Exploring the nexus between digital financial inclusion and financial stability: a systematic review of the literature

The rapid pace of technological advancement has driven the widespread adoption of digital infrastructure in the financial sector, significantly promoting digital financial inclusion. In pursuit of the Sustainable Development Goals, digital infrastructure is bridging financial gaps for marginalised communities. Nevertheless, concerns arise across the globe regarding potential challenges accompanying financial service digitilisation. This systematic review comprehensively examines the relationship between digital financial inclusion and financial stability by synthesizing existing research findings. The current research employed the Preferred Reporting Items for Systematic Reviews and Meta-Analyses framework for accessing articles from Scopus databases. Inclusion criteria comprised peer-reviewed articles published in English between 2017 and 2024 inclusive. The literature survey findings indicated that 41.4% of studies reported negative effects of digital financial inclusion on financial stability, while 17.9% yielded mixed results. Although digital financial technology has been instrumental in promoting digital financial inclusion, majority of studies reviewed highlight potential negative implications for financial stability. The study reveals regulatory framework challenges, severe competition in the financial sector, systemic and cybersecurity vulnerabilities and financial literacy gaps as significant challenges arising from digital financial inclusion. Although digital financial inclusion significantly contributes to the economy, its effectiveness hinges on addressing regulatory, security and literacy concerns. In line with the above findings and conclusions, this study recommends the strengthening of the regulatory frameworks to safeguard financial stability. Policymakers, financial institutions and stakeholders should prioritize digital financial inclusion while establishing robust regulatory frameworks that balance expansion with effective risk management.