Fintech

An Innovative Nation is a Connected Nation

MEDICI

The value of connectivity is difficult to overestimate – nations that are most successful in innovation adoption are the most connected nations, where the rate of internet penetration and mobile technology adoption are the highest. Indeed, nations recognized as the most innovative ones in GII 2016 – Switzerland, Sweden, the UK, the USA, Finland, Singapore, Iceland, Denmark, Netherlands and Germany – all have internet penetration rates varying from 82.5% to 100%.

An Innovative Nation is a Connected Nation

Data sources: GII 2016, Internet Users by Country (2016)

Internet connectivity has far-reaching economic and social benefits, long recognized by professionals and governments. Among those benefits are enhanced productivity of labor and capital, reduced transactions costs due to enhanced speed and quality of information flows, greater innovation and adoption of new organizational models and business processes, enhanced access to financial capital with services such as mobile banking, facilitation of entrepreneurship and business expansion, access to new markets and improved human resource qualification and specialization.

Internet connectivity is critically important for developing countries on their way to smart, innovative nations. As emphasized by specialists from Deloitte, in developing countries, the Internet connectivity enables creative solutions to overcome the limitations arising from economic constraints and limited infrastructure. Extending internet access can give developing regions an opportunity to leapfrog developed world with the adoption of cutting-edge technologies, as professionals have observed with mobile banking.

China is one of the most interesting examples of the economy that owes its disruptive power to nationwide connectivity and the rate of mobile technology adoption. In its new report on China’s FinTech disruptive power, DBS emphasizes ubiquitous connectivity of the nation as one of the key drivers of financial technology in China – the report suggests that in June 2016, China had 710 million internet users, which is more that the US and Europe combined. At the recorded growth rate of internet connectivity in the country, professionals estimate that China will be able to reach penetration rates in North America (89%) and Europe (73.9%) in just a few years from the current rate of slightly more than 51%.

Lower internet penetration rates in developing countries, however, are not representative of the absolute numbers, where those countries massively beat nations with higher connectivity rates.

An Innovative Nation is a Connected Nation

Data source: Internet Usage Statistics

Wide internet connectivity, however, is not enough for nurturing an innovative nation – adoption of connected devices (smartphones, in particular) is another strong facilitator of advancements across industries, in financial services and insurance especially. Indeed, the regions with weakly developed physical banking infrastructure and largely unbanked population, mobile banking and mobile money services have taken off successfully to connect millions of people to the global economy. Examples include certain African countries (Kenya, Tanzania, Ghana), abovementioned China, India and more. Mobile money has been noted to be driving the cost of international remittances and facilitating financial inclusion in mentioned countries.

DBS emphasizes that the smartphone is becoming the universal internet access device. There is a clear harmony in data on the most innovative nations as well as the booming ones, their rates of connectivity and the highest smartphone adoption rates: ~68% of Switzerland's population has a smartphone with the same stat being available for other countries recorded at 72% for the US, 68% for the UK, 60% for Germany, 58% for China, etc. Moreover, Pew Global Research suggests that there is a strong relationship between per capita income and internet access, smartphone ownership.

An Innovative Nation is a Connected Nation

Source: Smartphone Ownership and Internet Usage Continues to Climb in Emerging Economies

The massive growth in personal smartphone usage and increasing the prevalence of connected devices are leading to an explosion in data generation, as professionals note. The Economy of Data (EoD) sees new business models derived from this data, not simply for reselling data, but for creating completely new market offerings.

New value streams and new business models are being built on the foundation of highly connected nations and the shift in primary access points from physical to digital through mobile devices. As we live in a mobile-first world with the number of mobile phones expected to reach ~8.6 billion globally by 2021 and 90% of data traffic coming from smartphones by the same time, the transition to mobile-centric business models is inevitable, which itself will significantly expand the reach opportunities for entrepreneurs in countries with high and booming smartphone adoption rates. Africa, for example, saw the number of smartphone connections across the continent almost double over the last two years, reaching 226 million. Selling prices have dropped from an average of $230 in 2012 to $160 in 2015.

Mobile technology has the potential to become the primary focus of businesses as users tend to stick to convenience and seamless experiences wherever they are and whenever they want. It’s an especially important property when it comes to financial services. Mobile-friendly interfaces didn’t complete the task of gaining loyalty, but mobile-first solutions have proven to possibly become the banking business model of the future.

MEDICI Team

MEDICI

MEDICI Team is a group of content writers, bloggers, journalists, researchers, and editors from the MEDICI team who collaborate to create FinTech insights.

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