On June 26 I participated in a panel discussion on digital money at the Royal Society of Arts (RSA) in London. The RSA, - whose full name is the Royal Society for the encouragement of Arts, Manufactures and Commerce, - was founded in 1754 to “embolden enterprise, enlarge science, refine art, improve our manufacturers and extend our commerce”. Today, it calls itself “an enlightenment organisation committed to finding innovative practical solutions to today’s social challenges”.
The panel was organized to mark the publication of an RSA pamphlet - From the digital divide to inclusive innovation: the case of digital money. I was a co-author of the pamphlet, along with Imperial College professors David Gann and Gerald George and University of Queensland professor Mark Dodgson. The four of us were joined in the panel by Citigroup executive Tomasz Smilowicz.
We discussed the profound transformative power of digital money. Economic transactions are increasingly moving from the physical to the digital realm, democratizing financial services around the world and helping billions join the global digital economy and improve their standard of living. As we wrote in the pamphlet:
“Just as communications and publishing have been transformed by digital technologies, so too will financial services. The progress of digital money will inevitably surprise us and it will develop in unexpected ways, but we believe it is on the cusp of delivering a remarkable transformation in the global economy. It will end the divide between those who can and those who cannot participate in formal economic transactions. It may usher in a new era of more inclusive innovation that involves billions of more people around the world in constructing the services that affect their future.”
The explosive growth of Internet-connected mobile device is one of the major forces driving the evolution toward toward a global digital money ecosystem. For the past twenty years, the Internet has been an incredible platform for innovation, enabling start-ups, large institutions, governments, NGOs and everyone in-between to quickly develop and bring to market many new digital products and services. It has led to the creation of all kinds of innovative applications. It has transformed many of our every-day activities, including the way we work, shop, learn, bank, listen to music, watch films and deal with government.
Getting online in the 1990s required a personal computer and an account with a service provider. e-commerce transactions required a credit card or bank account. So, while the Internet was truly empowering for those with the means to use it, it led to a growing digital divide both within countries and across the world.
The reach and connectivity we were all so excited about in this initial phase of the Internet era was in reality not so inclusive. As our economy was becoming increasingly digital, major new inequalities were now arising because so many around the world could neither afford a PC or an Internet account and had no bank relationship or credit card. It was disconcerting to have a global digital revolution that left out the majority of the world’s population.
But, this picture has started to change over the past several years. Continuing technology advances are now enabling us to bring the empowerment benefits of the digital revolution to just about everyone in the planet. Mobile phones and Internet access have gone from a luxury to a necessity that most everyone can now afford. We’ve been transitioning from the connected economy of PCs, browsers and web servers to our increasingly hyperconnected economy of ubiquitous, powerful and inexpensive mobile devices, cloud-based apps, and broadband wireless networks.
A recent McKinsey study examined the top 12 disruptive technology advances that will transform life, business and the global economy in the coming years. The mobile Internet was at the top of its list: “Equipped with Internet-enabled mobile computing devices and apps for almost any task, people increasingly go about their daily routines using new ways to understand, perceive, and interact with the world. . . However, the full potential of the mobile Internet is yet to be realized; over the coming decade, this technology could fuel significant transformation and disruption, not least from its potential to bring two billion to three billion more people into the connected world, mostly from developing economies.”
The mobile Internet is now ushering the next major phase in the evolution of money and payments. Money is continuing its centuries old transformation from being embodied in gold and silver coins, to being nothing more than information in the digital wallets of our mobile devices as well as in our digital accounts someplace out there in the cloud. And, since just about everyone in the world, rich and poor alike, now has access to mobile devices, this major chapter in the history of money brings with it the potential for universal inclusiveness that has been missing in the past. Mobile digital money is coming, - over time, - to every individual in every corner of the world.
The mobile Internet is also poised to become a platform for digital, inclusive innovations, of which digital money and the many services that will emerge around it are prime examples. Inclusive innovation is a relatively new concept. It aims to develop products and services that just about everyone can afford, even those in the bottom of the pyramid, that is, the poorer socio-economic groups around the world. .
But by itself, the mobile Internet cannot drive the transition to an inclusive digital money ecosystem. If we examine the Internet revolution launched two decades ago, what was truly transformative was not just the ability to communicate and access content, but also the ability to conduct economic transactions of all kinds. And doing so, requires that our digital platforms support a few critical enabling services, in particular the ability to uniquely establish our identity and securely handle e-payments.
Access to such digital services has not been an issue for those of us who already had unique identities in the physical world, - e.g., a birth certificate, driver’s license, banking relationship, passport, - which we could use to establish our identity in the digital world. However, as we now look to make these digital platforms truly inclusive, many of the people we are now aiming to reach have not had unique identities. Digital inclusiveness is thus acting as a forcing function to empower every individual in the planet, finally giving to each something as basic as their unique, recognizable identity, an absolute prerequisite for economic and social inclusion.
In the RSA panel, professor Gerald George, director of Imperial College’s Rajiv Gandhi Centre for Innovation and Entrepreneurship talked about India’s massive Unique ID (UID) initiative, known as Aadhaar. The UID project aims to issue each resident in India a 12-digit unique number, which will be stored in a centralized database and will be linked to basic demographics and biometric information. Among other benefits, Aadhaar will enable the underprivileged residents of India to avail themselves of the many services provided by the government and the private sector, including digital services they will now be able to access through their mobile devices.
These are all changes of a historical scale. While all the trends we discussed in the panel and pamphlet are real and currently underway, their evolution will take time. Most such massive changes start out slowly, as we need to overcome lots of technical, market and political obstacles. But, at some point, a critical mass or tipping point will be achieved and progress will significantly accelerate. As we wrote in the concluding paragraphs of the RSA pamphlet:
“The potential of digital money is extraordinary. It could prove to be one of the most transformative technologies of all time. For billions around the world, digital wallets containing digital identities, money and accounts are a ticket to inclusion in the global economy. In addition, the emergence of this platform for inclusive innovation will usher a plethora of apps and services, many of which we can barely imagine today. The innovations that digital money will induce will increase opportunities for wealth-creating entrepreneurship and the provision of highly localised innovations, thereby increasing standards of living and quality of life.”