Financial Literacy, Culture, and Institutions as Determinants of Digital Financial Inclusion: Evidence from Developed and Developing Economies

Digital financial inclusion has become an important mechanism for expanding access to financial services, improving transaction efficiency, and supporting participation in increasingly digitalized financial systems. However, substantial cross-country disparities persist, indicating that technological availability alone cannot adequately explain the adoption and use of digital financial services. This study examines the financial, cultural, and institutional determinants of digital financial inclusion, with particular attention to differences between developed and developing economies. Panel least squares estimation is employed for the baseline analysis, while Two-Stage Least Squares/Generalized Method of Moments estimation addresses potential endogeneity and evaluates the robustness of the results. The findings reveal that financial literacy positively influences digital financial inclusion in the overall sample and has a particularly strong and robust effect in developing economies. Individualism, uncertainty avoidance, and long-term orientation are significant cultural determinants in the whole sample, although long-term orientation exhibits greater robustness among developed economies. Regulatory quality positively affects digital financial inclusion in the overall sample under both estimation approaches, emphasizing the importance of supportive institutional frameworks. Institutional confidence demonstrates a positive effect among developed economies in the baseline estimation, although this relationship does not remain robust after addressing endogeneity. Population size and power distance generally exhibit insignificant effects. The study contributes to the digital-finance literature by demonstrating that financial capabilities, cultural characteristics, and institutional environments jointly shape cross-country differences in digital financial inclusion and that their relative importance varies systematically across levels of economic development.