Digital Financial Services, Regulatory Technology, and Financial Crime Risk in Nigeria’s Fintech Ecosystem

This study provides a comprehensive analysis of financial crime risk dynamics in Nigeria's rapidly expanding fintech ecosystem, examining how regulatory technology adoption and accounting information systems can detect, deter, and disrupt digital financial crime. Nigeria's fintech sector, comprising mobile money operators, payment service banks, digital lenders, and cryptocurrency platforms, has grown rapidly since 2019, expanding financial access while simultaneously creating new financial crime attack surfaces, including digital fraud, money laundering through e-wallets, and tax evasion via informal digital transactions. This study employs a mixed-method design, combining analysis of Nigeria's financial crime incident database maintained by the Nigerian Financial Intelligence Unit with a survey of 180 fintech compliance officers, accountants, and regulators, supplemented by case studies of 10 major digital financial crime incidents in the Nigerian fintech ecosystem from 2019 to 2023. RegTech adoption is measured using an original index covering transaction monitoring automation, customer risk scoring, real-time suspicious activity detection, and regulatory reporting integration. Financial crime risk is operationalized through incident frequency, value of detected fraud, and regulatory action rates. Structural equation modeling and qualitative thematic analysis are applied in a sequential explanatory design. Results establish that RegTech adoption significantly reduces digital financial crime risk, with the strongest effects observed for firms combining AI-based transaction monitoring with real-time regulatory reporting integration. The study contributes an original Nigerian Fintech Financial Crime Risk-RegTech framework and recommends mandatory RegTech minimum standards for all licensed digital financial service providers in Nigeria.

Keywords: digital financial services, RegTech, financial crime, fintech, Nigeria.