The Digital Development Divide

Relative Deprivation

There has recently been a piece of academic research in the Communications Theory space that the Fintech industry might like to take a note of. You can read the whole of the article here: it suffers under the cumbersome academic title: The Social Relativity of Digital Exclusion: Applying Relative Deprivation Theory to Digital Inequalities. There is a lot in here that only other academic researchers will really understand or care about. But there is also much for entrepreneurs to ponder as well. What struck me was that what Dr Helsper presents is an opportunity not only for her to apply relative deprivation theory to research into digital exclusion, but for the Fintech industry to set about making a real difference to the digital development divide.

The central question addressed in the research is one that has bothered many of us for a long time. Why do some people adapt to ICT and take it up as early adopters and others resist it and fail to take it up at all? Are they excluded? Do they exclude themselves? The digital divide is the gap between the levels of ICT take up in different countries. Why are some countries, especially in the developing world, slower at closing that gap than others? Indeed, why are other countries and emerging economies moving even faster than the industrialised world? Should we look for explanations at the level of individuals or countries?

In the literature that Dr Helsper has explored, it is individual characteristics, she says, that are often taken as the start and end point of analyses: “This assumes that stable, personal features such as socioeconomic circumstances or household characteristics consistently influence how individuals engage across different contexts. Even in research that focuses on the adoption of technologies in everyday life, the processes that drive adoption of ICTs by individuals within households are often without clear theorization of how individuals influence each other, or how others, who are not part of the household unit, influence individuals within the household.” But she goes on to show that either people think it is macro level problems of economy or infrastructure that are holding societies back or it is personality and skills. What the explanations do not seem to offer is the idea that it is context that might matter more and that this context can change.

Innovation Changes Behavior

Researchers have also tended to have quite a static view of the technology itself. Absolute deprivation is the situation in which you have less of everything than another person. It is the measure of a zero-sum game in which it is all or nothing. Very few things in the world are based on absolute deprivation but in this field there tends to be assumptions that there are fixed levels of connection speed, skill, or engagement. In light of how fast the Internet changes in all these senses, this is an oddly static approach and likely to lead to policies and interventions that become obsolete the moment they are introduced. And as we know in the Fintech industry, many countries leap frog generations of technology to adapt new systems, for example moving from phone to mobile broadband to deliver hand held transactions with few of the small steps between. We also know that innovation changes behaviour – think of cash to cheque to card to phone to transfer. This is a dynamic and changing set of contexts. It disrupts the picture and therefore can challenge the feeling of relative digital deprivation that might be holding people back.

It is arguable that outside rural areas and places of the worst poverty and isolation in the world, there is no long a state of absolute digital deprivation. Everything is relative. This matters hugely because your digital skills relative to another person’s digital skills can determine employment. Your countries levels of digital penetration, relative to another, can determine comparative economic advantage. As Dr Helsper puts it: “in a world that is increasingly and more complexly digital, a person whose digital resources stay the same will become increasingly excluded because to stay “equally rich” they have to continuously increase these resources.”

Financial Wellness

How then do you enhance digital adoption? One way is accepting that context matters as much as technology. Assume that the technology base is there, the reality is that people compare themselves to other people and they might change their behaviour in response to what they see other people doing. In Fintech this is particularly true for daily transactions and larger family financial planning needs. The reality can be that the digital deprivation is entirely subjective – they see it themselves, it is not objective – there are no real barriers. Dr Helpser does not claim that this is what is holding societies back only that it needs more research. However, from a Fintech perspective and a practical perspective, herein lies the opportunities and the gap that many start-ups have already began to fill. They want any size of customer, they want to look at all aspects of the customers life and they want to use technology to leap frog barriers, real or imagined, that are holding the digitally excluded back. All of these things, taken together, are Financial Wellness.

The holistic approach is also the best approach for breaking down self-imposed digital exclusion and removing those feelings of relative deprivation that might be holding individuals back. And if governments and donors can fully embrace this approach, support Fintech innovation and provide digital education and cyber skills training when required, then what works for the individual can start to work for country. Financial Wellness is one important part of addressing some of the deeply rooted causes of digital exclusion that do not stem from weaknesses in the critical information infrastructure alone but from our feelings about what we don’t have, and others do. A feeling of relative deprivation can also, then, be a source of motivation to act. It might be real, or it might be imagined but if we can reach people with the right tools that make their lives easier or give them the skills they need to find work, then we can eliminate the digital development divide.

Make Change Happen

My writing on Financial Wellness is designed to help the Fintech industry think about how to make change happen and what is needed to motivate people to reinvent financial services for the 21st Century. That means developing a Fintech sector with a social conscience because it is the right thing to do and because it makes sense for our customers and therefore our bottom line.

Three things drive people who want to make change in society happen: Engagement, Self-reliance and Altruism.

  • Know what change you want to make it happen.
  • Be able to make things happen on your own.
  • You need to want to do it for the good of others.

When these general principles are in action then we can achieve change.

Altruism for Entrepreneurs

For entrepreneurs, the same qualities can be applied. Altruism does not mean that you do not want to make a living from what you sell but if you are only driven by greed you will not succeed. You must be driven by the desire to provide a service, sell a product or make an innovation that you get paid for us but that serves a socially useful purpose. Otherwise, why get up in the morning.

When citizens take or are given control over their lives and their choices and they have these qualities, then change happens. When entrepreneurs think beyond balance sheets and engage with customers needs, they create successful companies.

But we need to add one more to this list: resources.

This is a transforming age. Austerity is ending but debt is still very high. Jobs for life are disappearing but the gig economy not yet fully embedded. Financial Wellness needs to be at the heart of the tools entrepreneurs in Fintech use to create new products and services.

Security in an Uncertain Age

When you ask people what they want, it is generally to be financially secure, to have their health, to educate their children and broadly for their children’s lives to be better than their own. That is at the heart of the Financial Wellness that I seek.

If you are going to become an agent of change, then the challenge is to decide for yourselves what your general principles are. Not to be undermined by the cynics nor be less than idealist.

It is not sufficient to merely imagine the world as we want it to be.

We have to work at ways in which we can make it like that. To drive Financial Wellness to the top of the agenda we need to:

  • Consult and build coalitions in favour of holistic approaches to financial security within our industry and more widely
  • Treat citizens as self-reliant human beings so that they behaviour like citizens and with financial responsibility they become customers
  • Embrace new technology as the means of delivering security and linking social well-being to financial services

These things are happening in start-ups all over the world. A slow revolution in the Fintech world is underway.

You can see me speaking more about my thinking on Vimeo here

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