Does financial inclusion moderate the effect of digital transformation on banks’ proportion of non-interest income in China?

Traditional commercial banks are impacted by financial disintermediation amid the advent of online banking. Lower revenue has forced banks to focus on new non-interest revenue to increase bank revenue. With banks' serious efforts toward digital transformation, this study is interested in examining whether digital transformation can affect non-interest income in China. Nonetheless, as the net profit of Chinese banks has dropped by 4.95 percent, rapid digital transformation does not promote non-interest income effectively. This study foresees the crucial role of financial inclusion in moderating the case and sets this as the ultimate aim of this study. This article uses the GMM to conduct an empirical study on the data of 116 banks from 2014 to 2021. As expected, the results show a non-favorable effect of digital transformation on non-interest income, but financial inclusion successfully brings a positive note. Hence, to grow together with customers, while initially, banks may have to lower the interest charges, efforts to enhance everyone's pursuit for a better financial life may help banks to enjoy more profit via higher non-interest income.