INTERNATIONAL JOURNAL OF MANAGEMENT AND DEVELOPMENT STUDIES (IJMDS)

An Empirical Investigation of Digital Frauds and Financial Performance of Nigerian Deposit Money Banks

Abstract

This study empirically investigates trends in digital banking fraud and its effects on the financial performance of Nigerian Deposit Money Banks (DMBs). Using secondary panel data from twelve (12) DMBs over a fourteen-year period (2010-2023), the study employs both descriptive (tables and figures) and inferential statistics (Feasible Generalised Least Squares (FGLS) technique to address heteroskedasticity and autocorrelation. The results show that ATM/Card-related fraud (β = −1.82, p = 0.053) and e-commerce fraud (β = −1.84, p = 0.035) exert significant negative effects on bank financial performance. In contrast, internet banking fraud (β = 0.74, p = 0.527) and web-based fraud (β = 1.33, p = 0.166) have statistically insignificant effects. Trend analysis further reveals a substantial increase in digital fraud incidents, from 2014 to 2023, reflecting heightened exposure of the Nigerian banking sector to technology-driven financial crimes. The study concludes that the impact of digital banking frauds vary across banking channels due to differences in risk management and control systems. The study recommends that bank management and regulators should adopt comprehensive, technology-driven fraud prevention strategies through secure authentication, real-time monitoring, consumer protection, and artificial intelligence to effectively curb the rising incidence of digital banking fraud and its adverse impact on bank performance in Nigeria.