Growing digital competence can be difficult for teachers when the scenery of technology tools is rapidly changing. Psychological wellbeing and self-efficacy sustain mental health and confidence in embracing digitalization in pedagogical methods. However, there is a lack of systematic evaluations to determine if these factors enhance digital competence within Higher Education Teachers (HETs). The study conducted systematic review of 36 journal articles from Scopus and Google Scholar database from year 2015 to 2025 using PRISMA framework. The study aim is to investigate whether self-efficacy and psychological wellbeing within teachers boosts self-confidence, motivation, and psychological resilience in using digital tools in their pedagogical practices, and provide future research prospects. The study reveals that psychological wellbeing and self-efficacy significantly enhance teachers' digital competence in Higher Education Institutions (HEIs). Higher self-efficacy positively impacts digital competence, while psychological wellbeing directly and indirectly enhances it. However, there is a lack of research on the relationship between these factors, preventing teachers from integrating technology-driven pedagogical practices. The findings provide a path forward for developing effective strategies by focus on self-efficacy and psychological wellbeing in technology-driven pedagogical practice and provides future directions..