The role of digital transformation in financial sector: A global perspective

Abstract

The financial industry is experiencing a digital revolution fueled by the fourth industrial revolution. While digital tools are widely adopted, the specific impacts of digitalization and innovation on financial markets and citizens remain under-researched. This study investigates the relationship between technological progress and innovation with the development of financial markets, the Human Development Index, and the Gross Domestic Product per capita. The core question is how, and to what extent, technological advancement and innovation influence financial development and other social and financial performances per capita. The research employs regression analysis, specifically simple linear regression, and integrates existing research and theoretical frameworks to build an inductive approach. Findings indicate that a one-unit rise in technological progress is linked to a 0.5unit increase in the financial development index (p-value < 0.001). These findings suggest that financial intermediaries and decision-makers in developing countries should consider altering their business models and adapting to rapid technological changes to enhance financial development. This paper provides insights into the connection between progress in digitization and outcomes in the economy and finance, emphasizing the importance of adapting to swift technological changes for sustainable development.