With mobile internet and increasingly powerful and lower cost computing, every person can theoretically connect to anyone else, obtain and generate knowledge, or engage in commercial or social activity. For organisations of whatever size, likewise, there are fewer technical barriers to global economic interaction at scale. Digital technology can support economic inclusion by breaking down barriers to information, broadening access, and lowering the level of skills needed to participate in the economy.
Of course, this does not mean that everyone and everything should be connected or digitised. Nor does it mean that the social and economic consequences of digital technology are necessarily inclusive or beneficial. Digital technology can both provide opportunity and accentuate inequality.
The challenge for policymakers, and other stakeholders seeking to contribute to progress toward the SDGs, is how to cooperate to leverage technology to create a more inclusive society. As we emphasise in this chapter and our recommendations, we believe digital cooperation must steer how digital technologies are developed and deployed to create meaningful economic opportunities for all.
Developing an inclusive digital economy will require sustained and coherent effort from many stakeholders across all walks of life. National policy frameworks and international agreements need to find ways to promote financial inclusion, innovation, investment, and growth while protecting people and the environment, keeping competition fair and the tax base sustainable.
Developing an inclusive digital economy will require sustained and coherent effort from many stakeholders across all walks of life. National policy frameworks and international agreements need to find ways to promote financial inclusion, innovation, investment and growth while protecting people and the environment, keeping competition fair and the tax base sustainable.
Financial Inclusion: Mobile Money, Digital Identification & E-Commerce
The ability of digital technologies to empower traditionally marginalised people and drive inclusive economic development is illustrated by financial inclusion.14 Mobile money, digital identification and e-commerce have given many more people the ability to save and transact securely without needing cash, insure against risks, borrow to grow their businesses and reach new markets.
According to the World Bank’s Global Findex 2017 report, 69 percent of adults have an account with a financial institution, up by seven percentage points since 2014. That means over half a billion adults gained access to financial tools in three years. But many are still left behind, and there is scope for further rapid progress: a billion people who still have no access to financial services already have a mobile phone.
Mobile money – the ability to send, receive and store money using a mobile phone – has brought financial services to people who have long been ignored by traditional banks. It reaches remote regions without physical bank branches. It can also help women access financial services – an important aspect of equality, given that in many countries women are less likely than men to have a bank account.
New business models enable people who have no physical collateral to demonstrate to lenders that they are creditworthy – for example, by allowing the lenders to see phone location data and online transaction and payment history. Mobile finance matters in wealthy countries, too, where low-income and historically marginalised groups generally both pay higher interest rates and receive a narrower range of financial services.
Well-known examples of mobile money include Kenya’s M-Pesa and China’s Alipay. Launched in 2007 by Vodafone, M-Pesa received support from diverse stakeholders who all have a role to play in digital cooperation. A private sector innovation with donor funding, it originally addressed microfinance clients in partnership with civil society – then citizens found new uses, including low cost person-to- person transfers. Alipay has made millions of small business loans to online merchants, more than half of whom are aged under 30.
What works in one country may not work in another. Rather than try to replicate specific successes, digital cooperation should aim to highlight best practices, standards and principles that can create conditions for local innovations to emerge and grow based on local issues, needs and cultural values. India, for example, has added 300 million bank accounts in three years as new business models have been built on the India Stack, a set of government- managed online standards in areas including online payments and digital identity.
Across many areas of financial inclusion, fragmented systems and lack of cooperation within and across states make it difficult to fully realise the benefits of digital technology. Common standards for cross-border interoperability of mobile money could unleash much more innovation: discussions to develop them should be a priority for digital cooperation.
Digital identification(ID)can support inclusive economic development more broadly. More than a billion people today lack an official way to prove their identity: this means they may not be able to vote, open a bank account, transact online, own land, start a business, connect to utilities or access public services such as health care or education. The consulting firm McKinsey & Company studied seven large countries and concluded that digital ID systems could add between 3 and 13% to their gross domestic product.
However, digital ID systems require caution. A digital ID can help unlock new opportunities but can also introduce new risks and challenges. They can be used to undermine human rights – for example, by enabling civil society to be targeted, or selected groups to be excluded from social benefits. Data breaches can invade the privacy of millions. To minimise risks, countries should introduce a digital ID system only after a broad national conversation and allow for voluntary enrolment and viable alternatives for those who opt out. They should establish ways to monitor use and redress misuse. Countries could cooperate to share experience and best practices in this regard.
The World Bank Identification for Development (ID4D) initiative has identified ten Principles of Digital Identification covering inclusion, design and governance “to improve development outcomes while maintaining trust and privacy”. This initiative draws on the experiences of countries that have already implemented digital ID systems. Among the most successful is Estonia, where citizens can use their digital ID to access over 2,000 online government services. Building on the positive and cautionary lessons of early adopters, the Modular Open Source Identity Platform (MOSIP) is developing open source code countries can adapt to design their own systems.
Recent years have also seen a dramatic increase in e-commerce, including by individuals and small businesses selling products and services using online platforms. When e-commerce platforms provide technological services to small entrepreneurs, rather than compete with them, they can level the playing field: it is relatively cheap and simple to start a business online, and entrepreneurs can reach markets far beyond their local area.
Inclusive e-commerce, which promotes participation of small firms in the digital economy, is particularly important for the SDGs as it can create new opportunities for traditionally excluded groups. In China, for example, an estimated 10 million small and medium-sized enterprises (SMEs) sell on the Taobao platform; nearly half of the entrepreneurs on the platform are women, and more than 160,000 are people with disabilities. E-commerce can support rural economic inclusion as clusters of villages can develop market niches in certain types of products: in China, an estimated 3,000 “Taobao villages” have annual online sales of more than one million dollars annually. A growing e-commerce sector also creates demand and employment in related businesses including logistics, software, customised manufacturing and content production.
The immense power and value of data in the modern economy can and must be harnessed to meet the SDGs, but this will require new models of collaboration.
E-commerce shows how digital technologies with supportive policies can contribute to inclusive economic development – it has done best in countries where it is relatively easy to set up a business, and where traditionally neglected populations are able to get online. As with inclusive mobile finance, as more individuals and small enterprises buy and sell internationally, there is also a need to create more supportive rules for cross-border e-commerce.
As e-commerce grows, there are also concerns about its relation to local and international markets.