Illustration of different currencies connecting to a lock

IMF Annual Report 2019

Our Connected World
IMF Logo


Harnessing Digital Dividends

Stronger policies are needed to embrace the technological revolution.

Illustration of different currencies connecting to a lock


Harnessing Digital Dividends

Stronger policies are needed to embrace the technological revolution.

Analyze This! Fintech

Behind The Scenes

A workforce of humans and robots?

Asia is at the forefront of automation with an estimated 65 percent of the world’s total industrial robot usage for 2017. With about 1 million robots in use, it has the highest robot density, which is the number of industrial robots per 10,000 workers.

Asia may be the global leader in employing industrial robots, but it is also the region with the highest robot production. Japan and Korea are the world’s top two producers, with market shares of 52 and 12 percent, respectively.

Robotics and automation mean growth opportunities for the region but also economic risks, especially for low-cost and low-skilled labor, which has been the basis for the region’s role as “the factory to the world.”

To reap the digital dividend, policymakers need to tackle disruptions caused by automation and robots by supporting job creation without stifling innovation. This means revamping education, investing in physical and regulatory infrastructure that supports entrepreneurship and innovation, and addressing labor market challenges as well as income redistribution and safety nets.

Technology is rapidly changing our lives. It is redefining economic models, work relationships, and financial transactions, to name a few examples. Such disruptive power can bring many opportunities, such as greater financial inclusion. But it can also be a source of anxiety, especially for workers at risk of losing their jobs to automation. IMF work has focused on policies that can bridge the digital divide and harness digital dividends.

With as many as 1.7 billion adults globally with no access to financial services, fintech is emerging as a game changer. Nowhere is this more visible than in Africa. The use of mobile money has grown exponentially over the past 10 years, making the region the global leader in mobile money innovation, adoption, and usage. It is also the only region where close to 10 percent of GDP in transactions occur through mobile money. This compares with just 7 percent of GDP in Asia and less than 2 percent in other regions.

Financial innovations, such as crypto assets and blockchain technology, are also piquing the interest of central banks around the world. For example, they are exploring whether a central bank digital currency can be used as legal tender as physical money is now. A related issue is how to treat crypto assets in macroeconomic statistics based on the current statistical standards and classifications, since Bitcoin-like crypto assets and digital tokens without counterpart liabilities do not meet the definition of a financial asset. Fintech is undoubtedly democratizing financial services around the world, but it also comes with inherent risks and challenges. To help countries harness the benefits and manage the risks, the IMF, together with the World Bank, launched the Bali Fintech Agenda in October 2018.

Figure 1.4
Asia employs 65% of the world’s manufacturing robots

A pie chart showing the estimated percent of total number of industrial robots delivered in 2017

Sources: International Federation of Robotics and IMF staff calculations.

Digitalization is also changing the way firms produce and market goods and services, and its measurement is of critical importance. The IMF is part of the expert group contributing to the Handbook on Measuring Digital Trade.

Just as it is a force for inclusion, technology can be an agent of economic division. One example is the market power conferred by proprietary intangible assets and network effects on highly productive and innovative digitally based companies, generating a “winner-takes-most” dynamic. By changing the way we work, technology can also leave some people behind. New technologies—such as artificial intelligence, automation, and robotics—that can substitute for a broad range of human skills can be disruptive for labor, and especially for women.

Globally, about 180 million female-dominated jobs are at high risk of being displaced. This is because women tend to be employed in more routine-oriented jobs, which are most prone to automation. Our research, however, shows that not all labor is replaceable, and artificial intelligence might transform jobs more than it will make them obsolete. Technological advances boost productivity, which over time creates new jobs and allows incomes and living standards to rise.

So what can countries do to harness the disruptive power of technology? They need policies to facilitate labor reallocation and shorten periods during which labor remains idle. But more fundamentally, countries need to invest in their people and provide them with opportunities. This means more effective public spending on education, making it responsive to market demands and providing opportunities for lifelong learning, along with appropriate redistributive policies. It also means investing in digital infrastructure and upgrading competition frameworks to ensure that the benefits from technology are fairly shared.

Technological advances present incredible economic and social opportunities. But they need to be supported by the right policies to ensure that they bring benefits to all.

Panelists gather after the Bali Fintech Agenda event at the 2018 IMF-World Bank Annual Meetings in Bali, Indonesia.

Panelists gather after the Bali Fintech Agenda event at the 2018 IMF-World Bank Annual Meetings in Bali, Indonesia. Ryan Rayburn/IMF Photo

What is the Bali Fintech Agenda?

Countries around the world are trying to harness the benefits and opportunities of rapid advances in financial technology that are transforming the provision of banking services, while at the same time managing the inherent risks. The IMF–World Bank Bali Fintech Agenda proposes a framework for countries to assess their policy options and adapt them to their own circumstances and priorities. The 12 elements of the framework were distilled from members’ own experiences and cover topics relating broadly to enabling fintech, ensuring financial sector resilience, addressing risks, and promoting international cooperation and information sharing.