Impact of Digital Transformation on Bank Credit Risk : The Moderating Effect of Financial Inclusion

As a result of the digital transition's information asymmetry, banks have generated a large number of non-performing loans to maximize profits, therefore endangering financial stability. In a complex and changing market environment, with sluggish economic growth and cross-industry integration, commercial banks, a major driver of digital development, must define how their digital transformation impacts their risks in order to sustain operational efficiency and steady growth. This paper takes 116 commercial banks in China from 2014 to 2021 as the research object, and innovatively combines the moderating effect of the bank's external inclusive financial development to test the impact of bank digital transformation on credit risk and the intermediary effect of bank profitability. The moderated mediation effect models show that digital financial inclusion suppresses the negative impact of digital transformation on bank credit risk by increasing bank profitability. Therefore, banks should increase their collaboration with other financial institutions, jump on the fast track of inclusive finance development, broaden the scope of their online customer services, leverage digital technology to swiftly identify lenders' credit, source high-quality customers to boost profits, and lessen credit risks