, the study adopted an ex-post facto research design and utilized secondary data obtained from the Nigeria Inter-Bank Settlement System (NIBSS) and the Nigeria Deposit Insurance Corporation (NDIC). Data were analyzed using Ordinary Least Squares (OLS) regression and Granger causality techniques. The findings reveal that cybercrime particularly ATM fraud, internet fraud, mobile banking fraud, and POS fraud exerts a significant negative effect on the Return on Assets (ROA) of Deposit Money Banks in Nigeria. Although FinTech adoption enhances banking efficiency, accessibility, and customer reach, rising cyber threats significantly undermine profitability and weaken customer confidence in digital banking systems. The study concludes that cybersecurity challenges adversely moderate the positive contributions of FinTech to bank performance. It therefore recommends stronger cybersecurity frameworks, investment in advanced fraud detection systems, improved digital risk management practices, and enhanced regulatory oversight to promote sustainable financial innovation and banking sector stability in Nigeria.