What is a Digital Economy?

The Digital Economy has been attracting a lot of attention lately, promising an exciting revolution in the way humans interact and do business by changing how we produce and consume. The transition to a Digital Economy has led some to worry about losing their jobs to automation, while others marvel at what digital technology can actually do to propel humanity forward. But what exactly is a Digital Economy?

“Digital Economy” is one collective term for all economic transactions that occur on the internet or using digital computing technologies. It is sometimes thought of as the Internet Economy. The term was first coined back in the 1990s when people began to focus on the impact of the Internet on the economy. Indeed, since then we’ve seen landmark changes in the way the world conducts business, with more of a reliance being placed on software or digital technology. In fact, 7 of the top ten biggest companies in the world are from the digital sphere – names like Microsoft, Apple, Google, Amazon and Alibaba.

It should come as no surprise that one of the main components of a Digital Economy is e-commerce. The businesses that adapted to, and adopted, the Internet and embraced online business in the last decade have flourished. Understanding the dynamics of going digital has become non-negotiable as the Digital Economy will soon become the new normal.

One of the hallmarks of a Digital Economy is the ability for businesses to operate more efficiently while using – and generating – large amounts of data. Traditionally, when we make purchases in a brick-and-mortar store using cash, there’s no way for the business to keep an account of our personal consumption or financial transactions on a large scale. Now, ordering online and paying electronically means that many of our consumption and financial transactions generate electronic data which can be analysed and help to improve businesses’ ability to streamline and tailor services and products to our needs.

The promotion of a Digital Economy has pushed the e-commerce sector into overdrive. Not just direct selling but buying, distribution, marketing and creating have all become easier due to digital technology and the Internet that permeates every facet of modern life.