Digital Trends Carry Extra Risks for Emerging Markets
Governments have an opportunity to ensure the forthcoming digital revolution is inclusive and competitive, and safeguards consumer interests.
By Priya Jaisinghani Vora, Matt Homer, and Kay McGowan
This article was co-produced with emerge85 partner Future State.
Digital data is growing exponentially in volume and value. More people and devices are coming online and artificial intelligence is making data-driven predictions more powerful. Decisions about how individual user data is managed and governed have profound social and economic implications. As a result, advanced economies are struggling to keep pace with the implications of commercial monopolies and breaches of public and private databases. But the risks and rewards of the data revolution are potentially greater still for developing countries.
Developed economies are grappling with how to retrofit our digital lives with the safeguards needed to protect personal privacy, while developing economies are at an inflection point that necessitates a strategic vision for data. Though rates of participation in the digital economies of low- and middle-income countries are lower than in advanced economies, connectivity and usage are spreading quickly, albeit unevenly. This lag provides an important but limited window of opportunity over the next several years to help shape data governance so the digital economy can benefit everyone before large market players irreversibly consolidate their dominant market positions.
Risks of the data revolution
A commonly cited concern about data and technology trends in developed economies include the potential for technology to exacerbate inequities between communities that are digitizing and those that aren’t. Connectivity-constrained communities risk becoming the new “digital underclass”, resulting in lower digital skills, fewer companies vying for their business, and less access to the markets and information the internet affords.
A second oft-cited concern is the risk associated with commercial monopolies. By design, platform businesses such as Amazon and Facebook not only provide products to consumers but also capture their data. Data usage patterns tend to initially be used to target ads or improve the platform’s services, thus creating self-reinforcing cycles whereby more usage of a platform creates more value in using the platform. In the United States, this has resulted in entire industries being quickly dominated by a handful of commercial platforms. In their dominance, these companies have the power to suppress competition, resulting in potentially dangerous concentrations of economic and political power.
If there is anything to be learned about the massive data concerns unfolding in the developed world, it is that the emerging economies of the world must act now.
The advent of fake news and micro-targeting of political propaganda in recent elections, as well as breaches of databases such as Equifax and the US government’s Office of Personnel Management, illustrate a third risk created by massive concentrations of private data: the misuse or theft of personal data. As data is increasingly concentrated with a smaller set of actors, these commercial and government data pools become targets for malicious attacks, or enable the data to be used for illicit purposes. The concentration of data also makes it easier for companies or governments to surveil the population, a growing concern among citizens.
Emerging markets are not immune
Emerging economies are even more vulnerable to these risks. There are unique factors common across most developing countries that indicate these concerns around data and technology will only be exacerbated. For example, data deficits are more likely to emerge in economies or communities with low purchasing power and, therefore, represent the least attractive segments for commercial players to serve. Indeed, of the 4bn people not online, the mobile and technology community actively talks about reaching only “the next billion”. And those online have greater access to information, jobs, and markets to improve their social and economic standing. Thus, the persistent gap between those online and those offline is exacerbating and reinforcing inequities.
Developing countries also have weaker institutions not well poised to keep up with technology trends and their implications. It is clear from the India experience that technology, even when designed for the public good, must be partnered with policy, law, and regulation to establish consumer protection and privacy; mechanisms to enforce the rules; and a thriving civil society to keep the government in check.
Finally, consumers in developing countries, particularly those who are low income, are structurally more vulnerable to data capture because of the tools and apps they use. The cost of computers and scarcity of reliable power leads more people to access the internet through a mobile device than a desktop. In India, 80% of users access the internet through a mobile channel. In Africa, where internet access is significantly lower, 64% of users rely on a mobile device for internet access. The mobile device, whether handheld or tablet, has revolutionized the cost and convenience of accessing the internet but simultaneously led to a user interface dominated by apps. Apps such as Alibaba, WhatsApp, and Facebook have become portals through which a user can access a variety of services generating further data for the parent company. In contrast, desktop users have more options to access services and information available on the world wide web.
If there is anything to be learned about the massive data concerns unfolding in the developed world, it is that the emerging economies of the world must act now. There is a window of opportunity for governments to put in place policies and systems that ensure the forthcoming digital revolution is inclusive and competitive, and safeguards consumer interests. Once platform businesses such as Facebook, Google, and Alibaba dominate the daily lives of citizens, it will be much more difficult to introduce such safeguards.
Priya, Matt, and Kay are the co-founders of Future State, an entrepreneurial effort supported by the Rockefeller Foundation to advance inclusive and equitable digital economies.