What Is The Digital Economy? Everything to know

Exploring the Broad World of Digital Economy

Digital transformation has taken the world by storm. The adoption of digital technology for transforming businesses and services has massively helped improve and enhance customer experiences. As per the latest reports, in 2022, the digital transformation market size reached USD 594.5 billion, further extending robust estimates that by the end of 2027, this figure will reach almost USD 1548.9 billion at a CAGR of 21.1%. 

What is Digital Economy


As the digital transformation market is experiencing a boom, the digital economy is walking hand-in-hand to experience its favourable impact. Also known as the internet economy or web economy, the digital economy covers all the transactions taking place on the internet, merging conventional and digital economies into one unit. 

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This article covers the digital economy meaning and its various associated aspects. 

What is a digital economy?

When digital transformation takes over traditional economic activities, a digital economy is formed, powered by the internet and other electronic means. The financial activities in a digital economy emanate from innumerable online connections that occur daily among businesses, processes, data, people, and devices.

Hyperconnectivity is the pillar on which the digital economy stands strong. Hyperconnectivity refers to the growing volume of interconnectedness between organisations, people, and machines resulting from mobile technology, the internet, and the Internet of Things (IoT). 

Interestingly, this new economy is taking good shape. Conventional notions regarding business structures and firm interactions are taking a backseat, making way for technologically advanced business models and markets. Consumers are also learning to obtain goods, services, and information from this new economy, making things easier and more convenient. 

The main factors which are driving this digital transformation include the following:

Electronic means

Electronic means like smartphones, computers, and other devices like wearables and smart TVs are powering the digital economy. 


It is needless to say that the internet has changed our lives massively and transformed our daily activities to a great extent, from how we live to how we entertain ourselves. With the advent of the internet, companies can now reach all corners of the world, defying geographical barriers and boundaries. All goods and services now have a global market and global customers. 


Businesses can no longer undermine the importance of data. A significant part of the digital economy, data helps make informed decisions regarding the business, designing and developing new services and products, getting insights about the target audience and so on. 

Considering all these factors, reports say that the global investment in digital transformation will almost double between 2022 and 2026. From USD 1.85 trillion in 2022, the figure is expected to reach USD 3.4 trillion by 2026. 

Three Important Things About the Digital Economy

Connecting to a global environment has become a cakewalk for people with the help of various devices like tablets, smartphones, smartwatches and other mobile internet devices. With internet connectivity, customers can become a part of the digital world anywhere and anytime. 

The digital economy is open for companies across the globe to sell their products or services. Customers worldwide can access these products and services to become an integral part of the digital economy. The transactions for these purchases take place online via different platforms. 

Here are three important things that make a digital economy different from a regular economy:


Various online tools, computer applications and digital platforms play an important role in carrying out business processes in the digital economy. 


In the digital economy, businesses have various technological resources, including software and hardware. Along with this, there is also the need for specialised and skilled human resources. 


E-commerce refers to the buying and selling of goods and services online. Generally, the goods and services are delivered to the customers’ doorstep in e-commerce. 

Along with these, e-banking and e-governance are also integral parts of the digital economy. 

Notable Characteristics of The Digital Economy

Now that we have a basic idea about the digital economy, let us focus on the notable characteristics which make this economy so popular. Some of the characteristics are as follows:

Round-the-clock availability

A digital economy is not time-bound and is available 24/7. This means that businesses can carry out their operations on a round-the-clock basis. They can reach their customers anywhere at any time of the day. 


One of the main components of a digital economy is data. Enterprises leverage benefits from the massive volumes of generated data for making decisions, targeting audiences, and creating new services and products for the business. 

Completely internet-driven

The Internet is the main pillar on which the digital economy stands. The internet brings the whole world to your fingertips. Organisations can reach out to new customers and venture into new markets for business expansion. 


The speed at which the digital economy operates is surprising. Businesses use and implement the latest upgraded technologies to provide the best services to customers. Organisations are on a constant lookout for innovations to make their business better in all aspects. 

Global reach and approach 

One of the prominent characteristics of a digital economy is its global reach and approach. There are no confinements of geographical boundaries. The economy is interconnected, and businesses can reach new customers globally. 

Highly competitive zone

A digital economy is a highly competitive arena. There are huge options and choices of products and services on online platforms. Customers can browse through different platforms before they make a purchasing decision. Businesses have to do something unique and different to grab the eyes of customers. 

How does a business benefit from the digital economy?

Overcoming the limitations of a conventional economy is possible with a digital economy in all aspects – including marketing, production, sales, and so on. Customers are also empowered to make choices from the abundant varieties available. 

Here are some reasons why the digital economy seems to be crucial:

Innovation is the key

Digitising business processes and businesses as a whole is an innovation in itself. Opting for the digital mode opens up many opportunities for businesses. They have the scope to experiment with new technologies and ideas to take their business to a new dimension. Organisations can work on ways to better their produce and market value and boost the sale of their products and services. 

Helps in reaching more customers

The success of a business depends on its customer base. Along with getting new customers, businesses concentrate on retaining the old news. With the digital economy, businesses can reach new markets globally. A business’s products and services reach customers anywhere in the world, boosting the consumer base significantly. Customer retention is also a crucial part of the digital economy. 

Benefits of Digital Economy


Helps in increasing business efficiency 

There is no doubt that the digital economy helps in improving business efficiency manifold times. Users can avoid the majority of glitches they usually face in conventional businesses by participating in a digital economy. A digital economy has access to technologically advanced tools and techniques, which help improve business operations. Moreover, businesses can now leverage the benefits from the generated data and make informed decisions accordingly. 

Helps in reducing costs in various departments

Traditional production, marketing and distribution methods in a business are expensive compared to the digital mode. With the implementation of new technological tools and techniques, marketing, advertising, sales, production and distribution costs have come down. Along with lowered costs, the working of these departments has also become efficient in the digital economy. 

Generates new job opportunities

One of the reasons why the digital economy is becoming popular among people is that it creates new job opportunities. There is an influx of startups and new businesses in the digital economy, with job roles spanning digital marketing, data mining, big data analysis, and various other domains. Professionals are learning new technologies to fit into these job roles, enabling aspirants to significantly boost their skill sets. 

Helps in making faster transactions

Gone are the days when businesses had to wait months to settle and clear their payments. With the digital economy, transactions take place almost instantly. You can choose from innumerable online payment methods for making and receiving payments. 

Improved communication and personalisation

The connectivity quotient is high in the digital economy, improving communication significantly. Businesses can communicate with their customers conveniently to understand their needs and preferences. Once businesses have that idea, they can personalise the services and products per customers’ requirements and demands. 

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Business experts across the globe agree that the digital economy is the future of business. With increasing competition in this arena, organisations of all kinds – government institutions, private organisations, non-profits, as well as service-centric entities, will require employees and leaders keen on embracing innovation and changes. 

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What is the digital economy?

The digital economy is the digital transformation of conventional economic activities, which is powered by the internet, data and electronic means. The digital economy uses information technology for creating, adopting, marketing and consuming various business services and products.

What are the main pillars of the digital economy?

Digital economy stands on three main pillars - digital payment system, digital infrastructure, and the framework for e-commerce.

What is the importance of a digital economy?

With the digital economy, consumers and businesses can connect with each other quickly and more effectively. Businesses can offer personalised services and products to customers, enhancing customer experience and satisfaction manifold times.

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