Project – Influence of Financial Technology (FinTech) Adoption on the Financial Management Practices of Small and Medium-Sized Enterprises in Bariga

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Small and Medium-sized Enterprises (SMEs) constitute an important component of economic activity because they contribute to employment creation, income generation, innovation, entrepreneurship and the distribution of goods and services. In developing economies such as Nigeria, SMEs provide opportunities for individuals to establish businesses with relatively modest capital and contribute to local economic development. Their sustainability, however, depends substantially on the ability of owners and managers to make appropriate financial decisions, maintain adequate records, manage cash flows, control costs, prepare budgets, monitor receivables and payables, and allocate available financial resources efficiently.

Financial management is consequently a central aspect of SME survival and growth. Financial management practices involve the planning, acquisition, utilisation, monitoring and control of financial resources in order to achieve organisational objectives. For SMEs, these practices commonly include cash management, budgeting, financial record keeping, working-capital management, investment decisions, financing decisions, cost control and financial reporting. Effective financial management allows business owners to understand the financial position of their enterprises and make informed decisions concerning expenditure, pricing, borrowing, investment and expansion.

The importance of financial management is particularly evident in small businesses because SMEs often operate with limited financial resources and may have less access to formal sources of finance than larger firms. A small error in cash-flow management, excessive borrowing, inadequate record keeping or poor control of expenses can therefore have significant consequences for the continuity of a small enterprise. Recent Nigerian evidence indicates that SMEs continue to experience difficulties in areas such as cash projections, budgeting and receivables control, with such weaknesses contributing to liquidity and decision-making problems (Sule, Joseph, & Babayaro, 2026).

At the same time, the financial environment in which SMEs operate has undergone considerable technological transformation. Financial Technology, commonly referred to as FinTech, involves the application of technology to the provision, delivery and management of financial services. FinTech encompasses a broad range of services, including digital payments, mobile banking, electronic transfers, digital lending, online financial services, payment gateways, digital wallets, point-of-sale (POS) systems, electronic invoicing and technology-enabled financial management systems.

The rapid expansion of FinTech has changed the way businesses receive payments, make payments, access finance and monitor financial transactions. In Nigeria, this transformation has been supported by the development of digital payment infrastructure, regulatory initiatives and growing consumer acceptance of electronic financial services. The Central Bank of Nigeria (CBN) identifies a sound and efficient payment system as an important foundation for economic activity and has implemented various initiatives aimed at strengthening electronic payments, mobile payments and other digital financial services.

The scale of Nigeria’s transition towards electronic payments demonstrates the growing relevance of FinTech to business operations. According to the Central Bank of Nigeria (2024), the volume of NIBSS Instant Payment transactions increased to more than 5.6 billion in the first half of 2024, while POS transactions reached more than 6.3 billion transactions during the same period. Mobile-payment transactions also exceeded 3.4 billion during the first half of 2024. These developments indicate that digital financial transactions have become an increasingly important component of Nigeria’s financial ecosystem.

The transformation has continued beyond conventional banking services. Nigeria’s FinTech ecosystem includes payment-service providers, mobile-money operators, switching companies, digital lenders and other technology-enabled financial-service providers. The CBN’s current register of licensed payment-service providers includes organisations operating in payment schemes, mobile money, switching and processing, demonstrating the institutionalisation of FinTech within Nigeria’s financial system.

For SMEs, the significance of FinTech extends beyond making and receiving payments. Digital financial technologies can potentially improve the way businesses manage financial information and control their resources. For example, digital payment platforms can create electronic transaction records that help business owners monitor sales and cash inflows. Mobile banking applications can allow owners to transfer funds, check balances and monitor transactions remotely. Digital accounting and cloud-based financial systems can facilitate bookkeeping, financial reporting and monitoring of business performance. Digital lending platforms can potentially provide alternative sources of finance for businesses that experience difficulty obtaining conventional bank credit.

Consequently, FinTech adoption can potentially transform several dimensions of SME financial management. A business owner who previously relied heavily on handwritten records may use digital payment records and accounting applications to monitor daily transactions. Similarly, a business that previously depended on cash transactions can use POS terminals, mobile transfers or payment links to receive payments electronically. The availability of digital transaction histories may make it easier to reconcile sales, monitor cash flows and identify discrepancies.

The relationship between FinTech and SME financial activities has received increasing scholarly attention in Nigeria. Kyari, Gulani and Waziri (2024) investigated FinTech as an alternative source of financing for Nigerian SMEs and found that factors associated with the external environment, innovation characteristics and staff or individual characteristics were positively related to SMEs’ decisions to adopt FinTech for alternative financing. The authors concluded that FinTech was accessible, observable and relatively cost-effective for SMEs in Nigeria.

FinTech can also influence the financial inclusion of SMEs. Digital financial services can reduce some of the geographical and transactional barriers associated with conventional banking. Small-business owners can receive payments, transfer funds and potentially access financial services without visiting a physical bank branch. The CBN has recognised digital payment channels as an important instrument for expanding financial inclusion and noted that mobile technology and interoperable payment platforms have enabled millions of Nigerians to make payments, save and access credit.

The relevance of FinTech to financial management is also associated with transaction efficiency. Traditional cash-based transactions require physical handling, counting, storage and reconciliation. Digital transactions, by contrast, can generate electronic records that may simplify transaction monitoring. The CBN (2024) reported substantial growth in electronic payments in Nigeria, reflecting the increasing preference for non-cash channels. For SMEs, this shift may provide opportunities for improved financial transparency and control.

Another potential benefit is improved financial record keeping. Financial management requires reliable information concerning revenues, expenses, assets, liabilities and cash flows. Where businesses maintain incomplete or inaccurate records, owners may be unable to determine the true financial position of the enterprise. FinTech-based accounting and transaction systems can potentially automate portions of the recording process and reduce reliance on manual bookkeeping. Recent Nigerian research by Obasi, Oledika and Osayande (2026) specifically found that FinTech adoption involving digital payment systems and cloud-based accounting software can transform accounting practices by improving efficiency, accuracy and transparency among Nigerian SMEs.

Information and Communication Technology more broadly has also been associated with financial-management effectiveness among Nigerian SMEs. Bamigboye et al. (2025) examined the relationship between ICT and financial management among Nigerian SMEs, demonstrating the growing importance of technology in the way small businesses manage financial activities. Although ICT is broader than FinTech, the evidence provides an important foundation for understanding how technology can influence financial processes within small enterprises.

FinTech can also influence cash-flow management. Cash flow represents the movement of money into and out of a business and is particularly important for SMEs because they often operate with relatively limited liquidity reserves. Digital payments can accelerate the receipt of customer payments and provide electronic evidence of transactions. Mobile banking can also allow business owners to transfer money to suppliers and monitor account balances without significant delay. Consequently, FinTech may potentially improve the visibility and control of business cash flows.

Similarly, digital financial technologies can support budgeting and expenditure control. Where financial applications allow owners to categorise expenses, monitor transaction histories and generate reports, business managers may be better positioned to compare actual expenditure with planned expenditure. The value of such systems depends, however, on the quality of information entered, the owner’s financial literacy and the extent to which the technology is incorporated into regular management practices.

FinTech may further influence access to business finance. Traditional SMEs may encounter difficulties accessing bank loans because of collateral requirements, lengthy procedures, limited credit histories or information asymmetries. Digital financial services can potentially offer alternative mechanisms for evaluating borrowers and delivering credit. Kyari et al. (2024) found that FinTech adoption had relevance for SMEs’ use of alternative financing in Nigeria, indicating that technological financial services can expand the range of financing options available to small businesses.

More recent Nigerian evidence also points to the connection between digital financial services and SME financing. Keremah (2026), examining Nigerian SMEs over the period 2009–2024, reported that mobile-payment adoption had a positive relationship with SME financing and suggested that digital payment systems can facilitate financial operations and money management within SMEs. This suggests that FinTech may influence financial management not only through payment processing but also through broader access to financial resources.

However, FinTech adoption is not automatically beneficial. The effectiveness of digital financial technologies depends on infrastructure, digital literacy, financial literacy, trust, security, regulatory conditions and the characteristics of individual businesses. Okoh et al. (2025), in a study of small enterprises across Southwestern Nigeria, identified regulatory barriers, technological infrastructure and financial literacy as important issues affecting FinTech adoption. Their study covered small enterprises in Lagos and other Southwestern states, demonstrating that the adoption of FinTech is influenced by contextual conditions rather than technology availability alone.

Cybersecurity and fraud also represent important challenges. As businesses increasingly conduct transactions digitally, they become exposed to risks associated with fraudulent transfers, phishing, unauthorised access, compromised passwords and other forms of electronic fraud. The CBN has consequently emphasised the importance of strong internal controls, transparency, accountability and effective supervision of FinTech operators. For SMEs, losses arising from digital fraud could undermine the financial benefits that FinTech is expected to provide.

Transaction charges may also affect the economic value of FinTech adoption. Although digital payments may reduce some transaction costs associated with cash handling, businesses may incur charges for POS transactions, transfers, payment gateways, digital lending or other services. An SME’s decision to adopt a particular FinTech service may therefore depend on whether the perceived benefits outweigh the associated financial and operational costs.

Digital financial literacy represents another important consideration. A business owner may have access to mobile banking, digital payment applications or accounting software but lack the knowledge required to use the tools effectively. Financial literacy influences the ability of entrepreneurs to interpret financial information, compare financial products, understand borrowing costs and make informed financial decisions. Consequently, FinTech adoption without adequate financial and digital literacy may not automatically result in improved financial management.

The geographical setting of the present study is Bariga, an urban community in Lagos State with a substantial concentration of commercial and entrepreneurial activities. Small businesses operating in such an environment participate in daily transactions involving customers, suppliers, employees, financial institutions and digital-payment providers. The increasing use of electronic payments and mobile financial services therefore makes FinTech particularly relevant to the financial activities of SMEs in the area.

SMEs in Bariga operate within an environment where consumers increasingly expect convenient payment options. Customers may prefer bank transfers, POS payments, mobile wallets or other digital payment methods instead of cash. As a result, business owners who adopt FinTech can potentially broaden their payment options and improve transaction convenience. At the same time, businesses that fail to adapt to changing payment preferences may face difficulties serving customers who prefer cashless transactions.

The relevance of FinTech to SMEs in Bariga is also connected to the broader digital transformation of Lagos’s commercial environment. As digital payments become increasingly normalised, business owners may increasingly use technology for sales transactions, supplier payments, salary payments, business transfers, savings and access to credit. This creates a need to understand whether these technologies are merely changing the method through which transactions occur or are actually improving the underlying financial-management practices of SMEs.

Financial-management practices remain critical because technology alone cannot guarantee financial discipline. An entrepreneur may receive payments digitally but still fail to separate personal and business funds. Similarly, a business may use POS terminals and mobile transfers without maintaining proper budgets, financial statements or expense controls. Therefore, the relevant question is not simply whether SMEs have adopted FinTech but whether adoption has influenced how they manage their finances.

The present study consequently conceptualises FinTech adoption in terms of the use of digital payment systems, mobile banking and digital financial services, digital lending/financing platforms, and digital accounting or financial-management tools. Financial management practices are considered in terms of cash management, budgeting, financial record keeping, expenditure control, working-capital management and financial decision-making.

The need for this study is strengthened by the fact that recent Nigerian research has established positive associations between FinTech and areas such as financing, accounting and business performance, but there remains a need for location-specific evidence concerning the effect of FinTech on the day-to-day financial-management practices of SMEs. For example, Obasi et al. (2026) examined FinTech and accounting practices nationally, while Kyari et al. (2024) focused on FinTech as an alternative financing mechanism. These studies provide useful evidence but do not specifically explain how FinTech adoption affects financial-management practices among SMEs operating in Bariga.

This gap is important because local business environments can influence technology adoption and its outcomes. SMEs in Bariga may have different levels of access to digital infrastructure, financial institutions, FinTech providers, digital skills and financial knowledge. Their experiences may therefore differ from those of SMEs operating in other parts of Nigeria.

The study is thus anchored on the proposition that FinTech adoption can potentially improve SME financial management by making transactions more efficient, improving financial records, facilitating access to financial services and strengthening cash-flow monitoring. However, these benefits may be constrained by financial literacy, infrastructure, transaction costs, security concerns and other barriers. The actual effect therefore requires empirical investigation rather than assumption.

Against this background, this study examines the Influence of Financial Technology (FinTech) Adoption on the Financial Management Practices of Small and Medium-Sized Enterprises in Bariga. The study seeks to provide empirical evidence concerning whether the adoption and use of FinTech has improved the ways in which SMEs in Bariga manage their financial resources.

1.2 Statement of the Problem

Small and Medium-sized Enterprises play an important role in economic activity, but many SMEs experience financial-management challenges that can threaten their survival and growth. Poor cash management, inadequate record keeping, weak budgeting practices, ineffective expense control and difficulties in accessing finance can undermine the ability of small businesses to make sound financial decisions. Recent evidence from Nigeria indicates that SMEs experience significant challenges in areas such as cash projections, budgeting and receivables control, which may contribute to liquidity and operational problems (Sule et al., 2026).

At the same time, the Nigerian financial environment is rapidly becoming digital. The CBN (2024) reported substantial increases in NIBSS Instant Payments, POS transactions and mobile payments, demonstrating the growing importance of electronic financial transactions in the Nigerian economy. This transformation presents SMEs with opportunities to improve their financial operations through digital payments, mobile banking, electronic transaction records, digital lending and technology-enabled accounting.

The problem, however, is that the increasing availability of FinTech does not necessarily mean that SMEs are using it effectively for financial management. Some business owners may adopt digital payment platforms simply because customers demand them, without integrating the resulting financial information into budgeting, accounting, cash-flow monitoring or decision-making. Consequently, the mere presence of FinTech may not automatically produce improved financial-management practices.

Another problem concerns inadequate financial records. Some SMEs continue to depend on informal or manual record-keeping systems, making it difficult to determine accurate revenue, expenditure, profit and cash-flow positions. Although digital financial systems can potentially improve financial-record keeping, their effectiveness depends on whether business owners actually use them systematically. Obasi et al. (2026) found that FinTech tools such as digital payment systems and cloud-based accounting software can improve efficiency, accuracy and transparency in accounting practices, suggesting that technology can potentially address some of the weaknesses associated with conventional financial management.

The financing problem is also important. SMEs frequently require external finance to purchase inventory, acquire equipment, expand operations and manage working capital. Conventional financing may be difficult to obtain because of collateral requirements, documentation, high transaction costs and other barriers. Kyari et al. (2024) found that FinTech can serve as an alternative financing mechanism for Nigerian SMEs and reported that several characteristics of FinTech were positively associated with SMEs’ decisions to adopt it for financing. However, access to digital finance does not necessarily guarantee responsible financial management. Easy access to credit could potentially support business growth, but inappropriate borrowing could also increase financial obligations.

There are also concerns relating to financial literacy and technological competence. Okoh et al. (2025) found that financial literacy, technological infrastructure and regulatory issues constitute important factors affecting FinTech adoption among small enterprises in Southwestern Nigeria. This means that some SMEs may have access to FinTech platforms but may not possess sufficient knowledge to use them effectively or safely. Inadequate understanding of digital financial products could affect the quality of financial decisions made by business owners.

Security and fraud constitute another important problem. The migration from cash-based transactions to digital financial systems creates exposure to electronic fraud, unauthorised transactions and cybersecurity threats. The CBN has recognised the importance of strong controls, transparency and accountability in the FinTech ecosystem. SMEs that experience financial losses through digital fraud may consequently suffer financial setbacks, undermining the anticipated benefits of technology adoption.

There is also the issue of transaction costs and service reliability. Digital financial services may involve transfer charges, POS charges, subscription fees or other costs. Network failures and service interruptions may also disrupt business transactions. For small businesses operating on narrow profit margins, these costs and disruptions may influence the extent to which FinTech contributes positively to financial management.

Furthermore, the increasing use of FinTech raises questions about whether digital transactions actually improve financial discipline. A business owner may receive payments through multiple platforms without reconciling the transactions into a single financial record. Multiple accounts and digital wallets may make it difficult to determine the total amount of business income if records are not properly integrated. Therefore, technology can potentially increase the volume of financial information available to an entrepreneur without necessarily improving the quality of financial management.

Another important problem is the separation of personal and business finances. Many small-business owners operate enterprises in which personal and business funds are not adequately separated. FinTech applications can make transactions faster and easier, but unless business owners establish appropriate financial controls, digital access may not resolve the underlying problem. Effective financial management therefore requires not only technological adoption but also appropriate managerial practices.

The situation is particularly relevant to SMEs in Bariga because businesses operate within an increasingly cashless commercial environment. Customers may use bank transfers, POS terminals and other electronic payment methods to purchase goods and services. As electronic payments become more common, business owners are increasingly required to manage digital transaction records, reconcile payments and monitor electronic cash flows. However, there is limited empirical evidence establishing whether this technological transition has resulted in improved financial-management practices among SMEs specifically operating in Bariga.

Existing Nigerian studies provide evidence concerning FinTech adoption, financing, accounting and business performance, but important gaps remain. Kyari et al. (2024) investigated FinTech as an alternative source of SME finance, while Obasi et al. (2026) examined FinTech adoption and accounting practices. Ojima (2026) also reported a positive relationship between FinTech investment and SME performance using panel data covering Nigerian SMEs between 2015 and 2024. Nevertheless, these studies do not specifically establish how FinTech adoption influences the broader financial-management practices of SMEs in Bariga.

The absence of location-specific evidence creates a practical problem for SME owners, business-support organisations, financial institutions and policymakers. Without evidence from the local business environment, it is difficult to determine whether SMEs in Bariga are obtaining the anticipated financial-management benefits from FinTech adoption or whether challenges such as financial literacy, fraud, transaction costs and inadequate integration of digital records are limiting those benefits.

The problem is therefore not simply whether FinTech is available to SMEs but whether its adoption has changed the way SMEs manage their financial resources. It is necessary to determine whether digital payment systems improve cash management, whether digital accounting tools improve financial record keeping, whether digital financial services support budgeting and expenditure control, and whether digital financing platforms influence financial decision-making.

There is consequently a need for an empirical study that examines the influence of FinTech adoption on the financial-management practices of SMEs in Bariga. Such evidence can help establish whether the technological transformation occurring within Nigeria’s financial system is translating into improved financial-management practices at the level of individual small and medium-sized businesses.

It is against this background that the present study investigates the Influence of Financial Technology (FinTech) Adoption on the Financial Management Practices of Small and Medium-Sized Enterprises in Bariga. The study seeks to provide evidence on the extent to which FinTech adoption influences financial record keeping, cash management, budgeting, expenditure control, working-capital management and financial decision-making among SMEs in the study area.

1.3 Aim of the Study

The main aim of this study is to examine the influence of Financial Technology (FinTech) adoption on the financial management practices of Small and Medium-sized Enterprises in Bariga.

The specific objectives are to:

1. examine the extent of FinTech adoption among Small and Medium-sized Enterprises in Bariga;
2. determine the extent to which digital payment systems influence the cash-management practices of SMEs in Bariga;
3. examine the influence of mobile banking and digital financial services on the financial record-keeping practices of SMEs in Bariga;
4. determine the influence of digital lending and financing platforms on the financial decision-making practices of SMEs in Bariga.

1.4 Research Questions

The following research questions will guide the study:

1. What is the extent of FinTech adoption among Small and Medium-sized Enterprises in Bariga?
2. To what extent do digital payment systems influence the cash-management practices of SMEs in Bariga?
3. To what extent do mobile banking and digital financial services influence the financial record-keeping practices of SMEs in Bariga?
4. To what extent do digital lending and financing platforms influence the financial decision-making practices of SMEs in Bariga?

1.5 Research Hypothesis

The following null hypothesis will be tested at 0.05 level of significance:

H₀: FinTech adoption has no significant influence on the financial-management practices of Small and Medium-sized Enterprises in Bariga.

1.6 Significance of the Study

The study will be significant to SME owners and managers because it will provide evidence concerning the usefulness of FinTech for managing business finances. The findings may help business owners identify the financial-management areas in which digital technologies can improve efficiency, accuracy, transparency and control.

The study will be useful to financial institutions and FinTech providers. The findings may enable banks and FinTech companies to understand the specific financial-management needs and challenges of SMEs and design products that are affordable, accessible, secure and appropriate for small-business users.

The study will benefit government agencies and policymakers, particularly those responsible for SME development, financial inclusion and digital economic development. Evidence from the study may support policies aimed at improving digital financial infrastructure, financial literacy, cybersecurity and access to appropriate financial technologies.

The study will also be valuable to SME-support organisations and business-development agencies. Such organisations may use the findings to design training programmes on digital payments, bookkeeping, cash-flow management, budgeting, digital lending and financial literacy.

The study will benefit accountants and financial consultants who advise SMEs. The findings may help practitioners understand how FinTech can be integrated with conventional financial-management practices to improve financial reporting, budgeting, cash-flow monitoring and financial decision-making.

The study will also be useful to researchers and students in accounting, finance, business administration, entrepreneurship and related disciplines. It will contribute to the growing Nigerian literature on FinTech and SME financial management and may provide a basis for further research in other locations and sectors.

1.7 Scope of the Study

The study focuses on the influence of Financial Technology (FinTech) adoption on the financial-management practices of Small and Medium-sized Enterprises in Bariga.

The independent variable is FinTech adoption, operationalised through the use of digital payment systems, mobile banking and digital financial services, digital lending/financing platforms, and digital accounting or financial-management tools.

The dependent variable is financial-management practices, operationalised through cash management, financial record keeping, budgeting, expenditure control, working-capital management and financial decision-making.

Geographically, the study is restricted to SMEs operating within Bariga, Lagos State, Nigeria. The study will focus on owners, managers or personnel responsible for financial decisions within the selected SMEs.

1.8 Operational Definition of Terms

Financial Technology (FinTech): The application of technology to the delivery, management and improvement of financial services and transactions.

FinTech Adoption: The extent to which an SME uses technology-enabled financial products and services in conducting and managing its business financial activities.

Digital Payment Systems: Electronic mechanisms through which businesses receive or make payments, including bank transfers, POS transactions, payment links, mobile payments and digital wallets.

Mobile Banking: The use of mobile devices and applications to perform banking and financial transactions such as transfers, balance enquiries, bill payments and account management.

Digital Lending: Technology-enabled provision of credit or financing through online or mobile platforms.

Digital Accounting Tools: Software and technology applications used for bookkeeping, transaction recording, financial reporting, invoicing, expense tracking and other accounting functions.

Financial Management Practices: The processes through which SMEs plan, record, utilise, monitor and control their financial resources.

Cash Management: The process of monitoring, controlling and managing cash inflows and outflows to ensure adequate liquidity.

Financial Record Keeping: The systematic recording and maintenance of information concerning business income, expenditure, assets, liabilities and other financial transactions.

Budgeting: The process of preparing financial plans that estimate expected income and expenditure for a specified period.

Expenditure Control: The processes used by an enterprise to monitor and regulate spending in order to prevent unnecessary or excessive expenditure.

Working-Capital Management: The management of short-term assets and liabilities to maintain adequate liquidity and support the continuous operation of an enterprise.

Financial Decision-Making: The process through which SME owners or managers make decisions concerning financing, investment, expenditure, savings, pricing and allocation of financial resources.

Small and Medium-sized Enterprises (SMEs): Business enterprises that fall within the applicable Nigerian classification of small and medium-sized businesses based on criteria such as number of employees and/or financial characteristics.

Bariga: The study location in Lagos State within which the selected SMEs covered by this research operate.

Project – Influence of Financial Technology (FinTech) Adoption on the Financial Management Practices of Small and Medium-Sized Enterprises in Bariga