Bridging society’s digital divide: How investors can help

Key points:

• There is a growing ‘connectivity canyon’ between those who have access to digital technology and those who do not
• This can have a significant impact on education, employment, healthcare and more, holding back economic growth and deepening social inequalities
• Investors can play a role in helping address this digital divide

It may seem hard to believe for those of us who take digital connectivity for granted but around a third of the world’s population still has no access to the internet.¹

A recent report from the United Nations found a “growing connectivity canyon emerging between the hyperconnected and the digitally destitute” – with the digital divide creating a significant gap between those who have access to digital technology and all the benefits that it brings, and those who do not.

The Global Connectivity Report 2022 also says while 2.9 billion people have no access to the internet, hundreds of millions more are only able to access expensive, poor quality services.

Unsurprisingly, internet use levels in low-income countries remains far below that of high-income nations, at 22% versus 91%, and the share of internet users is twice as high in urban areas as in rural areas. There is also a gender divide – globally, 62% of men use the internet, compared to 57% of women.

Not having access to the world wide web can have serious implications for education, employment, healthcare, entrepreneurship and more – holding back economic growth and deepening social and global inequalities.

Over $1trn is estimated to have been lost in economic potential due to the digital gender gap alone.² And countries with higher rates of digitalisation had more resilient economies during the COVID-19 pandemic than those with lower rates of internet use.³

A need for infrastructure and services

Investors can play an important part in helping address this challenge and potentially narrow the digital divide, by directing their capital towards companies operating in a variety of sectors.

At the heart of the issue is access to technology and the infrastructure needed to create connectivity. Digital inclusion means making technology accessible to everyone – and while the cost of smartphones and digital devices is becoming lower in real terms, getting online is still expensive, particularly in some developing economies.

This is where companies like Helios Towers come in – the UK-based telecoms company builds and operates telecommunication towers in African countries, that provide much-needed voice and data services to people and businesses in areas with little or no fixed line infrastructure. In Europe, Infrastrutture Wireless Italiane (INWIT) provides connectivity for rural areas and during COVID-19 helped hospitals to develop remote care.⁴

Once people are online, there is still a need for services that directly address underserved populations. For example, nearly a quarter of people do not have bank accounts⁵ , but companies like Bank Rakyat in Indonesia provide digital banking services that can be accessed by smartphones, helping people to set up and grow businesses, giving them better financial prospects for themselves and their families, and contributing to their countries’ economic growth. Micro-businesses are increasingly able to accept online and card payments as companies like Square have entered the market, helping sellers to scale up their businesses and become more economically empowered.

Digital literacy goes hand-in-hand

But it’s not just in emerging markets where the digital divide exists. In the US, some 24 million people lack access to high-speed internet, and many more are not online, for example as they lack digital literacy.⁶

Having sufficient skills to use technology is crucial. The World Economic Forum predicts that nine out of 10 jobs will require digital skills by 2030 – but even in Europe, almost half the population – 42% - lacks even basic digital skills.⁷ This is an important element of the digital divide, which governments are taking steps to address. In July, US President Joe Biden announced more than $400m in loans and grants to support high-speed internet projects for rural US communities, while in Europe, the European Skills Agenda and the Digital Education Action Plan are among the European Commission’s policies aiming to address this problem.⁸

In the private sector, education providers such as IDP Education use online learning to help students not only improve digital skills but also study to achieve their ambitions, for example giving students in emerging markets the access and flexibility to learn English and placing them in universities around the world.

A need for global investment

Ensuring that the internet is accessible to the majority of people within the next five years needs $2.1trn of investment, according to the World Economic Forum.⁹ This includes developing digital solutions in areas such as healthcare, education and financial services, as well as teaching digital skills.

Yet as the cost-of-living crisis persists, there is a risk that more people will be forced offline as they prioritise spending on other areas including housing, food and energy.

Governments and corporates need to work together to help drive digital transformation, for example by investing in upgrading and expanding digital infrastructure, putting in place regulation to build competitive markets and to keep internet users safe, but also investing in education and digital skills.

Backing companies operating in these areas is a way for investors to participate in narrowing the digital divide, while aiming to achieve financial returns. And it is only through creating a more connected world that we will have digital equality, coupled with greater entrepreneurship, financial inclusion, and ultimately a stronger more sustainable global economy.