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Influence of Cashless Policy on Financial Performance of Deposit Money Banks in Nigeria: The Mediating Role of Transaction Volume and the Moderating Role of Cybersecurity Controls

Abstract

The cashless policy introduced by the Central Bank of Nigeria (CBN) represents a major financial sector reform aimed at promoting electronic payment systems, reducing dependence on physical cash transactions, enhancing financial inclusion, improving operational efficiency, and strengthening the stability of the Nigerian financial system. Through the promotion of digital payment channels such as Automated Teller Machines (ATMs), Point-of-Sale (POS) terminals, mobile banking, internet banking, electronic fund transfers, and the Nigeria Inter-Bank Settlement System (NIBSS), the policy seeks to modernize banking operations and improve the efficiency of financial intermediation. While the implementation of the cashless policy has significantly transformed banking operations in Nigeria, concerns remain regarding its actual impact on the financial performance of Deposit Money Banks (DMBs). Although increased adoption of electronic payment platforms has generated new sources of revenue and expanded banking services, challenges such as cybersecurity threats, electronic fraud, system failures, and operational risks continue to affect banks' ability to maximize the benefits of the policy. Against this backdrop, this study investigates the influence of the cashless policy on the financial performance of Deposit Money Banks in Nigeria, while examining the mediating role of transaction volume and the moderating role of cybersecurity controls.The study is anchored on the Technology Acceptance Model (TAM), Innovation Diffusion Theory (IDT), and Resource-Based View (RBV). The Technology Acceptance Model explains how the acceptance and use of digital payment technologies influence organizational performance, while Innovation Diffusion Theory describes the process through which technological innovations are adopted within the banking industry. The Resource-Based View emphasizes that valuable organizational resources, including technological infrastructure and cybersecurity capabilities, provide competitive advantages that enhance financial performance. Guided by these theoretical perspectives, the study seeks to determine the direct influence of the cashless policy on the financial performance of Deposit Money Banks, assess whether transaction volume mediates this relationship, and examine whether cybersecurity controls moderate the relationship between cashless policy implementation and financial performance.A quantitative research design will be adopted using a structured questionnaire administered to bank managers, accountants, operations managers, electronic banking officers, information technology specialists, risk managers, internal auditors, and other relevant personnel from selected Deposit Money Banks operating in Nigeria. A stratified random sampling technique will be employed to ensure adequate representation of banks across different ownership structures and geographical locations. Primary data obtained from respondents will be complemented, where appropriate, with secondary financial information extracted from the annual reports of selected banks. Data analysis will involve descriptive statistics to summarize respondents' characteristics and perceptions, while Structural Equation Modeling (SEM) will be employed to examine the direct, mediating, and moderating relationships among the study variables. The measurement model will be validated through reliability and validity tests, including Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA). Diagnostic tests will also be conducted to ensure the robustness of the empirical model.The study anticipates that the cashless policy will have a significant positive influence on the financial performance of Deposit Money Banks through increased operational efficiency, expansion of electronic banking services, reduction in cash handling costs, improved service delivery, enhanced customer convenience, and increased fee-based income generated from digital transactions. It is further expected that transaction volume will mediate this relationship by serving as the operational mechanism through which the benefits of the cashless policy are translated into improved financial performance. Increased usage of electronic payment platforms is expected to generate higher transaction volumes, leading to increased service charges, improved customer retention, greater market penetration, and enhanced profitability. Consequently, transaction volume is anticipated to partially mediate the relationship between cashless policy implementation and banks' financial performance.Furthermore, cybersecurity controls are expected to moderate the relationship between the cashless policy and financial performance. Deposit Money Banks with robust cybersecurity frameworks—including advanced encryption technologies, multi-factor authentication, intrusion detection systems, continuous security monitoring, effective cyber risk management policies, employee cybersecurity awareness programmes, and regular system audits—are expected to derive greater financial benefits from cashless banking initiatives. Strong cybersecurity controls are likely to minimize electronic fraud, reduce financial losses arising from cyberattacks, enhance customer confidence in digital banking platforms, and improve the reliability and availability of electronic payment systems. Conversely, banks with weak cybersecurity controls may experience increased exposure to cyber threats, operational disruptions, reputational damage, regulatory sanctions, and financial losses, thereby weakening the positive effect of the cashless policy on financial performanThis study is expected to make significant theoretical and empirical contributions to the literature on banking, accounting, financial technology, and digital financial services by integrating transaction volume as a mediating variable and cybersecurity controls as a moderating variable into the relationship between cashless policy implementation and bank financial performance. Unlike previous studies that primarily focused on the direct impact of cashless banking on profitability or operational efficiency, this research provides a more comprehensive framework by examining the operational mechanism through which digital payment adoption influences financial outcomes and the organizational conditions that strengthen or weaken these effects. The findings will provide valuable insights for the Central Bank of Nigeria (CBN), Deposit Money Banks, the Nigeria Inter-Bank Settlement System (NIBSS), financial regulators, cybersecurity professionals, investors, policymakers, and banking executives on the importance of strengthening cybersecurity infrastructure while promoting greater utilization of digital payment systems. The study will also offer evidence-based recommendations for enhancing electronic payment security, improving digital banking operations, increasing customer trust, and maximizing the financial benefits of Nigeria's cashless policy to support a resilient, inclusive, and technologically driven banking sector.

Keywords: Cashless policy, financial performance, Deposit Money Banks, transaction volume, cybersecurity controls, electronic banking, digital payments, mediation, moderation, Structural Equation Modeling (SEM).