A Multidimensional Approach to Defining and Measuring Financial Literacy in the Digital Age

Digital financial services (DFS) have rapidly expanded in recent years, largely driven by Fintech and further accelerated by the COVID-19 pandemic. There are growing concerns that traditional financial literacy is insufficient to empower individuals to effectively access and use DFS. Digital financial literacy (DFL) is emerging as a key enabler that involves a set of knowledge, awareness, and abilities, which includes some aspects of financial literacy (FL) and digital literacy (DL), but also specific features and risks that are particular to DFS.

This chapter focuses on construction of a multidimensional framework for DFL that highlights the empirical techniques needed to test the reliability, validity, and robustness of the metrics. It also examines best practices to investigate the extent to which DFL can boost financial inclusion and improve peoples’ livelihoods, especially for those traditionally excluded from the financial marketplace. The insights from this chapter provide a useful starting place for scholars to build upon to contribute to better-targeted DFL strategies that ensure no one is left behind in the digital transition.