This study investigates Egypt's banking sector, focusing on the impact of digital financial services (DFS) on banking stability under the moderating role of financial inclusion amid the debate between "innovation-growth" and "innovation-fragility," perspectives. Using balanced panel data from 30 Egyptian banks spanning 2011–2022 and employing hierarchical regression analysis and cross-sectional analysis, the study finds that DFSs play a crucial role in promoting financial inclusion. Moreover, financial inclusion significantly moderates banking stability, as evidenced by using non-performing loans or capital adequacy proxies. Therefore, the Egyptian context supports "innovation-growth" by demonstrating that DFSs directly support financial inclusion and indirectly contribute to banking stability. Further research can solidify our understanding of these relationships and guide policymakers in crafting effective strategies for a more inclusive and stable financial system.