Technology & Innovation

Digital public infrastructure: building the rails of the digital revolution

April 03, 2023


Digital public infrastructure: building the rails of the digital revolution

April 03, 2023

Monica Ballesteros

Senior manager, Policy and Insights

Monica Ballesteros is a senior manager in the Policy & Insights team at Economist Impact. Monica works with clients in the private and nonprofit sectors on research programs to help answer some of the critical economic and public policy questions facing our world. At Economist Impact she has led several bespoke engagements to promote economic, digital and financial inclusion. 
Monica has over 10 years of experience as a communications and research professional. Prior to her time at The Economist Group, Monica worked in the International Affairs Unit of Mexico’s Ministry of Finance and Public Credit, where she was part of the G20 task force. She also worked as an account manager in one of Mexico’s most prominent consulting firms, where she designed and implemented communication strategies for multinational corporations. She holds a master’s degree in international relations from the Fletcher School of Law and Diplomacy and a bachelor’s degree in political science from Wellesley College.

Just like railways were essential for economic integration during the industrial revolution, investments in digital public infrastructure are crucial to realise the gains of digital transformation.

These digital rails facilitate a more inclusive provision of digital goods and services with massive economic returns. These rails usually come in the form of a stack, comprising all the technologies required to operate an application: computer languages, architecture, libraries, servers, user interfaces and experiences, and software. The India Stack pioneered the development of an interoperable public platform that layered digital IDs, interoperable payments and a privacy data sharing framework that enabled a thriving digital ecosystem. Singapore developed the Singapore Government Technology Stack (SGTS) for agencies to build their digital applications. The SGTS comprises layers of software and infrastructure to improve the speed government agencies deliver services on a common set of infrastructure. These investments have allowed countries to improve public services and accelerate the digital transformation of the financial sector.

Investment can accelerate economic growth

Digital public infrastructures hold a huge economic potential for low- and middle-income countries. Layered payment and digital ID platforms can facilitate the expansion and digitalisation of financial services and the use of open data. Open financial data can broaden and improve the range of product options available to customers, saving them money. It can also cut costs and make it easier to adopt automation technologies, with the associated efficiency boost. In India,  the use of the national digital identification system, Aadhaar, for “know your customer” (KYC) verification of retail consumers reportedly reduced costs for financial institutions from about $5 per customer to $0.70 [1]. Open data can also improve fraud prediction. Real-time access to customer data provides more evidence and clues with which to flag suspicious activity.

Low- and middle-income countries can use digital public infrastructure to leapfrog traditional development trajectories and improve sector-specific and macro-level outcomes. The Digital Public Goods Alliance estimates that the adoption of digital public infrastructure in the financial sector can accelerate GDP growth by 20-33% by 2030. In India, the total potential GDP impact from open financial data in 2030 is between 4% to 5% [2].

Foster more inclusive and resilient economies

Digital public infrastructure has been a key driver of financial inclusion. India saw the number of people with a bank account  increase from 27% in  2008, to 78% in 2021 [3]. The India Stack systematically removed barriers to inclusion. In 2008, only 25% of Indians had a form of identification. In 2009, the Aadhaar programme, the first layer of the stack, was launched to address this challenge; in 2016 Aadhaar had more than one billion users. The stack addressed another key barrier to inclusion through the creation of the Unified Payments Interface (UPI), a real-time mobile payment system. This system, connected to Aadhaar numbers, enabled data sharing and allowed participation and innovation by fintech companies.

Digital public infrastructure has also been vital to building economic resilience. According to the World Bank, countries that were able to use digital databases to coordinate their covid-19 cash transfer response, reached, on average, 51% of their population with cash transfers, whereas countries that could not rely on existing databases reached only 16% [4] . Ukraine has also leveraged its digital government application (Diia); a digital wallet where citizens can store digital documents—including a passport recognised by neighbouring Moldova and Poland—to continue using public services and receive emergency payments [5].

Critical infrastructure for the 21st century

Strategic investments in public infrastructure can help governments foster economic growth and target key areas of development. Digital infrastructure can provide the necessary rails to create robust digital ecosystems, spurring innovation and levelling the playing field for a broader set of competitors in the financial and tech sectors. In addition to accelerating economic growth, these critical investments can help promote financial and digital inclusion and create more resilient and equitable economies.

[1] McKinsey (2021) Financial data unbound: The value of open data for individuals and institutions
[2] Digital Public Goods Alliance (2022) Bold Investments for Digital Public Infrastructure: Quantifying the Human & Economic Impact
[3] World Bank (2022) Global Findex
[4] World Bank (2023)  How digital public infrastructure supports empowerment, inclusion, and resilience
[5] World Bank (2023)  How digital public infrastructure supports empowerment, inclusion, and resilience

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