This paper examines the impact of digital transformation on the systemic risk of commercial banks, focusing on the Chinese market. The authors find that digital transformation significantly reduces systemic risk by enhancing bank competitiveness. The reduction in marginal costs due to digital transformation is a key factor in this process. The study also reveals that the effect varies by bank size, transformation mode, and systemically important status. Large commercial banks, those without financial technology subsidiaries, and systemically important banks benefit more from digital transformation in terms of reducing systemic risk. The empirical analysis uses a system of indicators for digital transformation and measures systemic risk using the ΔCoVaR index. The results confirm that digital transformation reduces systemic risk, and the mechanism involves improving bank competitiveness through reduced marginal costs. The study provides valuable insights for understanding the role of digital transformation in maintaining financial stability.This paper examines the impact of digital transformation on the systemic risk of commercial banks, focusing on the Chinese market. The authors find that digital transformation significantly reduces systemic risk by enhancing bank competitiveness. The reduction in marginal costs due to digital transformation is a key factor in this process. The study also reveals that the effect varies by bank size, transformation mode, and systemically important status. Large commercial banks, those without financial technology subsidiaries, and systemically important banks benefit more from digital transformation in terms of reducing systemic risk. The empirical analysis uses a system of indicators for digital transformation and measures systemic risk using the ΔCoVaR index. The results confirm that digital transformation reduces systemic risk, and the mechanism involves improving bank competitiveness through reduced marginal costs. The study provides valuable insights for understanding the role of digital transformation in maintaining financial stability.