You know the feeling. That popup notification that tells you how many hours you’ve spent on your phone that week. You might wonder where your time went, but the truth is, you helped create all kinds of information and value. Working. Shopping. Banking. Monitoring our household appliances. Every minute spent online is part of something bigger. We’re building and contributing to the digital economy.
The digital economy is built from those networks upon networks of interconnection – of people, data, mobile technology, the Internet of Things – all of which is held together by today’s accelerating hyperconnectivity. Many businesses are already riding the wave of digital transformation, but those who want to lead the digital economy are reimagining how value is created in their industry. They’re strategically adapting their conventional business models for new opportunities in key areas. Here’s where the digital economy is evolving fastest and where businesses are looking to leverage and stay ahead of changes in the months ahead.
Social Commerce is Growing
As the digital economy evolves, social media and eCommerce companies have come together to create a new business model: social commerce. The global social commerce market generated US$474.76 billion in 2020 and is expected to expand at a compound annual growth rate of 28.4% from 2021 to 2028. eCommerce platforms are as strong as ever, but social commerce is giving customers the added opportunity to make purchases right from their social media feeds. The model shows promise for brands and businesses with strong social reach, especially in apparel and beauty products, where customers appreciate a seamless shopping experience. Sites like Pinterest, Meta, and Instagram are already providing more detailed shopping information on their images. We can expect to see more “buy” buttons appearing directly in social apps, and payment integrations that give customers their preferred digital payment options.
It’s Getting Easier to BNPL
Shoppers have always preferred getting something today and paying for it tomorrow. It used to be done with credit cards, but fintech has brought a new business model to town: Buy Now Pay Later, or BNPL. This model divides the price tag into several smaller, equal monthly payments, often without interest. . As an additional payment option, BNPL reaches more customers and cuts down on cart abandonment.
It’s not only the big eCommerce platforms like Amazon that are supporting BNPL. Many independent retailers are joining the fray, especially those with luxury and higher-priced items, such as fashion and beauty products. Payment becomes far more manageable for younger shoppers despite the tight financial climate. Millennial and Gen Z shoppers also prefer the ease and flexibility of installments over credit card fees. Vancouver-based accessible luxury clothing and accessories retailer OAK + FORT recently used BNPL to boost reach and increase sales and give younger shoppers more access to their products. Overall, the BNPL numbers are impressive. A recent study showed 55 billion in BNPL sales in the US in 2021, expected to double by 2024.
Expect More SaaS
With the need for increased processing power and data storage capabilities, more and more companies are renting off-site cloud computing services to run applications. Entertainment and business products companies are swiftly moving to the cloud as well, and adopting the lucrative Software as a Service (Saas) subscription-based model. Instead of buying products or software, customers sign up yearly or month by month to get access to streaming services, such as Netflix, to payment processing and customer management software. Just as we’ve seen an explosion in digital content streamers, we can expect to see SaaS starting to take a larger portion of software sales revenue in the coming years.
Brands Prepare for the Metaverse
Talk of an emerging metaverse has exploded of late alongside Facebook’s recent rebranding as Meta. A metaverse uses virtual and augmented reality technologies to enable activities in virtual space – from socializing, to business, to shopping and entertainment. Online gaming and some social media platforms already exist as metaverses, allowing in-game or in-app virtual purchases, trading of virtual assets, NFTs and cryptocurrency. Now, more brands are looking to the metaverse as an opportunity to extend their reach and increase sales by debuting NFTs, selling virtual items and apparel, or using blockchain technology to authenticate limited edition or luxury items. The territory is still uncharted, but big-box retailers are planning for what’s next. Walmart, for instance, recently filed a series of trademark applications for making and selling virtual goods, and is considering offering its own virtual currency and NFTs.
The digital economy relies on those billions of people on the Internet producing billions of bytes of valuable data every day. But all that growth brings an increased risk of cyberattack and an urgent need for governments, businesses and individuals to reduce the risk of identity theft and protect sensitive information. In response, cybersecurity solutions are getting more sophisticated and using machine learning and artificial intelligence to detect, prevent and respond to attacks. As enterprise computer networks grow in size, move off-site, and connect to a range of technologies and devices in the physical world and in the cloud, enterprises are adopting zero trust architecture as a new security model. Zero trust reinforces security inside distributed systems by requiring mutual verification and multi-factor authentication. Customers already expect companies to use best efforts to protect their data and their transactions; the digital economy is bringing new models to deliver the same assurances.
As the digital economy evolves, businesses around the world are embracing the opportunity to reinvent themselves and break out of traditional ways of reaching consumers. With social commerce, the metaverse and BNPL among the transformative options on the horizon, the digital economy promises a lot of excitement.