The digital sector: an explanation and outlook
Digital sector, digital economy or digital industry? Although rather confusing, all of these terms describe the same thing. But what do they actually mean? They refer to the radical change that is leading to technologisation of companies and operations in the real economy. This affects all companies with digital operations, although some more than others. Strictly speaking, many industrial enterprises are now also players in the digital sector. Among other things, this is thanks to the Internet of Things (IoT), as well as machines that are networked with one another and also use digital software. However, the digital sector is also home to pure Internet companies that market products such as apps, on-demand solutions or pretty much any kind of digital products and services. The "Digital Index"¹, which is published regularly by technology association Bitkom and the Ifo economic research institute, shows how well this section of the economy has fared during the crisis. While the business climate index in traditional sectors and those with little or no digitalisation remained consistently negative, the digital sector actually recorded growth. Although the coronavirus pandemic is also leaving its mark on players in the digital sector, any negative effects are far less severe. Indeed, many digital enterprises were even able to record major growth during this time, in particular as a result of the lockdowns and the changed consumer behaviour that this brought about. The quarterly figures of the major US tech companies² underline this.
Digital Trends 2021: an overview
How is the digital landscape likely to change? Several trends can already be identified here, some of which will have a major influence across all sectors. Below is a short summary of these:
Privacy & security
A survey undertaken by auditor PwC³ and "Security IT Summit"⁴ underlines the important role that security solutions and increased awareness of privacy are likely to assume for consumers in future. Progressive companies in the digital sector have long since recognised this. The findings of the surveys include the following:
Consumers are increasingly focusing on how companies process their data and whether their privacy is being respected.
Trust is becoming more and more important when choosing whether to make purchases.
Identity management will play a greater role in future.
A large number of jobs that focus on data protection and privacy are being created in the digital sector.
IoT and cloud computing
The Internet of Things allows devices to communicate among one another and with their owner. The devices themselves can range from modern smartphones, all the way down to basic microwave ovens here. Cloud computing then provides for optimum communication and processing of the data. The two go hand in hand and are set to become ever more important over the coming decade. Just like AI and machine learning, they also both play a key role in trends that are currently still a long way off, such as self-driving vehicles.
5G is making consumers more mobile and more digital
5G will gain further market shares in 2021. Although not a trend in itself, the new mobile connectivity standard is acting as a trigger and catalyst for other trends - in particular those associated with mobile devices. 5G will also bridge the gap that currently still remains between AI and machine learning and which it has not yet been possible to close with the transfer rates of 4G. As a connectivity standard, 5G will influence all sectors: from digital financial solutions, through mobile games, all the way up to on-demand products on smartphones, tablets and soon maybe also smartwatches.
Health services are transforming health into a status symbol
Systematic, intelligent and continuous data processing is already shaping the digital sector here. The fact that healthcare costs in Western industrialised countries are continuously on the rise is also nothing new - not least due to providers investing in digital technology and new innovations. These two factors are leading to a situation in which a person's own health is likely to be seen as status symbol in 2021.The heightened health consciousness of millenials, who are also willing to purchase high-end gadgets such as smartwatches or apps to help them achieve a healthy diet, serves to support this. Political decisions, such as the opt-out for organ donations or digital health cards, are also fuelling the trend. Even after distribution of a Covid-19 vaccine, the "digital health sector" is still set to achieve massive growth potential in 2021. This will range from telehealth services, through health features on smartwatches, all the way up to integration of IoT kitchen appliances in intelligent nutrition apps.
Contactless, secure payment processing
Digital products are not standalone units that operate in a vacuum. As such, it is first important to understand how they are acquired - and also how companies employ omnichannel strategies to encourage further sales within their own digital product range. Modern, future-oriented payment processing is the key to success here. Learn more about up-to-date payment processing at www.unzer.com
. It would surely make little sense to cater to one of the aforementioned trends by launching corresponding products or services, but then only offering a small selection of traditional payment methods.Instead, consumers today want easy, fast, contactless and secure payment methods that also allow their products to shipped immediately. From a political perspective, the foundations have already been laid for this through various factors, including the EU General Data Protection Regulation (GDPR), yet also security measures such as two-factor authentication.
Digital products are becoming digital platforms
Advances in connectivity, data processing, AI and cloud computing are increasingly also transforming digital products themselves into platforms. Amazon is a good example of this with its Prime service. What started as a subscription service for improved delivery conditions has morphed into a digital product in the form of the streaming service of the same name. The digital product has since been continuously extended to include premium pay TV channels, music streaming, eBook subscriptions and on-demand purchases. This has resulted in a complete transformation from a basic service into a platform that combines many sales channels within its own ecosystem and thereby firmly establishes itself in the lives of users.This trend is also likely to take hold in other areas. Indeed, many companies today already prefer in-app purchases and therefore offer the actual platform free-of-charge. Even when this is not the case, digital platforms of this kind are permanently integrated into an omnichannel strategy. Thanks to its scalability down to individual services and products within the platform, this strategy then promises to deliver significant growth and also secure optimum customer loyalty. Payment processing needs to be as "smart" as the platforms themselves, as well as being both personal and secure, fast and contactless.
New segments are emerging, such as eSports
Whether the focus is on working from home permanently, the IoT or SaaP (services as a product): new segments are continuously emerging in the digital sector and displaying significant overlaps with sectors that are already established. The world of eSports is no different. As shown by a survey undertaken by PwC⁵ , Germany has now become market leader in the eSports sector within Europe. Massive growth is also being generated in the US. The concept of eSports is obviously not new in itself. After all, video and computer games have been around for more than 20 years. However, the way in which the industry is being commercialised is definitely new. What started out as a bit of fun among friends in the spare room or cellar has become a highly professional industry, whose companies and top players generate huge sums of money. The recent commercialisation of the industry is offering market players attractive opportunities to get in early and acquire further market shares in this growth market.Advanced smart payment solutions are vital here, since a target group as tech-savvy as gamers and their supporters simply will not tolerate non-technical, complicated solutions or long waiting times. Anyone looking to succeed in this growth market must therefore set the conditions for efficient, contactless and flexible payment across all connected channels, as well as for all products and services. Money invested to secure a future-oriented structure really pays off here, as the majority of consumers in this sector are aged between 15 and 39 and likely to remain loyal for a long time once they find a company they like.
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¹ Source: https://www.bitkom.org/Digitalindex, ² Source: https://www.handelsblatt.com/technik/it-internet/apple-amazon-google-und-facebook-maechtig-und-innovativ-die-grossen-tech-konzerne-dominieren-auch-in-der-krise/26053666.html, ³ Source: https://www.pwc.com/us/en/library/risk-regulatory/strategic-policy/top-policy-trends/data-privacy.html, ⁴ Source: https://securityitsummit.co.uk/briefing/these-are-the-key-data-privacy-issues-in-2020/, ⁵ Source: https://www.pwc.de/de/technologie-medien-und-telekommunikation/digital-trend-outlook-2019-esport.html#:~:text=Wenn%20es%20um%20Esport%20geht,Platz