The Fletcher School and Mastercard unveil the Digital Evolution Index 2017, an in-depth look at technology adoption and the state of digital trust globally
New research by The Fletcher School at Tufts University in partnership with Mastercard has identified developed markets in Asia Pacific, such as Singapore, New Zealand, South Korea and Hong Kong, as the leading the charge for a digital future. With momentum and innovation on their side, these markets exemplify the sweet spot of advancement and future growth.
On the other hand, developing markets in the region, such as China, Malaysia, India, Philippines, Bangladesh, and Indonesia, are evolving rapidly, and though are low-scoring in their current states of digitalization, they are demonstrating the fastest momentum and significant headroom for growth.
The Digital Evolution Index 2017 maps the development of 60 countries, demonstrating their competitiveness and market potential for further digital economic growth. It looks at four key drivers and 170 unique indicators to chart each country’s respective course:
- · Supply (or internet access and infrastructure)
- · Consumer demand for digital technologies
- · Institutional environment (government policies/laws and resources)
- · Innovation (investments into R&D and digital start-ups etc.)
Asian Markets Riding High, Lessons Still To Learn
According to their overall digital evolution scores, international trade hubs Singapore (6th) and Hong Kong (9th) make the top ten list of advanced digital economies globally.
In South Korea (7th), the digital environment and experience fostered by government and businesses is highly sophisticated.
In Singapore, the government is pushing the smart-city agenda to new levels by harnessing all public data to create a “Virtual Singapore,” a genuine “Smart Nation.” This online platform will map out the performance of the city state in real time. It will be possible to look at how diseases might spread in an epidemic, or how traffic will react to roadworks.
The top 10 is rounded out by Norway (1st), Sweden (2nd), Switzerland (3rd), Denmark (4th), Finland (5th), the United Kingdom (8th) and the United States (10th).
The four Nordic nations that feature in the top five have an impressive history of producing global brands and innovative startups, despite their relatively small populations. However, past digitalization is not translating into future momentum. While their governments were early investors in digitalization, they now suffer from a combination of demand saturation and clogged innovation engines, which Asia’s digital leaders could stand to learn from.
At the other end of the spectrum, Pakistan, India and Bangladesh scored the lowest in the Index, indicating that much more can be done to develop their digital economies.
For example, only roughly a quarter of India’s population can access digital services via a smartphone, despite the recent rapid uptake following the government’s demonetization initiatives. That said, the popularity of services rooted in older technologies demonstrate the potential for growth through data enabled mobile solutions.
Momentum of Digitalization Across Asia Pacific
How fast markets in Asia Pacific continue to develop digitally and how open and supportive they are to innovation hold clues into their future growth potential. Combining the pace and state of digital advancement, the research puts the markets into four distinct categories:
- • Stand Out – Singapore, New Zealand, and Hong Kong demonstrated high levels of digital development while continuing to lead in innovation and new growth.
- • Break Out – Though China, Malaysia, Bangladesh, Philippines, Indonesia, India, and Vietnam are still at lower absolute levels of digital advancement, these countries demonstrate the fastest momentum and are poised for growth.
- • Stall Out – Australia, Japan and South Korea are digitally advanced but because of slowing momentum, they are at a risk of falling behind.
- • Watch Out – Thailand faces challenges and is constrained both by low levels of digital advancement and a slow pace of growth.
“Adoption, the quality of digital infrastructure and institutions, and innovation collectively shape a country's digital competitiveness, but governments also play a key role. The report also found that consumers’ trust in digital technologies correlates with digital competitiveness,” said Bhaskar Chakravorti, senior associate dean of international business & finance at The Fletcher School at Tufts University, and founding executive director of Fletcher’s Institute for Business in the Global Context.
“The global digital economy is rapidly evolving, and Asian markets are emerging as key players with strong investor and entrepreneurial interest. Digitally advanced markets such as Singapore, Hong Kong and New Zealand have set the standards for others to emulate, trailblazing the way forward for other markets to look at their models and examine which elements of a successful strategy they can potentially replicate, or even further improve on,” said Ajay Bhalla, president, global enterprise risk & security, Mastercard.
“While it takes a complex combination of factors to bring a digital economy to the next level, momentum, innovation and trust are the imperative constants to becoming a successful digital nation. For Asia Pacific, where nearly half (46 per cent) of the region’s population is online, and 96 per cent have access to a mobile phone which is higher than any other region, it is no secret that businesses and governments that are responsible for the region’s economic growth are looking to make sure they continue to stand out and break out when it comes to adopting and adapting to our digital future.”
New This Year: The Trust Factor and Its Impact on Digitalization
To date, digital trust has proved difficult to understand, let alone measure, but it remains a keystone of the global digital economy. New to the 2017 report, the research team analyzed 42 of the 60 countries in the Index around four key dimensions — environment (security, accountability, privacy), experience (extent of friction), behavior (tolerance for friction, use of e-commerce) and attitude (self-reported trust) — to understand the state of digital trust.
Overall the research shows that in less advanced markets such as China and Malaysia which are undergoing rapid advances in digital technology, individuals are more tolerant of friction in their daily digital interactions and transactions – such as slow internet speeds – suggesting that momentum may be a vital factor in understanding consumer behavior and trust.
In South Korea, Australia, the United States and France, where the digital environment and experience fostered by government and businesses is highly sophisticated, users tend to be less patient and fickle when faced with friction online.
Western and Northern European states lead in digital trust experience and environment scores, which reflect investments in strong security, privacy, and accountability measures, and in minimizing friction.
Implications: How Countries Can Win
More details and country-specific case studies can be found in the summary insights overview including:
- · Use Public Policy as Key to the Success of the Digital Economy: This has implications ranging from Brexit negotiations to how India nudges its society towards a “less cash” future to the U.S.- China competition for economic dominance.
- · Identify What Drives Digital Momentum: Developed and developing economies ought to emphasize different ways to spur growth: innovation and institutions, respectively.
- · Jumpstart Small Country Growth by Involving Government: They can grow quickly as early adopters by assembling the right ecosystems.
- · Reinvent the Digital Stalwarts: The most digitally advanced countries can use their scale and existing connections in the world to reinvent themselves.
- · Play Digital Catch-Up by Closing the Mobile Internet Gap: The least digitally advanced countries must prioritize increasing internet access via mobile phones.
- · Work Harder to Earn Users’ Trust: As nations become more digitally evolved and momentum slows, technology providers and policymakers may need to prioritize building trust to continue growth.
The link to the full report and methodology can be found here.
The Digital Evolution Index 2017 builds off the successful launch of the first edition of the Index in 2014. The research behind this latest edition considers numerous new factors to better reflect rapid changes in the digital world and create a report that is accurate, robust and comprehensive.
The in-depth analysis includes a study of the pace of digital evolution across 60 countries, across four key drivers of supply, demand, institutional environment and innovation. It utilizes data over 8 years (2008 – 2015) to provide an overall digital evolution score and digital momentum score, as well as a measure for digital trust.
The Digital Evolution Index is a research product of Digital Planet — an interdisciplinary research platform, based at the Institute for Business in the Global Context at The Fletcher School at Tufts University.
The Fletcher School at Tufts University is the oldest exclusively graduate school of international affairs in the United States. The School’s alumni represent the highest levels of leadership in the world, including hundreds of sitting ambassadors, political and military leaders, respected voices from distinguished media outlets and institutions, heads of global non-profit organizations, and executive leadership of some of the world’s largest corporations. The Fletcher School offers a collaborative, flexible and interdisciplinary approach to the study of international affairs, featuring a distinguished faculty and diverse student body representing more than half the world’s countries.
Mastercard (NYSE: MA) is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Mastercard products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone.