Digital platforms offer areas for market participants to conduct business and trade. (Evans 2018) Two-sided platforms (such as ride-hailing apps) connect two distinct participant types, allowing them to benefit from trade in goods and services or other forms of interaction. The two groups are unable to individually capture the value created. These marketplaces rise in tandem with the number of people, participants, and transactions on the digital platform, resulting in network externalities between the two participant types. More than two different kinds of participants are involved in multisided platforms (such as content providers, search engines, and advertisers that link users), and the network externalities are even greater.
Important Technologies Fueling Digital Platform Development
Pertinent viewpoint: They are subject to change. The fundamentals of semiconductor technology provide a helpful place to start. Corporation noted that the complexity of semiconductors doubled every 18 to 24 months. Over the previous fifty-plus years, semiconductor technology has advanced more than ten million times thanks to Moore's Law, which is an exponential growth. Even though progress is slowing, it still forms the core of the majority of technological innovations that support microprocessors, memory, communications, sensors, and imaging.
As the name implies, infrastructure technologies offer the fundamental components of the platform economy (ADB 2021). These are:
Connectivity: Through digital connectivity, individuals and services can converse via wireless, optical, and wired networks. 54% of people worldwide had internet access in 2019. The ongoing expansion of the digital economy is reaching the remaining population.
Devices: A range of devices including wearables, smartphones, and personal computers are used by people to engage with the digital economy. The smartphone is currently the most popular gadget in the world, but wearable technology like smartwatches, earbuds, and eyewear is set to become the next big thing.
Imaging: The use of photography and video has advanced quickly thanks to imaging technologies.
Cloud computing: Compared to conventional computing equipment, cloud technology is expandable. This makes it possible for new startups in technology and services.
Transactional Technologies Facilitating Digital Commerce
Digital commerce is significantly facilitated by the third category of technologies, known as transactional technologies:
- Electronic payments: Digital payment solutions that are effective, secure, and reasonably priced for both individuals and businesses are essential to the growth and success of digital commerce. Digital payments via smartphone apps, mobile money accounts, or online banking provide a more secure and effective payment method. Additionally, this enables users to establish a digital footprint that tracks their financial activity and accumulates credit history.
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Digital identity: For the digital economy to function and allow citizens to access services like bank accounts, education, and health. In certain cases, this has extended to citizenship rights like the capacity to vote or obtain social benefits. Furthermore, cutting-edge biometrics like fingerprinting, iris scanning, and facial recognition are assisting in overcoming paper-based methods to create reliable, affordable digital identification systems that can expand to national levels.
Privacy and cybersecurity: Cybersecurity is essential for managing devices, facilitating safe transactions, and protecting different kinds of data. To prevent unwanted access to data centers and other comparable systems, cybersecurity tools are utilized. This is particularly important for organizations involved in banking, healthcare, social protection, education, utilities, manufacturing, and communication.
Effects of Digital Platforms on Development
Strong online networks or digital marketplaces that can significantly increase market share have emerged as a result of the internet and other digital technologies. They cut production and facilitate social and commercial activities that can increase economic development in three main and connected ways by lowering information and transaction costs:
1. Inclusion (Information and Search)
The internet can assist in filling in data gaps and more successfully addressing information asymmetries by expanding the speed and reach of search algorithms. For instance, e-commerce platforms have made it possible for small manufacturers or distributors to sell in both domestic and foreign markets by allowing them and services on demand, improving the caliber of products and services, and cutting costs.
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2. Efficiency (Coordination and Automation)
The internet also increases the production including spare assets, it dramatically increases efficiency and lowers the cost of carrying out specific tasks like inventory management. Thus, businesses, industries, households, and the public sector can all benefit from increased efficiency.
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Great insights on how digital platforms and tech like cloud computing and digital payments are transforming markets. For those looking to gain skills in this space, Intern Boot offers internships and certifications in these areas.