Transformational Leadership in Digital Banking: A Critical Literature Review of Innovation, Governance, and Pathways to Sustainable Financial Inclusion

Abstract

Digital transformation expands access to financial services and improves operational efficiency, but it also creates governance, ethical artificial intelligence (AI), and inclusion challenges for financial institutions. Existing research emphasizes technology and regulation, with limited attention to how leadership shapes innovation quality, governance strength, and sustainable financial inclusion outcomes across institutions with similar resources. This study aims to explain how leadership influences digital banking outcomes by critically evaluating and integrating transformational, moral, digital, adaptive, and ethical AI leadership perspectives into a unified framework applicable to governance and inclusion challenges. Using a critical literature review of peer‐reviewed studies and institutional sources, the study developed an integrated leadership framework composed of five interdependent dimensions: vision, empowerment, adaptability, ethics, and reflection, and examined their interaction within digital banking ecosystems. The review further finds that existing leadership literature remains conceptually fragmented, with leadership perspectives often examined independently despite their interdependent influence on digital banking outcomes. The study finds that leadership operates as an integrated system rather than discrete traits, with the five dimensions collectively shaping system‐level mechanisms that influence innovation, governance, and inclusion outcomes; balanced leadership configurations improve innovation quality while maintaining governance safeguards, whereas imbalances increase systemic risk and exclusion; and institutional factors such as regulatory capacity, technological readiness, and governance structures significantly moderate leadership effectiveness. The Bangko Sentral ng Pilipinas (BSP) case illustrates how coordinated leadership dimensions enable responsible innovation, ethical AI governance, and expanded financial inclusion. This research contributes a structured leadership framework and a diagnostic tool that enables assessment of alignment between digital innovation initiatives, ethical governance requirements, and inclusive access objectives, advancing theory by reconceptualizing transformational leadership as a system‐level capability embedded in institutional and regulatory contexts and offering actionable guidance for achieving responsible and inclusive digital finance.