Does the Adoption Process of Financial Technology in Africa Follow an Inverted U-Shaped Hypothesis? An Evaluation of Rogers Diffusion of Innovation Theory

Abstract

As the global financial system evolves towards a technology-enabled financial solution- Fintech, its implication to the future of the financial system becomes a policy concern. This study investigates non-linear/inverted U-shaped Fintech adoption process among a panel of 32 African countries spanning from 2002–2018. The study argues that Fintech adoption in Africa will continue to rise and not follow the inverted U-shaped process if sustained through greater trade openness. The dynamic system GMM techniques found a strong evidence for an inverted U- shaped adoption process for the 32 African markets and 24 frontier African markets but violated among the emerging (N = 3) and fragile (N = 5) groups. The first lag of Fintech compatibility and the contemporaneous levels of relative- advantage, complexity, trial-ability and observe-ability were its main determinants. The study concludes that Fintech will be replaced with new innovations in future irrespective of possible sustainability strategy. The need to strengthen African financial markets’ innovativeness to have a competitive edge on Fintech’s replacement is stressed.