Digital Finance by Baxter Hines

1 Introduction 
Digital finance is the process of using digital devices and digital technology to acquire, 
use and distribute financial resources to economic agents such as individuals, households, 
firms and government (Siddik and Kabiraj, 2020; Ozili, 2018). The use of digital 
technology in finance began in the early 2000s during the dot.com bubble. Digital finance 
innovations became prominent after the 2007 to 2009 global financial crisis as financial 
institutions began to use digital technology to process cross border payments, to manage 
customers’ account, to save cost and to maximise profits. 
Generally, digital technology in finance has aided the rapid development of the 
financial sector of many developed countries by increasing the speed of the transmission 
of financial market information to investors, shareholders and other market participants, 
and by increasing the speed of financial transactions and payments (Bech et al., 2017; 
Shabsigh et al., 2020). In developing countries, the use of digital technology in finance 
has helped to increase the size of remittance inflows and has contributed to high levels of 
financial inclusion (Podolski, 2020; Emara and Zhang, 2021). 
Digital finance, while being important, has also become the subject of enormous 
debate. The debate is centred on five main themes: debate about the net welfare benefits 
of digital finance (Ozili, 2018), debate about the structure and size of transaction cost 
when using digital finance applications (Nagle et al., 2020; Gille, 2005), debate about 
which aspects of finance should be digitised and which should not be digitised (Ozili, 
2021a), debate about the voluntary or involuntary use of digital financial services (Ozili, 
2021a), and debate about how to handle and secure the large data or ‘big data’ that arises 
from digital financial transactions (Beaumont, 2019; Schiff and McCaffrey, 2017). These 
debates have led to calls for more regulation, that is, to regulate the digital finance 
ecosystem and enact legislation to protect users’ digital data. While these developments 
are important from a safety point of view, they show that digital finance comes with some 
issues. Consequently, providers and users of digital financial products and services need 
to understand these issues, so that providers of digital financial products and services can 
conveniently provide access to finance to users, and users can use digital financial 
services safely and in an environment of trust. 
Another important area, which is central to this paper, is the global developments in 
digital finance in several parts of the world. Understanding these developments can help 
us understand the determinants of digital finance and whether digital finance enhances 
globalisation. Such knowledge can also help us gain some insight into whether digital 
finance is evolving too fast and can help us make predictions about the future of digital 
finance. Such knowledge can also provide insights about the risks of international digital 
finance. To explore this important area of digital finance, this paper survey the existing 
research on digital finance and it draws insight from real-world experience in digital 
finance developments. This paper is one of the first papers to review the most recent 
global developments in digital finance. 
This review paper contributes to the literature in the following ways. Firstly, the 
paper contributes to the literature that examines the role of the internet and digital 
technology in finance. It contributes to this literature by exploring the potential to 
increase access to finance for all economic agents through digital technology enabled by 
the internet. Secondly, this paper contributes to the financial innovation literature. Studies 
in this literature include Tufano (2003), Laeven et al. (2015), Bernier and Plouffe (2019), 
etc. This paper contributes to this literature by showing that many financial innovations 

are built using digital technology and rely on digital technology to function. Thirdly, this 
paper contributes to the digital finance literature. Studies in this literature include 
Gomber et al. (2017), Ozili (2018), etc. This paper contributes to the digital finance 
literature by providing a much needed review of the state of digital finance research and 
development, and it makes predictions about the future of digital finance in 10 to 
20 years’ time from now. 
To begin, Section 2 highlights the importance of digital finance. Section 3 highlights 
the modern application of digital finance. Section 4 presents the international determinant 
of digital finance. Section 5 presents a concise review of post-2010 digital finance 
research in the literature. Section 6 identifies some of the developments in digital finance 
around the world. Section 7 offers a prediction about the future of digital finance. 
Section 8 suggests some directions for future research. Section 9 concludes. 
2 Importance of digital finance 
Why is digital finance important? Digital finance is important to modern finance for 
many reasons. One, digital finance is important because almost all forms of financial 
instruments in global financial markets are traded using digital financial platforms, 
technologies or infrastructure (Moșteanu, 2019; Feyen et al., 2021). Two, digital finance 
is important is because most of the disruptive innovations in finance today such as private 
digital currency, cryptocurrency, embedded finance, internet finance, blockchain finance, 
decentralised finance, artificial intelligence (AI) finance and central bank digital currency 
(CBDC) are all the outcome of advancement in digital finance (An et al., 2021; 
Wullweber, 2020; Zetzsche et al., 2020a; Ozili, 2019). Three, digital finance is important 
because digital finance offers convenience to users by saving the time and transportation 
cost that users would incur to visit a financial institution to perform basic financial 
transactions (Nagle et al., 2020; Ozili, 2018). Four, digital finance is important because it 
allows financial institutions to focus on improving the efficiency of their financial service 
offering rather than spending too much time in resolving soft issues, e.g., human-side 
issues (Wang et al., 2020). Five, digital finance is important because it can increase 
financial inclusion by bringing unbanked adults into the formal financial sector through 
digital devices so that they can have access to basic financial services (Ozili, 2018; Durai 
and Stella, 2019; Ozili, 2021b). Finally, digital finance is important because it increases 
consumption spending and investment thereby contributing to economic growth (Li et al., 
2020; Guo et al., 2021; Sadigov et al., 2020). 
3 Modern developments in digital finance 
Over the years, digital finance has evolved in remarkable ways. Today, digital finance 
manifests through internet finance, Fintech finance, embedded finance, AI finance, 
blockchain finance, decentralised finance, etc. Internet finance is a financial services that 
is offered over the internet using a network which may be an analogue network or a 
digital network. Internet finance facilitates financing, payment, investment, and 
information intermediary services by the internet (Hou et al., 2016). Fintech finance is 
financial services that is offered by financial technology companies. Fintech companies 
use technology to enhance or automate financial services and processes which are then 

Digital Finance by Baxter Hines