Navigating digital finance: how digital financial literacy influences digital financial services use and benefits in Korea

Abstract This study examines whether digital financial literacy influences the adoption of digital financial services and whether users benefit from them. Drawing on the related literature, digital financial literacy is defined as a composite construct of financial knowledge and four domains of digital literacy related to digital finance (digital knowledge, awareness of digital financial services, practical know-how of digital financial service operations, and self-protection from digital scams and fraud). Using data from 1552 adults in South Korea, this study employs a series of regression analyses and instrumental variable techniques to estimate the associations between digital financial literacy and digital financial service adoption and benefits. The results show that digital financial literacy is associated with a higher likelihood of adopting digital platforms for banking, loans, stock investing, insurance, utility payments, and credit card management, as well as using a greater number of digital financial services overall. Further analyses indicate that digital financial literacy predicts improved access to financial services via digital platforms, receiving fee waivers or discounts, and receiving customized information, such as payment reminders and financial product recommendations. When the subdimensions of digital financial literacy were modeled separately, the effects of digital literacy were generally greater than those of financial knowledge. These findings highlight the prominent role of digital financial literacy in promoting financial inclusion in the digital age and its benefits for financial consumers. Policymakers and educators should provide educational programs that teach both theoretical knowledge and practical skills related to digital finance, while regulators incentivize financial service providers to create more inclusive digital financial environments.