Skin cancer is considered a dangerous type of cancer with a high global mortality rate. Manual skin cancer diagnosis is a challenging and time-consuming method due to the complexity of the disease. Recently, deep learning and transfer learning have been the most effective methods for diagnosing this deadly cancer. To aid dermatologists and other healthcare professionals in classifying images into melanoma and nonmelanoma cancer and enabling the treatment of patients at an early stage, this systematic literature review (SLR) presents various federated learning (FL) and transfer learning (TL) techniques that have been widely applied. This study explores the FL and TL classifiers by evaluating them in terms of the performance metrics reported in research studies, which include true positive rate (TPR), true negative rate (TNR), area under the curve (AUC), and accuracy (ACC). This study was assembled and systemized by reviewing well-reputed studies published in eminent fora between January 2018 and July 2023. The existing literature was compiled through a systematic search of seven well-reputed databases. A total of 86 articles were included in this SLR. This SLR contains the most recent research on FL and TL algorithms for classifying malignant skin cancer. In addition, a taxonomy is presented that summarizes the many malignant and non-malignant cancer classes. The results of this SLR highlight the limitations and challenges of recent research. Consequently, the future direction of work and opportunities for interested researchers are established that help them in the automated classification of melanoma and nonmelanoma skin cancers.