IMPACT OF OPEN BANKING ON DIGITALIZATION OF DEPOSIT MONEY BANKS (DMBS) WITHIN BAUCHI METROPOLIS

ABSTRACT This study examines the impact of open banking on the digitalization of deposit money banks (DMBs) in Nigeria, with a focus on the Bauchi metropolis. The research explores how open banking influences competition, customer experience, financial inclusion, and the adaptability of traditional banks in the evolving financial ecosystem. Open banking, enabled through standardized Application Programming Interfaces (APIs), facilitates secure data sharing between banks and third-party providers, fostering innovation and collaboration. The study adopted a quantitative research design using a structured questionnaire administered to 250 respondents drawn from selected commercial banks and customers within Bauchi metropolis. Data were analyzed using descriptive statistics and the chi-square test for hypothesis testing. Findings revealed that open banking significantly enhances competition among financial institutions by compelling traditional banks to innovate and adopt digital strategies. It was also found to improve customer engagement and financial inclusion by granting customers greater control over their data and increasing access to financial services for the unbanked and underbanked populations. However, the study identified several challenges facing traditional banks, including technological constraints, cybersecurity risks, high compliance costs, and potential revenue loss to fintech competitors. The chi-square analysis confirmed a statistically significant relationship between open banking and improvements in competitiveness, customer experience, financial inclusion, and adaptability of traditional banks in Nigeria. The study concludes that while open banking serves as a catalyst for digital transformation and inclusive growth, it also disrupts traditional banking models, necessitating robust security frameworks and strategic realignment. It recommends that banks strengthen cybersecurity measures, upgrade legacy systems, and collaborate effectively with fintech firms to leverage open banking for sustainable innovation and growth.