Top-Down vs. Bottom-Up: Bhutan and Fiji’s Contrasting Paths to Digital Transformation Reveal the Pros and Cons of Government and Market-Driven Approaches

Digital competitiveness has emerged as a game-changing driver of economic resilience and efficiency for emerging economies. The term refers to the capacity and readiness of economies to adopt and explore digital technologies, which can be key enablers of growth across business, government and broader society.

Prioritizing digital competitiveness helps governments and companies decide where to focus their resources, and what technologies and best practices to adopt when embarking on or building upon digital transformation efforts. Over the past decade, the pursuit of digital competitiveness has led to remarkable success stories, driving economic growth across various regions. For instance, India’s advancements in digital public infrastructure (DPI) — including its national digital ID, Aadhaar, along with its Unified Payments Interface (UPI) digital payments system — are recognized worldwide. And in Africa, Kenya’s robust DPI infrastructure is boosting access to essential services and paving the way for socioeconomic transformation. In addition, countries like Brazil and South Africa are also demonstrating how digital technologies can transform public infrastructure and enhance the delivery of social services in emerging economies.

However, the path to digital transformation remains challenging for many nations across the developing world. This is particularly true for small countries, which often have inaccessible, hilly terrain, widespread archipelagos, or other unique geographical challenges that they must grapple with when building DPI and digital financial ecosystems. Limited resources, dispersed populations and connectivity gaps further strain the implementation of digital infrastructure in these markets, requiring tailored solutions. These nations typically have low levels of digital competitiveness, which restricts their ability to fully engage in the digital economy and leverage its transformative economic and social potential. Yet digital transformation remains a national priority in many of these countries.

For instance, Fiji and Bhutan are working to overcome their inherent geographical challenges, actively establishing digital public infrastructure to advance their national development agendas. The two countries have comparable sizes and socioeconomic structures, yet despite facing common barriers — including geographic dispersion, youth emigration and the digital divide — they have approached their digital transformation very differently.

The policy paths undertaken by these nations present contrasting examples of digital adoption strategies, providing valuable lessons for other small countries with similar attributes — and interesting case studies of how DPI adoption can play a prominent role in these countries’ changing financial sector landscapes. FinValue assessed these different approaches in an internal study involving both countries, and we’ll share learnings from this research in the article below.

Fiji: Fragmented beginnings with uneven growth 

In contrast to Bhutan, which has embraced innovation early and decisively, Fiji has been a late starter. It has a larger population and a more developed, diversified financial sector consisting of commercial banks, credit institutions and insurance companies, along with a longer-established digital payments environment. However, the country’s growth trajectory has remained fragmented, largely driven by market demand and overseen by a regulatory sandbox approach. The growth of Fiji’s digital financial services has been more organic and market-driven than Bhutan’s, with mobile money companies like Digicel and Vodafone leading the way with services like M-PAiSA and MyCash. But interoperability challenges present an ongoing obstacle.

However, the government’s recent push towards national digital identity is giving the island nation much-needed impetus for digital adoption. In 2024, the Reserve Bank of Fiji successfully onboarded the country’s Mobile Network Operators into FIJICLEAR, the backbone of the National Payment System. This integration enables the instant transfer of funds between customers’ mobile wallets and bank accounts, along with direct transfers between customers of M-PAiSA and MyCash. However, debit card and QR interoperability remain a challenge. For instance, Fiji’s scale and volume of QR code transactions are significantly lower than those of Bhutan: Though its QR code transactions soared from 3.4 million to 6.3 million between 2022 and 2023, Bhutan saw 99.43 million QR code transactions during 2023.

There are many reasons for Fiji’s relatively slow progress:

• Despite the government’s growing efforts, Fiji remains in the early stages of developing a unified digital ID system. Its identification ecosystem — comprising birth registries, tax IDs and SIM card data from mobile phones — is fragmented, leaving about 29% of the population without formal IDs (according to a 2021 study). This lack of integration hampers the scalability of digital financial services (DFS), especially in rural areas where connectivity and trust issues prevail. Since that study, Fiji has made commendable efforts to increase birth registries and issue voter IDs and national IDs, along with significant progress in establishing digital infrastructure to roll out a secure National Digital ID System. Under the National Digital Strategy 2025-2030, the nation aims to achieve universal digital identity coverage by 2030.
• Between 2016 and 2022, Fiji witnessed exponential growth in mobile and internet banking, with mobile money transactions rising 50-fold to 34 million annually. A 2024 report by Fiji’s Consumer Council, based on a nationwide survey, reveals high DFS adoption rates but highlights significant challenges around consumer trust, financial and digital literacy, and rural connectivity. Security is users’ biggest worry, with over 35% of survey respondents citing concerns about data privacy, fraud and transactional errors.
• Fiji’s central bank has implemented reforms to boost financial inclusion, such as tiered Know Your Customer (KYC) policies and support for government-to-person payments. However, the absence of a comprehensive digital ID law has limited the potential for transformative change.
• While demand for DFS is high, rural users and women remain underserved, highlighting the need for targeted literacy and inclusion programs.

Bhutan: Driving DPI development with proactive government initiatives

Compared to Fiji, Bhutan offers a remarkable DPI success story. Despite having a smaller and less diversified financial sector with only a few key banks, non-bank financial companies and microfinance institutions, it has made remarkable strides in digital payments, largely propelled by government-led initiatives. The country is emerging as a model of early adoption with a proactive government leading from the front.

The Royal Monetary Authority of Bhutan has been progressive in developing the payment system infrastructure to help foster ecosystem development. These efforts have resulted in a few standout achievements, including Bhutan’s high and rapidly increasing volume of QR code transactions, facilitated by the Bhutan QR Code payment system launched in 2020, and ATM interoperability, which was enabled way back in 2011 through the Bhutan Financial Switch. Along with this interoperability, the Royal Monetary Authority has implemented several payment-related innovations in the past decade, including: the RuPay payment gateway, which allows Indian visitors to use their payment cards at ATM and point-of-sale machines in Bhutan; the Bhutan Immediate Payment Service, which enables customers to send money through internet banking, mobile apps and ATMs to a receiver in any other participating bank; and mobile money.

These accomplishments demonstrate a successful, top-down approach to achieving widespread digital payment adoption. The fully operational Bhutan National Digital Identity project, built on self-sovereign identity principles, is a crucial enabler of these systems, providing a secure foundation for digital transactions and e-governance that Fiji is still striving to achieve. The Royal Monetary Authority of Bhutan was an early adopter of India’s Unified Payments Interface, making Bhutan the first UPI-enabled country outside India. And in an effort to balance innovation with regulation, the country has taken up regulatory and policy initiatives to advance the adoption of digital finance through a regulatory sandbox approach, along with innovation labs and a dedicated central portal.

Through these measures, and coupled with a robust digital banking infrastructure, Bhutan has successfully integrated DFS into daily life in several ways. For instance:

• Digital wallets, linked to bank accounts, are becoming increasingly common, although point-of-sale infrastructure is still expanding.
• Bhutan’s Digital Identity Act and e-signature laws provide a robust legal foundation for DFS. These frameworks not only ensure citizen data protection but also enhance interoperability across services. Bhutan’s foray into green fintech — leveraging hydropower for crypto mining — has added another layer of economic innovation.
• Aiming for universal inclusion, Bhutan’s digital ecosystem integrates marginalized groups through targeted e-services.

Divergent Adoption Pathways followed by Bhutan and Fiji

The core contrast between Bhutan and Fiji’s divergent approaches to digital transformation lies in their driving forces and the resulting adoption. Bhutan’s progress, while more recent, is characterized by deliberate government strategy, a strong emphasis on interoperability from the outset (via the Bhutan Financial Switch and Bhutan QR Code), and the leveraging of national digital identity to accelerate adoption.

Meanwhile, Fiji’s digital transformation is largely propelled by market innovation, and the broader integration of DPI remains a work in progress. The country’s financial ecosystem is evolving, with mobile payments gaining traction — however, the foundational digital infrastructure, like digital identity and data exchange, is still at a nascent stage. Recent government initiatives aimed at enhancing its National Digital Identification System are laudable, and signal a growing recognition of DPI’s transformative potential. The system requires a strong emphasis on robust security against identity fraud, while aiming to make essential public and private services more accessible.

Both nations share the overarching goals of digital inclusion and economic growth, but their implementation strategies reflect contrasting approaches, priorities and challenges. As a result, the experiences of Bhutan and Fiji offer valuable lessons on how DPI implementation can be tailored in diverse developing country contexts to achieve equitable development outcomes.

Insights generated from these two distinct case studies highlight the results of taking a market-driven approach vs. a government-led approach in a country’s digital transformation journey. A few of these insights include:

• The Need to Establish Unified Digital Identity First: Bhutan’s digital ID system demonstrates the value of a cohesive identity framework, while Fiji’s piecemeal approach highlights the challenges of fragmentation.

• The Value of Regulatory Frameworks: Legal and regulatory frameworks are critical enablers of DFS, as seen in both countries.

• The Importance of Legal Foundations: Early legislation on digital identity and data protection can build consumer trust and drive adoption — an area where Bhutan’s comprehensive approach contrasts with Fiji’s incremental yet fragmented progress.

• The Impact of Government-to-Person Payments: Integrating DFS with government payments can act as a catalyst for adoption in underserved communities.
• The Need to Build Consumer Trust: Addressing security concerns and improving financial literacy is essential for sustainable growth.
• The Role of Green Innovation: Bhutan’s green crypto initiatives showcase how small economies can lead in sustainable fintech.
• The Value of Ensuring Scalability from the Outset: Investing in interoperable, scalable technology ensures long-term viability.

• The Power of Inclusion by Design: Addressing rural inclusion and literacy is as important as technological advancements in achieving widespread DFS adoption

In conclusion, Bhutan and Fiji exemplify two sides of the digital financial journey. Bhutan’s proactive, integrated approach has positioned it as a leader among small nations, while Fiji’s demand-driven but fragmented progress underscores the challenges of delayed implementation. For consultants and policymakers, both countries highlight the importance of strategic foresight, unified systems and inclusive practices in building resilient digital economies.

Small nations can achieve digital competitiveness with the right mix of policy and market innovation, while keeping inclusion at the forefront. To that end, Bhutan’s accelerated digital journey is inspirational, while Fiji’s ongoing efforts are commendable. Both nations provide valuable lessons for the global DFS community.

Neeraj Lekhwar is a senior consultant, digital financial services, and Garima Singh leads the communications and business development verticals at FinValue Advisors.

Photo credit: chameleonseye