Impact of Banking Habits Preference on Financial Performance of Selected Banks in Nigeria

Abstract

This study investigates how banking habits preference shapes the financial performance of selected listed deposit money banks in Nigeria and whether operational efficiency amplifies this effect, against a backdrop of accelerating digitalisation, persistent financial-inclusion gaps and mounting pressure on bank margins. Anchored in financial-intermediation and behavioural-finance theories, the study employs a quantitative ex post facto panel design using annual bank-level data for 2010–2024. Financial performance is proxied by ROA, banking habits by digital transaction ratio, cash transaction share and account-usage index, and operational efficiency by cost-to-income and non-interest income ratios, with size, capital adequacy and macro controls; descriptive statistics, correlations and panel unit-root tests precede fixed-effects panel least squares baseline and moderation models. Results show that digital habits significantly raise profitability (β = 0.85; z = 4.10 & P>z = 0.000), while cash-intensive habits significantly depress it (β = -0.64; z = -3.52 & P>z = 0.001); operational efficiency strongly moderates this link, as the interaction between digital transactions and cost-to-income is positive and significant (β = 0.95; z = 2.80 & P>z = 0.007), with effects economically large and consistent with a shift from cash-based, low-usage behaviour to digital, high-engagement relationships. The study concludes that competitive advantage in Nigerian banking increasingly depends on managing the behaviour–efficiency nexus rather than scale alone. It recommends policies and strategies that incentivise sustainable digital usage, strengthen cost management, expand fee-based digital services, align fintech partnerships with core deposits and encourage further research using richer micro-data and dynamic models.