From Irving Wladawsky-Berger:
On January 29 I attended the 2014 Digital Money Symposium in London, co-sponsored by Citi and Imperial College. The Symposium convened a group of leaders in their fields to explore
the state of adoption of digital money and its economic and societal
impacts around the world. This is the second such Digital Money
Symposium, the first one having taken place in London in January of 2013.
I
was a part of the Citi-Imperial team that organized the event. For
this year’s Symposium, we developed a framework that would enable us to
discuss the state of adoption of digital money on a more data-driven,
scientific basis. We looked at digital money as a highly complex sociotechnical
ecosystem, that is, a technology-intensive system that has major
societal, economic and political implications, like cities, healthcare
and education. To help us begin to quantify and understand this
ecosystem, we developed the Digital Money Readiness Index, a set of global metrics that enables us to link digital money adoption to various measures of socio-economic development.
The
Index is a multi-functional tool, encompassing publicly available data
from 90 countries around the world. By analyzing its various
interdependent components, the team computed a measure of how ready a
country is to adopt digital money. Quantifying the progress being made
by each country along the digital money roadmap should help understand
the key obstacles the country faces, as well as the potential actions it
could take to overcome them.
Overall, the Index aims to help answer two fundamental sets of questions:
What Matters?: What factors affect the adoption of digital money around world, and how do they vary across different countries and regions?
Why Bother?:
Does digital money adoption really make a difference, and if so, can we
quantify the benefit to governments, companies and individuals?
The initial answers to these questions are described in Getting Ready for Digital Money: A Roadmap, a report developed by the Citi-Imperial team for the 2014 Symposium.
The Readiness Index is composed of four key pillars:
- Institutional Environment,
a measure of the institutional conditions enabling digital money
adoption, including property rights, market efficiency, regulatory
quality, R&D spending and patents.
- Enabling Infrastructure,
which measures the technological and financial infrastructure needed to
support digital money, including availability and affordability of
financial services, financial regulation, and ICT infrastructure and
skills.
- Solution Provisioning,
consisting of the industries and functions driving digital money
solutions, including electronic payments, e-commerce and e-government.
- Propensity to Adopt,
which captures the extent to which consumers and businesses embrace
digital innovation, including ICT usage, technology diffusion rates,
quality of business sophistication and perceived corruption.
Using
these various indicators, a readiness score was computed for each of
the 90 countries in the study. Based on their scores, the countries
were then clustered into 4 major readiness groups:
- Incipient (30 countries): Limited ICT and financial services are available to the majority of the population.
- Emerging
(20 countries): These countries have basic ICT infrastructures,
financial services and regulatory regimes. However, they are challenged
by a number of factors, including a sizable informal economy, limited
enforcement of existing regulations, lack of ICT beyond urban centers,
and consumer preference for cash.
- In-Transition
(20 countries): These countries have overcome most of the challenges of
the earlier stages, but they are behind in some of the more advanced
digital payment solutions, including e-commerce and transit.
- Materially Ready
(20 countries): ICT infrastructures and digital solutions are
ubiquitous. The regulatory environment encourages private sector
investment and innovation in new digital solutions. But there is still a
need to continue the development of the digital money ecosystem and to
drive toward its near-universal adoption.
Each
country has its own unique history and culture, so its progress along
the readiness roadmap must be tailored to its unique circumstances. The
Roadmap report includes a few such concrete examples. But, an analysis of the
data at each stage reveals the most likely bottlenecks whose resolutions
will increase the likelihood that a country will transition to the next
readiness stage....
...
MUCH MORE
