SINGAPORE - Governments worldwide will need to step up and build interconnected infrastructure to harness and spread the benefits of their digital economies within their own countries and across their borders, said the Monetary Authority of Singapore (MAS) in a report launched on Monday (April 26).
The report - launched at a hybrid Singapore FinTech Festival (SFF) event - notes that while the rapid growth of digital solutions has helped enhance the economic and social well-being of millions of people around the world, digital inclusion and interoperability with different devices remain as challenges.
Interoperability refers to the basic ability of different digital products or systems to connect and exchange information with one another.
Foundational digital infrastructures are critical for more pervasive and inclusive digitalisation across societies, the report said. They will allow different users and different digital devices to seamlessly interact with one another, it noted.
Such foundational digital infrastructures will enable interoperable solutions and seamless digital services to reach more people and businesses, at lower costs and greater convenience, it added.
The report was prepared in collaboration with Mastercard and the central banks of Brunei Darussalam, Cambodia, Ghana, and Kenya, MAS said in a separate statement.
MAS said the infrastructure is also necessary for seamless cross-border transactions around the world.
"Foundational digital infrastructures are public goods that governments have a vital role in providing or facilitating. Governments can do this through direct provision, or developing open standards for technical implementation, or guidance on best practices," the central bank said.
The report sets out four key pillars of a foundational digital infrastructure - digital identity, authorisation and consent, payments interoperability and data exchange.
"These are the four essential ingredients to enable end-to-end digital transactions; they collectively meet the foundational needs of a digital economy," MAS noted.
A trusted digital identity will be a core component of the infrastructure. It will ensure authentication and validation of an individual's identity, while protecting privacy and security of information.
Authorisation and consent will ensure transparent and secure digital transactions through authorised use of data and mechanisms for obtaining users' consent.
Meanwhile, payments interoperability is needed to facilitate seamless payments between digital and physical systems and for seamless domestic and cross-border transactions.
Data exchange will enable users to make their data accessible to third parties for the benefit of the users, such as for payments and financial planning, among other things.
Mr Ravi Menon, the managing director of MAS, said in the report that he hoped it will help players in the financial sector and broader technology community to better understand the key value drivers of a strong digital infrastructure, and inspire them to explore the digital infrastructure potential for cross-border use.
Speaking at the SFF event, Mr Menon said: "To create a truly efficient and inclusive digital economy, digitalisation must be end to end."
He said while we have seen rapid adoption of digital solutions, many of these solutions are not interportable and digital transactions are not seamless.
"It means that we are not able to exploit the full efficiency benefits of digitalisation. It also means that the digital economy is not as inclusive as it should be," he noted.
The MAS chief said these issues can be addressed by foundational digital infrastructure and help digital services reach more people and businesses at lower costs.
"The public and private sectors must come together to create common digital infrastructures and avoid the pitfalls of isolated technology solutions."