KASIMU ABUDU

This study investigated the effect of digital payment systems on the profitability of deposit money banks in Nigeria using quarterly time-series data from 2012Q1 to 2022Q4. Five electronic payment channels such as Automated Teller Machines (ATM), Point of Sale (POS), Web payment platforms, Mobile payment systems, and NIBSS Electronic Fund Transfer (NEFT) were examined. The Fully Modified Ordinary Least Squares (FMOLS) technique was employed to estimate the long-run relationship between digital payment adoption and bank profitability. The empirical findings revealed that ATM and Web payment transaction values exerted a statistically significant and positive influence on bank profitability. In contrast, POS, Mobile payment, and NEFT transaction values showed no significant long-run effect on profitability during the study period. These results suggest that while some digital channels have matured into profit generating platforms, others remain operationally essential but financially under-optimized. Based on the findings, the study recommends that banks strengthen and expand ATM and Internet banking infrastructure to sustain profitable digital operations. In addition, banks should re-evaluate fee structures, improve service reliability, and increase merchant and customer adoption of POS and mobile payment platforms to unlock profitability potential. Collaboration with regulators and payment stakeholders is also essential to enhance NEFT efficiency, reduce operational costs, and support wider digital financial ecosystem stability. Overall, a balanced multi-channel digital strategy is crucial for long-term profitability and competitive resilience in Nigeria’s evolving financial technology landscape