Myanmar: Anticipating a leap-frog in development through financial inclusion

Myanmar reviewIn preparation for the 2015 Global Forum on Development, which will focus on how access to financing can contribute to inclusive social and economic development, the OECD Development Centre, United Nations Capital Development Fund (UNCDF) and the Better than Cash Alliance have developed a series of articles exploring the key issues and dimensions of financial inclusion. Today’s post by James Eberlein of the OECD Development Centre and Kameshnee Naidoo of UNCDF provides an overview of the Financial Access Landscape and the usage of financial services by consumers in Myanmar. These findings are some of the highlights from the recent “Making Access Possible” (MAP) diagnostic undertaken in Myanmar and draws on the OECD’s Multi-dimensional Country Review of Myanmar.

U Chit Po is 49 years old and runs a grocery store in Myanmar. He is responsible for his wife and two children. He recently had a major health scare and consequently would like to retire soon. U Chit Po has no medical coverage, as there is no license for the health insurance market in Myanmar. His income consists of profit from his small business and interest on loans to others, which he lends at 20% interest per day. He has never saved in a formal banking institution, but his knowledge about the value and complexities of saving are highly sophisticated. He feels that banks have so much red tape, especially for provisions which he might need to access at short notice, and the interest offered by banks on savings is so little, that it is not worth the hassle.

Like U Chit Po, most adults in Myanmar do not use formal financial services. More than half of all credit in the country is sourced informally, through people like U Chit Po who on-lend their savings as a way of generating additional income. While such local intermediation plays an important role in the local economy, from a public policy perspective it means that such funds are not available for national investment.

Nature of financial services usage in Myanmar

Click to see full size
Click to see full size

Source: FinScope Myanmar, 2013

For people who do use formal financial services, it is common for such usage to be limited to one service — a phenomenon known as being thinly served. 30% of the total adult population have access to a regulated financial service from a regulated institution, but only 6% have access to more than one (a combination of credit, savings, insurance and payments); this is higher for urban adults than rural, as shown in the figure above.

The development of the rural financial system is particularly critical. Of all the segments of Myanmar’s economy, the rural sector is the most underserved by the formal financial system: only 2.5% of all loans go to this sector, even though it represents 30% of GDP and two-thirds of employment. Improving access to finance in rural areas could catalyse a process of agricultural modernisation and the creation of non-farm jobs, which will be critical for the future.

Thinly-served populations results in adults using ‘inappropriate’ financial services to meet a particular financial need. Like U Chit Po, 31% of the adult population in Myanmar experienced illness within their household or family that resulted in medical expenses. However, in the absence of health insurance, 47% of adults reported using credit, 27% sold assets or reduced expenditure, 22% used their savings and 4% did nothing. In all these responses, adults are forced to rely on wealth-depreciating mechanisms, leaving them more vulnerable to shocks in the future and undermining the productive allocation of resources.

The UNCDF’s Making Access Possible (MAP) programme unpacks the realities of adults like U Chit Po, across various economic groups based on their income profile, to understand the needs of different segments of the population and to position the supply-side response within the current contextual and market challenges. These include a heavy reliance on paper-based banking systems, a rapidly changing political economy and a modernising financial sector that will require new skills and approaches to meet needs on the ground.

MAP targets low-income consumers, as well as small and micro businesses, and hence its application in Myanmar is supporting the Government’s objectives to improve access to financial services, reduce poverty and catalyse jobs and economic activity. The figure below gives an idea of the levels of income and the size of these different groups of consumers that are not being efficiently served.

Target markets for financial inclusion in Myanmar

Click to see full size
Click to see full size

Source: FinScope Myanmar, 2013

To achieve this, UNCDF, in partnership with the Ministry of Finance, developed a roadmap for financial inclusion. By analysing the various options available, timelines and resources required, it will assist the Ministry in developing policy and setting out its priorities for financial inclusion in the short, medium and long terms, and in attracting development partners to support specific areas of financial or other need.

The roadmap was presented at the ASEAN Financial Inclusion Conference hosted in October by the Ministry of Finance of the Government of the Republic of the Union of Myanmar in Yangon. The event took place in the framework of Myanmar’s contribution as the Chair of the 18th ASEAN Finance Minister’s Meeting and offered a space to develop a collective agenda. It concluded with the Yangon Outcomes for Financial Inclusion, a set of recommendations to accelerate financial inclusion in the ASEAN region.

The Conference was part of UNCDF’s new programme, Shaping Inclusive Finance Transformations (SHIFT) which aims to double financial inclusion in the ASEAN region by 2020, and will focus on interventions at country level while bringing cross-border and regional solutions to problems that cannot be addressed by any single country. It also seeks to take advantage of economies of scale, including training and policy research and advocacy to make financial inclusion a key outcome of the financial integration process.

With the recent changes in government and new investor interest, Myanmar is poised for growth. In its 2015 Economic Outlook for Southeast Asia, China and India, the OECD Development Centre forecasts that Myanmar’s economy will grow by nearly 7.8% over the next five years. This has the potential to move millions of people out of poverty. There is growing evidence that financial inclusion can play a critical role in contributing to equitable growth policies that reduce poverty and inequality.

Given the current level of development of the financial sector in Myanmar, much work needs to be done to further expand access and, importantly, to improve the quality and depth of services offered to those already financially included. Thus the roadmap will provide a structured approach to that that the benefit of economic growth is shared across the poor and marginalised groups.

Useful links

OECD Development’s work on:

Inclusive Societies and Development

Multidimensional Country Reviews

UNCDF Making Access Possible Making Access Possible (MAP) for Myanmar

A clearer picture of climate-related development finance

Climate finance
Climate-related development  finance totals $37 bn

Today’s post is by Stephanie Ockenden of the OECD Development Co-operation Directorate

The world will need more and better targeted financing to meet the challenges of global development post-2015. This means taking important decisions not only on what qualifies as official development assistance (ODA), but also on how those flows can be most strategically used. The Ministers of the OECD Development Assistance Committee (DAC) are in discussions today and tomorrow at the DAC High Level Meeting to redefine the terms for determining what qualifies as ODA.

But these terms are just part of that package of what the DAC is putting together to contribute to successful outcomes at the Third International Conference on Financing for Development in Addis Ababa, 13-16 July 2015, the UN General Assembly Post-Millennium Development Goals (MDG) Review Summit in New York in September 2015, and the United Nations Climate Conference (COP21) in Paris in December 2015.

An equally important objective is to provide a better picture of the total resources available for global sustainable development, including for action on climate change. It is now widely understood that climate change and development are intrinsically linked. Achieving an efficient and effective allocation of public finance to simultaneously support good development and climate change outcomes will be critical to ensuring that the most vulnerable get the targeted attention they need.

Robust statistics on climate-related development finance can facilitate better decision making, in part through improved co-ordination and priority setting. Consistent, comparable and transparent statistics on climate-related development finance will, in turn, support parties in their monitoring and reporting to deliver greater accountability and help build trust under the UN Framework Convention on Climate Change.

As an important step in this direction, the DAC, in collaboration with the multilateral development banks and other international organisations, has presented – for the first time ever – an integrated picture of bilateral and multilateral development finance flows targeting climate change objectives in 2013.

By adding data on the multilateral flows, the DAC promotes transparency and makes a wealth of data publically available online, including information on over 7,000 development finance activities in 2013, contributing to over USD 37 billion of climate-related development finance.

Energy, transport and water received over two-thirds of climate-related development finance, according to the statistics. On the regional level, Asia is the largest recipient of climate-related development flows, at around 40%, and Africa is the second largest, at 30%. The data show that in 2013, adaptation receives a significant share of total climate-related flows (39% when activities that are designed to tackle both mitigation and adaptation are included). Measured in the same way, mitigation receives 74% of the total flows (with 13% also targeting adaptation). A larger share of the bilateral development assistance portfolio is dedicated to adaptation, as compared to the multilateral portfolio.

Among other advantages, this integrated dataset avoids double counting and provides consistency across countries using standardized definitions and measurements. Going forward, the DAC will continue to work in collaboration with other partners to further improve the quality, coverage, communication and use of environmental development data.

This video explains the treatment of multilateral climate-related flows in DAC statistics:

Useful links

OECD DAC Climate Change External Development Finance Statistics

OECD Statistics on External Development Finance Targeting Environmental Objectives Including the Rio Conventions

Increasing the transparency of climate-related development finance flows: publishing detail on over 7,000 projects in 2013 Stephanie Ockenden on the Climate Funds Update blog

Is inequality good or bad for growth?

Inequality and growthIf you’ve been following the income inequality debate, you’ll know there’s been much discussion of the question in the headline above. Until just a few years ago, it’s probably fair to say that mainstream opinion leaned towards the “good for growth” side of the debate. Yes, inequality might leave a bad taste in the mouth, but it was worth it if it meant a strong economy.

This case rests on three main arguments: First, inequality creates incentives for entrepreneurs. Second, wealthy types are a source of investment for the economy. Third, when the state tries to reduce inequality by taxing wealth and transferring it to the less well-off, some of these resources will be lost in the “leaky bucket” of bureaucracy and administration. From an economic perspective, that’s inefficient.

All these arguments have some merit, and indeed few would disagree with the idea that some level of inequality is necessary in a modern economy. But over the past couple of years, the bigger proposition – that inequality is good, or at least not bad, for growth – has come under increasing fire, including from the IMF, the OECD and even Standard & Poor’s. And now comes new research from the OECD indicating that “income inequality has curbed economic growth significantly”.

Much of the coverage of rising inequality has focused on the incomes of “the 1%”. But the OECD research, which was led by Michael Förster and Federico Cingano, indicates that it’s the situation of people at the other end of the earnings scale that has the biggest impact on growth. These lower-income households are not a small group. They represent some 40% of the population, comprising families that, from a social perspective, might be called lower-middle and working class.

Where overall inequality is higher in a society, a clear pattern emerges: People from such backgrounds invest much less in developing their human capital – essentially their education and skills. By contrast, it has almost no impact on the educational investment of middle-income and wealthy families. The implications for social mobility are clear – an ever-widening education and earnings gap between society’s haves and have-nots.

This gap is seen not just in the length of time people spend in education but also in their skill levels. At the risk of swamping you in data, this is strikingly evident in the chart below. It divides the overall population into three groups based on parental education background, or PEB (which is used to represent socioeconomic status) – high, medium and low levels of education. The chart then looks at the average numeracy scores of people from each of these three groups in the OECD’s Adult Skills Survey and charts them against levels of inequality as measured by the Gini coefficient (where 0 equals absolute equality and 1 equals absolute inequality).

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Where inequality is relatively low (around 0.20), the gap in numeracy levels between the three groups is relatively modest. But, on the other end of the scale, where inequality is higher (around 0.36 – a little more than in the UK today and a little less than in the US), the score of people from poorer backgrounds is markedly lower; by contrast, the scores of people from middle and high-income families don’t change much.

How does this affect growth? As an economist might say, it’s “inefficient” – workers with higher skill levels can contribute more to the economy. If a large swathe of the population is unable to invest in its skills, that’s bad news for the economy.

Just how bad is clear from the OECD research. It estimates that rising inequality knocked more than 10 percentage points off growth in Mexico and New Zealand in the two decades up to the Great Recession. The impact of rising inequality was also felt – albeit not as strongly – in a number of other OECD countries, including Italy, the UK and the US and even in countries with relatively low levels of inequality like Sweden, Finland and Norway

To be sure, the debate over inequality and growth will certainly continue. Just last week (before publication of the new OECD paper), Nobel laureate Paul Krugman admitted he was a “skeptic” who remained to be convinced of the link. But the fact that the debate is happening at all is surely a good thing. Rising inequality is one of the most significant socioeconomic trends of our time. Understanding its possible impact on our societies and economies has surely never been more important.

Useful links

OECD work on income inequality and poverty

Focus on Inequality and Growth (OECD, 9 Dec. 2014)

Trends in Income Inequality and its Impact on Economic Growth (OECD Working Paper, 2014)

A prayer for your pension

OECD Pensions Outlook 2014In the 18th century, the Church of Scotland had a problem – widows. Whenever a married minister died, his salary was transferred to his successor. If the dead man was married, his widow and children could find themselves without either income or home. The only option for some was the poorhouse – an unedifying spectacle for a church.

Two churchmen, Dr. Robert Wallace and Alexander Webster, decided something needed to be done. They wanted to create a fund that would provide ministers’ widows with a pension. But how to design it? Rather than turning to prayer, the two sought a solution in another of their great passions – mathematics.

As Yuval Noah Harari explains in his excellent Sapiens, the two churchmen exploited the emerging field of probability and, in particular, the Law of Big Numbers. This stated, in effect, that while “it might be difficult to predict with certainty a single event … it was possible to predict with great accuracy the average outcome of many similar events”. So, while it was impossible to say how many years an individual 60-year-old minister might live, one could say how much longer the average 60-year-old man would live. All that was needed was good data.

Here the two ministers were in luck. At the end of the 17th century, the great astronomer Sir Edmund Halley – better known today as a comet spotter – had studied records for births and deaths in the German city of Breslau. From these, he produced some of the world’s first life tables, which gave precise odds for the probability that a person of a certain age would die in a certain year.

The two preachers used this data to design their fund. As Dr. Harari explains, the fund proposed a range of pension plans: For example, any minister who paid in £2.12s.2d (or about £2.61) a year would guarantee an annual pension for his widow of £10 – more than enough to keep her out of the poorhouse.

The fund was an enormous success, not just because of the peace of mind it brought to ministers’ families but also because its careful design meant it was financially sound. Wallace and Webster had predicted that 20 years after its establishment, the fund would be worth £58,348. They were wrong: In fact it was worth, £58,347 – just £1 short of their forecast.

If only things were as straightforward today. The church fund existed at a time when – outside periods of disease and war – life expectancies changed little. That’s not the case now. In a typical wealthy country today, the life expectancy of a 65-year-old is rising by nearly two months every year.

Rising life expectancies are, of course, a good thing, but they do create problems for pension funds, most notably “longevity risk” – in other words, pension funds aren’t always taking sufficient account of just how much longer people are living. That’s due in part to the fact that they may be relying on outdated data that doesn’t improvements in life expectancy. According to a new OECD report, getting these estimates wrong can be costly: “Each additional year of life expectancy not provisioned for can be expected to add around 3-5% to current liabilities.”

Rising longevity is posing other problems for pensions, according to the OECD Pensions Outlook 2014, released today. In many countries, the rising share of retirees in the population will leave more people dependent on a shrinking share of workers. This imbalance will become much more evident as growing numbers of post-war baby-boomers reach retirement age.

There are other uncertainties, too, notably what Larry Summers (pdf) calls “secular stagnation” – a drawn-out period of economic sluggishness “characterized by low returns, low interest rates, and low growth”, says the Outlook. Meeting pension commitments against that backdrop could become quite a challenge.

How are governments responding? The Outlook reports that the pace of reforms has speeded up. Priorities have included raising the retirement age and linking benefits to expected rises in longevity as well as steps to strengthen the funding of private pensions. And to respond to rising public concern over private pension providers, there’s a growing focus on how the sector is regulated. Still, there’s no doubt that much more will need to be done if today’s future pensioners are to enjoy the peace of mind of those 18th century Scottish widows.

Useful links

OECD Pensions Outlook 2014 (OECD, 2014)

Mortality Assumptions and Longevity Risk (OECD, 2014)

OECD work on insurance and pensions

Every child has special needs: “secrets” of Finnish education

Finland education outlookToday’s post is by Janet English. Janet was awarded the Fulbright Distinguished Award in Teaching and the Presidential Award for Excellence in Math and Science Teaching. She holds a masters degree in education, and teaches in southern California.

In 2013 I moved to Finland on a Fulbright Award to learn the “secrets” of Finnish education. For the next six months I traveled by train, on bus, on bike and on foot to observe classrooms, document Finnish educational practice, and interview teachers, administrators and students. I began this journey to find out what makes Finnish students successful problem solvers in PISA, but along the way I learned much, much more. Finns have been combining high quality educational research with classroom practice for more than twenty-five years and they’ve designed an educational system to optimize learning for every child, regardless of a student’s educational needs. The rest of us need to be paying attention. There are many aspects of Finnish education that can and should be incorporated into schools systems abroad.

The Finnish Way” to Optimize Student Learning is a free e-book that takes readers on this educational journey through Finnish schools. The “secrets” are revealed through in-depth storytelling, video interviews, and compelling images that illustrate the design and practice of the Finnish education system. Finnish teachers talk about the importance of taking time to optimize student learning, how they incorporate problem solving into almost every lesson, how the pace of teaching is determined by the rate of student learning, and how they approach student assessment. An administrator from the Finnish National Board of Education talks about educational design, Pasi Sahlberg from Harvard University discusses equity, and Andreas Schleicher from the OECD reflects on the need for education systems to evolve.

The Finnish Way” to Optimize Student Learning is a valuable resource for anyone wanting to design an education system where all students have a chance to succeed and reach their full potential. The chapters are short, those interviewed are insightful, and the stories are sparking vibrant discussions about the policy and practice of education.

Last year I used these Finnish methods to teach conceptual biology to second language learners, those with significant learning challenges, and many who have struggled or have been unsuccessful in traditional American high schools. (Some of these classes were as large as thirty-eight students.) This year I’m using a blended Finnish/American approach to teach college preparatory biology to high achieving students and low achieving students. The learning results of both groups have been remarkably positive.

Ninety-four percent of the students I polled said this Finnish/American method of teaching is more intellectually stimulating than they’ve experienced in prior science classes. Six percent asked for more structure (by taking traditional vocabulary tests and answering multiple-choice questions) to help them feel like they are achieving in ways that are familiar with what they’ve done in the past.

One student told me, “This teaching style helps both high achieving and low achieving students achieve their best. We actually get to learn much more and we’re not limited by what’s in the textbook. It lets us go as far as we want to go. The teacher is not just a babysitter to make sure we learn what’s in the textbook.”

I hope that The Finnish Way” to Optimize Student Learning (ages 3-18) will be useful for policymakers, teachers, teacher trainers, administrators, parents, and anyone whose goal is to optimize student learning.

Useful links

Finland featured in a video series produced by the Pearson Foundation profiling policies and practices of education systems that demonstrate high or improving performance in the PISA tests. See the video and other material from the OECD here.

Stimulating SME Equity Financing? Change The Culture

HPgarage1
Would you have invested in this SME?

On October 23rd, the OECD Financial Roundtable (FRT) dealt with public SME equity financing with a special focus on exchanges, platforms and players. In today’s post, Markus Schuller of Panthera Solutions gives us his personal view on the meeting.

Let’s face it: the bulk of small and medium-sized entreprises (SMEs) are still financed mainly by bank credit. However, as bank finance is harder to come by in the current post-crisis environment, fostering non-bank financing alternatives may help closing an SME financing gap. The OECD has been looking into such issues, also with input from the private sector via its Financial Roundtables. After the one held in April that discussed SME non-bank debt financing, this one, held in October, explored impediments and possibilities for public equity financing for SMEs.

Banks represented at the discussion naturally pleaded their cause, namely for debt financing, some even arguing that there is no shortage of SME debt financing, but only of risk financing. I allowed myself to add that this insight comes rather late. Too late actually, to stop the BoE and ECB in rolling out their securitisation support (asset backed securities purchase programme and covered bond purchase programme) that may be pointless if the analysis that the Eurozone suffers mainly from a demand-side problem is correct – as we have been highlighting over the last three years.

But back to the actual Roundtable topic. The overall challenge was described as how to stimulate equity financing for a segment that is characterised by low survival rates and a large diversity of entities, the two main drivers that make it difficult to assess risk. The focus of the debate was more on analysing the current drivers of a challenging environment for SME equity financing and less on solutions.

The limitations in the ecosystem (exchanges, platforms, brokers, market-makers, advisors, equity research) necessary both for the development of SME equity finance and the maintenance of liquidity in such markets can definitely be named as impediments. Having said that, those are technicalities that can be resolved quickly by market forces, given sufficient investor interest in allocating to this segment. It appears to be a chicken or egg situation, but it isn’t. If investors are intrinsically motivated to seeking exposure in SME equity investments, the supply side will follow.

Let me focus on a more fundamental driver of an investor´s motivation to ensure a sustainable flow in SME equity investments: cultural change.

In my FRT contribution I highlighted the lack of a risk equity culture across Europe as an important obstacle. In Germany, only 13,8% of the population invests directly (7,1%, 2013) or indirectly via funds (6,7%, 2013) in listed equity securities. Compared with around 50% in the US (45% in 2008, ICI Survey / 52% in 2014, Gallup Survey). Both the US and Germany saw a slight deterioration in equity ownership from 2000 until today, explained by the long-term effects of the dot-com bubble during the 2000s and the pro-cyclical behaviour of retail and institutional investors, leading to a reduction in their exposure caused by the Great Recession.

On top of shying away from the volatility in asset pricing, equity exposure in Germany is significantly linked to the educational attainment of the individual. In 2013, investors with vocational baccalaureate diplomas achieved an exposure of 25,9%, with secondary school leaving certificate only 11,8% and secondary modern school qualification alarmingly 6,5%.

How to reverse this trend of sinking equity ownership in Germany and neighbouring countries? By reframing the question. Let’s analyse what drove the rise of equity owners in Germany from 3,9 million (1992) to 6,2 million (2000) and back to 4,5 million (2013). Two main factors can be named for the rise: pro-equity friendly sentiment in politics; and accessible home bias led to a low entry barrier for investors.

The dot-com bubble burst deformed the first. Since then politicians harvest low hanging populist points by stigmatising equity markets as too dangerous to get exposed to. The Great Recession acted as reaffirmation of their convictions. Some even enacted policies to forcefully dry up market liquidity as seen in Austria with its stock exchange tax.

The dot-com bubble also caused millions of Germans to divest their home bias. Home bias is a well-researched cognitive dissonance in behavioural finance, driven by both rational and irrational factors. Local bias in SME investments is driven by pride of local ownership; ambiguity aversion (investors are more likely to choose an option with known risks over unknown risks, and with fewer unknown elements rather than many); identification with product, service or entrepreneur; reduced information asymmetry through local knowledge.

Sourcing information globally on listed companies works well thanks to its digital distribution, identifying yourself with them doesn’t. Investors reject exposure to risk if they cannot judge the situation, or do not know the relevant risk drivers. This behavioural pattern can be traced back to the individual’s need for control (as von Nitzsch points out).

The affinity to an equity home bias for both institutional and retail investors can be used as entry point for changing the lack of equity culture in Europe.

The same cultural change was needed in Europe for SME debt financing. For corporate debt markets it needed the Great Recession and banks unwilling to or incapable of lending to trigger the change. Since then, starting with large corporations, a trickle down effect is starting – see German “Mittelstandsanleihen” and their friendly welcome by investors. In short, cultural change is possible.

A potential trigger for cultural change in equity markets can be found in the ongoing financial repression and negative interest on savings accounts. Less a carrot, more a stick.

In my profession as asset allocation advisor, I cannot recommend a home-biased portfolio as being well diversified. Scientific evidence opposes this view. My point is to only use this bias as an entry point for inducing cultural change. It needs to be followed by a further increase in sophistication levels of market participants, enabling them to properly invest in a risk factor diversified, global, multi-asset portfolio.

Which leads to my second FRT contribution, namely on calling for increased education regarding equity investments for all market constituencies (SMEs, individual investors and advisors alike). Only increased levels of sophistication allow a responsible extension of alternative equity financing options in the ecosystem – see the delicate, little plant called “crowdinvesting” for example.

As cultural changes and educational effects only pay a dividend in the medium term, I suggested at the FRT to leverage the activities of an existing EU institution, namely the European Investment Fund (EIF).

It acts under the umbrella of the European Investment Bank (EIB). The EIF is a specialist provider of risk finance to benefit SMEs across Europe, including equity financing via more than 350 privately managed private equity funds. Its equity activity encompasses the main stages of SME development. In total it runs a book of EUR 5.6 billion in outstanding commitments, leveraging EUR 20,7 billion from other investors. In 2013, the EIF committed EUR 1.5 billion to mobilize EUR 7.1 billion in other resources.

In its announcement of a EUR 300 billion stimulus package for EU28, the Juncker commission should increase the EIF allocation power by a multiple. Positive real economic effects are guaranteed.

Useful links

OECD work on financial markets

Financial Market Trends OECD Journal

Today is Cyber Monday. And so is tomorrow and the next day and the next…

measuring digital economyToday’s post is from Andrew Wyckoff, head of the Directorate for Science, Technology and Innovation (STI) at the OECD. 

Today is Cyber Monday – although the term is less than ten years old, so you may not have even known it. Like its better known cousin ‘Black Friday’, ‘Cyber Monday’ is a marketing term to mark the kick-off of the holiday shopping season, right after Thanksgiving, in the US. Unlike Black Friday though, Cyber Monday is all about e-commerce: the New York Times sanctified the term in 2005, with the observation that “millions of otherwise productive working Americans, fresh off a Thanksgiving weekend of window shopping, were returning to high-speed Internet connections at work Monday and buying what they liked.”

When IBM took a look at Cyber Monday 2013, it found it to be the biggest online shopping day in history. This year’s looks set to be even bigger as more Americans than ever before plan do some of their holiday shopping online.

The OECD has just released a comprehensive mapping of the digital economy around the world. It shows how American consumers aren’t the only ones who are buying more online. Our data shows 90% of internet users in the U.K. and Germany now shop online, with the U.S. closer to the 70% mark – although when data is broken down by age, American seniors rank among the biggest e-shoppers of their peers.

Shopping online has gotten easier. The New York Times pointed to access to broadband internet as a precipitating factor. The explosion in smart phone use is another, which outsold standard phones for the first time in 2013, as we can now also make payments on the go: apps in the Android market are growing by almost 60% a year. Paying online is easier too, with services increasingly provided by firms like Facebook, eBay or PayPal, rather than banks. As a result, we’re witnessing a revolution in how consumers behave – it’s Cyber Monday every day now. Close to 50% of all adults in OECD countries now shop online, up from less than a third in 2007.

But has it all become too easy? As e-commerce grows and consumption patterns change, have measures to protect consumers been able to keep up?

New patterns of consumption are making new consumer grievances emerge. They focus on accessing and understanding payment, product and transaction-related information, which all too often is buried in footnotes or so complex and lengthy that we don’t bother to read it. Concerns around privacy are even more sensitive. Consumers report not understanding what is being done with their data by the many different entities that are involved in an online transaction – why such information is being collected, whether it can be shared with third parties, and for what purposes.

The U.S. provides an illustration of another type of possible tension. The U.S. Federal Trade Commission recently reached million-dollar settlements with both Google and Apple (and a third case against Amazon is ongoing), to compensate parents of children who had run up charges while playing “free” online games. As a result of the FTC’s action, both Google and Apple have agreed to change their advertising practices and introduce authentication tools that would help stop kids from unwittingly spending money online.

What should be done when things go wrong? When, for example, you download or stream a poor-quality song, or your cell phone bill includes unexpected charges, you can end up having either to navigate a maze of legislation that may govern your transaction or enjoy no level of protection at all. When you buy online from a different country – like the two-thirds of Canadians who report buying a U.S. product over the web – it can mean double trouble. So it is hardly surprising that the OECD finds that in some countries, less than half of Internet users feel confident about buying products online from another country.

So what needs to be done? New OECD guidance developed with governments, civil society and leading industry players recommend that businesses and governments implement measures to prevent children from being able to purchase products without parental consent, to ensure advertising is clearly identifiable as such, and that apps be clear about any charges that might be incurred. E-sellers and regulators should also implement measures to enable consumers to know how personal data may be collected, used and shared, and sensitive data such as geo-location, health or financial information should be the object of express consent. The OECD also calls for the development of some level of consumer protection for all types of e-commerce transactions.

Google, like Apple, is starting to bring in changes along these lines. Protecting and empowering consumers, and building their confidence in buying online, is the best way to ensure we benefit from the dynamism of e-commerce, on Cyber Monday or any other day.

Useful links

OECD work on the Internet economy

OECD work on Internet consumer policy