Digital economy

A) Digital financial inclusion

Innovations in the financial technology (fintech) space are enablers for expanding financial inclusion, as they help remove barriers. For example, mobile phones have addressed the inaccessibility of financial service providers and facilitated more direct, immediate, convenient and user-controlled access. Other digital channels such as online banking platforms, mobile apps and software have helped extend digital financial services (DFS) to unbanked people. However, there is still room for improvement as only 62 per cent of individuals in the developed economies and less than 35 per cent in developing economies leverage Internet banking (see Figure 26). Safe and secure online banking should be scaled up rapidly, particularly in developing countries.

DFS are delivering a new frontier in economic growth and financial inclusion. They are strengthening the capacity of domestic financial institutions and encouraging and expanding access to banking, insurance and financial services for more of the population than ever before. In particular, they are increasing the access of small-scale industrial and MSMEs to financial services including affordable credit, especially in economies without suitable credit markets.

In parallel, financial health and literacy should be improved to ensure that people gain from their inclusion. People need to trust that their money is secure in a digital account and that transactions will be performed as instructed with an accurate record. Using DFS should be affordable not only for consumers but also merchants. Systems should be convenient, user-friendly, and easily accessible, with simple onboarding. As DFS continue to be scaled up, policies that encourage innovation, multistakeholder collaborations and responsible finance should be established. This includes generating a service-based approach to DFS, consumer protection regulations that are applicable to DFS, and market conduct regulations for non-bank agents that are on a par with those of bank agents.

The COVID-19 pandemic is driving a large-scale shift toward digital markets and finance. The digitalization of finance, for both individuals and businesses, can decrease costs and introduce new market and livelihood opportunities, enabling countries to rebound as the pandemic subsides.  However, the pandemic has also hindered the growth of the industry’s smaller players and emphasized individuals’ unequal access to digital infrastructure. To allow everyone to build back better, it is essential to strike a balance between enabling financial innovation and mitigating risks and challenges (e.g. the need to enhance financial and digital literacy, foster affordable access to digital infrastructure, guarantee data privacy, and tackle data biases and cyberthreats).

A) E-commerce enablers

The rate at which the digital economy is expanding demands quick global action to minimize the inequalities among countries, businesses and individuals. Updated or new policies and regulatory frameworks that tackle the barriers to digitalization are critical. These should be informed by research, data and statistics on local economic digitalization and potential outcomes. Digital public infrastructure and goods should be utilized to ensure inclusion. Alternatively, digital technology can be made accessible and affordable for all through financing or investments. Addressing the high cost of entry into e-commerce for global MSMEs will make innovation possible at the grassroot levels. Technical support can be provided to LDCs, LLDCs and SIDS through partnerships with the private and social sectors or even multilateral agreements. A coordinated approach to implementing and regulating e-commerce should be prepared through multistakeholder engagement at an international level. E-commerce software interventions can be made available in off-the-shelf products to enable MSMEs to digitalize easily and quickly without needing IT capabilities.

B) Digitalisation of B2B commerce and supply chains

The digitalization of B2B commerce has expanded commercial opportunities, broadened companies’ reach to new buyers and markets, improved sales, increased efficiency and delivery speed, reduced costs, strengthened data analytics and enhanced scalability. At five times the value of B2C, the global B2B e-commerce has a market value of about USD 14.9 trillion.[128] Nearly 80 per cent of the market share is in the Asia Pacific region, excluding not only other developed regions (e.g. North America and Europe) but also developing countries in Latin America and Africa.[129]

Digital technology is redefining supply chain management by incorporating strategic considerations facing the business, considering the end-to-end visibility and implications, interacting dynamically with integrated business-planning capabilities, and leveraging advanced analytics for agile and smart decision-making. Similar to B2B e-commerce, it also delivers significant impact, including increasing revenue, improving service, driving profitability, optimizing supply chain costs and strengthening resilience.

To enable MSMEs to benefit from both B2B trade and digital supply chains, there needs to be a clear digital strategy supported by the capacity to operate efficiently, integration with existing business models and processes, and financing to obtain and implement the necessary digital tools. Both digital B2B and supply chains should be expanded beyond multinational corporations and MSMEs to include the social sector, especially education and health care. Multistakeholder partnerships across sectors and industries can help by making digital tools accessible, developing expertise, and assisting with financing. CSPs are already collaborating with cloud service providers and technology partners to accelerate the digital transformation of cloud businesses, such as the partnership between Airtel, Cisco and Google Cloud.

A) National cybersecurity strategies

To address cybersecurity holistically across the national digital economy, each country should develop and implement a national cybersecurity strategy (NCS). Through the strategy, governments can define the vision, objectives and priorities relevant to the country, e.g. governance, preparedness, resilience, data protection, and safeguarding critical infrastructure. Countries can develop their NCS by establishing the necessary leadership, and committees; identifying the stakeholders who should be included in the process; evaluating the national cybersecurity landscape and risks; developing a strategy, with corresponding targets, in line with recommendations from the evaluation; and consulting with beneficiaries from across industry, the social sector, and civil society. The NCS should also be aligned with other objectives related to ICT. Once finalized, the strategy should be translated into legislation, actionable policies, roadmaps and initiatives for implementation. In addition, these should be supported by sufficient resources and budget. Implementation of the strategy should be monitored to determine the progress against objectives, measure the efficacy of actions, and identify areas for improvement.

B) Cybersecurity capacity building of MSMEs

MSMEs are at greater risk of falling victim to cybercrimes as they are not always well-equipped to handle them, especially in developing markets. It is important that these enterprises are empowered with adequate knowledge, skills, cyber hygiene and security resources (software, hardware and education) to protect themselves and respond appropriately when exposed to a cyberthreat. PPPs are mechanisms that can help make cybersecurity frameworks, best practices, training materials and programmes more accessible and affordable for MSMEs. In addition, private sector organizations could collaborate with MSMEs to share expertise, experience and skills. Governments can advocate for and incentivize partnerships and collaborations by including or even prioritizing cybersecurity for MSMEs in the NCS and bringing together key stakeholders to engage and commit to action.

Sustainability should be central to how the public, private, social, and civil society sectors engage in the digital economy. Policy-makers can enact legislation and regulatory frameworks that mandate and incentivize sustainable practices. Enterprises need to embed sustainability as their way of operating and align it with their business objectives. The adoption of principles like the circular economy, carbon neutrality, and net-zero green software engineering, can guide how businesses approach sustainability. Establishing committees and identifying leaders to champion the sustainability agenda in an organization can help provide strategic guidance to drive progress on targets, initiatives and best practices. A shift from the linear economy of take-make-dispose to one of a circular economy for electronics is key, where ICT equipment is designed with waste management in mind, reuse and repair are encouraged, and discarded equipment is collected and properly recycled. These factors are critical in order to ensure the necessary rise in ICT penetration rates over the long term.

Digital innovations that reduce the environmental footprint of these technologies should be commercialized and scaled across industries. Civil society organizations need to be made aware of the impact of their ICT-related activities on global sustainability. With increased awareness through campaigns, media attention, and transparency from businesses as well as access to more accurate data, individuals should be empowered to make more sustainable decisions. Partnerships involving the public, private and social sectors can help industries to agree on strategies and targets, produce more environmentally responsible innovations, increase demand, and source funding to support a sustainable digital economy.