Effect of financial technology on cash holding in Nigeria

Abstract

Purpose

This paper aims to examine the effect of financial technology on cash holding in Nigeria.

Design/methodology/approach

The authors use Pesaran et al.’s (2001) autoregressive distributed lag (ARDL) bounds test approach to cointegration to estimate the long-run relationship between four direct measures of financial technology (automated teller machine [ATM], Internet banking [IB], point of sale [POS] and mobile banking [MB]) and cash holding.

Findings

The authors find the presence of long-run negative relationship between cash holding and the four direct measures of financial technology.

Practical implications

Despite the negative effect of financial technology on cash holding, the descriptive results highlight increasing trajectory in cash holding. This suggests that structural factors such as ethical climate, literacy level, household characteristics, currency denomination structures, economic uncertainty and infrastructure deficit may account for the pervasive cash transactions in Nigeria and not necessarily the unwillingness of economic agents to use digital platform for financial transactions.

Originality/value

This study contributes to existing literature by augmenting the money demand function to accommodate direct measures of financial technology in examining the effectiveness of the policy on cash holding in Nigeria.

Citation

Onah, E.O., Ujunwa, A.I., Ujunwa, A. and Ogundele, O.S. (2021), "Effect of financial technology on cash holding in Nigeria", African Journal of Economic and Management Studies, Vol. 12 No. 2, pp. 228-249. https://doi.org/10.1108/AJEMS-04-2020-0190