The Role of Digital Transformation in Enhancing Financial Inclusion: Unveiling the Economic and Social Challenges from Residents’ Perspective

Financial inclusion is widely recognized as a crucial driver of economic and social development in modern societies. However, achieving financial inclusion presents various economic and social challenges, particularly in developing countries. To address these challenges, many governments have adopted digital transformation as a strategic tool to expand access to financial services. Digital transformation enables the provision of financial resources that help individuals manage personal finances, establish businesses, and take advantage of a wide range of financial opportunities. This study explores the role of digital transformation in promoting financial inclusion in Algeria. A comprehensive literature review on digital transformation and financial inclusion serves as the foundation for developing a conceptual model. A simple linear regression model was constructed based on data collected from a sample in 2024, using the least squares method to estimate regression coefficients. The model posits digital transformation as an independent variable encompassing six key elements: infrastructure, trust and security in electronic transactions, governmental commitment to digital transformation, qualified human resources, legislative and legal frameworks, and institutional development in electronic transactions. It also incorporates three internationally recognized dimensions of financial inclusion: access to financial services, usage of financial services, and quality of financial services. A survey was conducted across 840 individuals from 48 provinces in Algeria. The results indicate the robustness of the model, with a Fisher test value of 877 and a significance level below 0.05. Additionally, the findings reveal a strong positive correlation between digital transformation and financial inclusion, with a correlation coefficient of 0.71. Nevertheless, Algeria’s digital transformation faces numerous technical, economic, and social challenges, as the majority of the average scores for digital transformation dimensions were low. This is primarily due to inadequate electronic infrastructure. Moreover, the advancement of digital transformation is further impeded by outdated legal frameworks, which negatively affect trust and security in electronic transactions. This deficiency is reflected in the quality of financial services offered by commercial banks and the Algerian Post, despite ongoing efforts to expand the networks of bank branches and post offices. Therefore, enhancing Algeria’s electronic infrastructure is crucial for fostering better financial inclusion nationwide.