The impact of digital payment systems on informal economies: An evaluation in Lagos State
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Background of the study
Digital payment systems have revolutionized economic transactions, particularly within informal economies where traditional banking services are limited. In Lagos State, mobile money platforms, online banking, and digital wallets have facilitated smoother, faster, and more secure financial transactions among small-scale traders and informal business operators (Oluwaseun, 2023). These systems have not only enhanced financial inclusion but also stimulated economic activities by providing access to credit and reducing transaction costs. Digital payments enable informal entrepreneurs to expand their customer base, engage in e-commerce, and integrate into broader economic networks. However, the adoption of these technologies faces challenges such as digital literacy gaps, infrastructural limitations, and security concerns. The transformative potential of digital payment systems in boosting informal economies is significant, yet their impact on economic empowerment and social mobility remains underexplored. This study evaluates how digital payment systems affect the informal economy in Lagos State, analyzing their role in fostering economic growth, reducing inequality, and promoting financial inclusion (Okeke, 2024).
Statement of the problem
Despite the widespread introduction of digital payment systems in Lagos State, many informal sector participants remain excluded due to low digital literacy and limited infrastructure. These challenges restrict the full economic potential of digital transactions, leading to persistent financial disparities and reduced access to broader markets. Without addressing these issues, the benefits of digital payments may not reach all segments of the informal economy, undermining efforts to promote inclusive economic growth (Oluwaseun, 2023).
Objectives of the Study
To assess the impact of digital payment systems on the informal economy in Lagos State.
To identify barriers to the effective adoption of digital payments.
To recommend strategies for enhancing financial inclusion in the informal sector.
Research questions
How do digital payment systems affect informal economic transactions in Lagos State?
What challenges hinder the widespread adoption of these systems?
What measures can promote digital financial inclusion among informal sector participants?
Significance of the study
This study is significant as it evaluates the transformative potential of digital payment systems in promoting economic inclusion within informal economies. The findings will assist policymakers and financial institutions in designing initiatives to overcome adoption barriers and enhance financial empowerment in Lagos State (Oluwaseun, 2023).
Scope and limitations of the study
This study is limited to digital payment systems and their impact on informal economies in Lagos State. It does not consider formal banking sectors. Limitations include variability in digital literacy and infrastructural disparities.
Definitions of terms
Digital Payment Systems: Technologies that facilitate electronic financial transactions.
Informal Economy: Economic activities that occur outside of formal regulatory frameworks.
Financial Inclusion: The process of ensuring access to financial services for all segments of society.
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