Decades ago, the idea of cloud computing, the internet, big data, or novel innovations in technology and the emergence of global economies built around fintech would not have been conceivable. Now, these are the drivers of 21st-century economies. The digital economy offers a new way of doing business for global economic development and inclusion (Gaziz et al., 2020). The digital economy is the sum of economic activities that utilize digi-form communication and information as the basis of production. In a traditional economy, the factors of production – land, labour, capital, etc., combine to create outputs of value. As mentioned above, the digital economy utilizes electronic data and technology to create products and services, and this comes with overarching benefits for individuals and the government.
Fintech is one of the greatest successes of the digital economy. In Asia, where e-commerce companies like Alibaba contribute more than 20% to the world’s B2C market, one could argue that the digital economy contributes a considerable volume of value to economies where government policies recognize the need for novel ways of improving the economy through ICT and digital information (Song et al., 2021). The internet is a core component of the digital economy. Since its inception, the internet has simplified how businesses reach their customers and how people generally buy and sell. In the era of the digital economy, all a potential customer needs is a website that details what product or service an organization offers. Thus simplifying the ease of making business and closing sales. Another great way the digital economy has impacted 21st-century society is the rumble of social media which has made information sharing and interaction simpler than ever.
Social media is an important part of the digital economy because it helps people and businesses connect with others while increasing engagement for economic or social gains. Unlike the traditional economy that thrives on the sense of physical activity: the coming and going of people, products, and services in exchange for cash, the digital economy evolved into credit cards, online payment options using digital information and technology to create job opportunities, drive economies and scale financial inclusion (Niu, 2022). For businesses and individuals, the benefits are apparent, and the question is, how much of these economic activities under the digital economy impact governments. The digital economy incorporates innovation and technology plus digital information to change the nature of demand, production, and payment and the size of human capital for global economic growth (Niu, 2022). The benefits of the digital economy are tailored to meet the requirements of individual nations, depending on how it prioritizes the sector. Thus, how much the digital economy contributes to economies lies in the primacy of reason for governments creating policies that support or impede the growth of the digital economy in the country.
For governments, the digital economy may mean an improved economy. In Asia, for example, where the digital economy has become a major economic driver, the government has witnessed a revamped economy that thrives solely on lending and financial services. The system has created more financial inclusion for the continent, especially in the Peoples’ Republic of China, where Tencent, Alibaba, and other e-commerce corporations contribute to the country’s GDP growth (Song et al., 2021). A digital economy means more data for policymakers and government decisions for economic development. Data is not only important to organizations; it equally helps the government formulate better economic policies based on data mined, collated, and analyzed. Thus, better economic decisions are made from recycled data from the internet and digital information.
In third-world economies, the digital economy forms the major driver of economic growth in such countries. Thus, because of the enormous potential the sector offer, many countries are restructuring their economic systems to allow for more data utilization to drive demand and supply, transform the industry, create jobs, build human capital and improve the efficiency of their economies.
In conclusion, the digital economy assembles digitalized data to create economic benefits, drive innovations, create jobs, and grow economies. For businesses and individuals, the digital economy drives efficiency in the way businesses are conducted while creating jobs and increasing outputs. A digital economy means more data for decision-making, an improved economy, and GDP growth.
Gaziz, S., Prodanova, N., & Bokov, D. O. (2020). Digital Economy and its Role In The Process of Economics Development. Journal of Security and Sustainability Issues, 9(4). https://doi.org/10.9770/jssi.2020.9.4(9)
Niu, F. (2022). The Role of the Digital Economy in Rebuilding and Maintaining Social Governance Mechanisms. Frontiers in Public Health, 9. https://doi.org/10.3389/fpubh.2021.819727
Song, M., Zheng, C., & Wang, J. (2021). The role of digital economy in China’s sustainable development in a post-pandemic environment. Journal of Enterprise Information Management, 35(1), 58–77. https://doi.org/10.1108/jeim-03-2021-0153