A recent report provides some surprises about which countries are gaining traction in the digital space and which are stalling.

Researchers at the Fletcher School of International Affairs at Tufts University in Massachusetts looked at where digital is replacing "physical interactions," in communications, society and politics, commerce, media and entertainment.

For example, instead of handing over paper currency to a human who locks it in a safe, we now make bank transfers with the swipe of a phone screen, regardless of location.

"We identified many hot spots around the world where these changes are happening rapidly and other spots where momentum has slowed," the authors of the Digital Evolution Index said. "Two years on, depending on where we live, we continue to move at different speeds toward the digital planet."

Countries were organized into the categories of Stand Out, Stall Out, Break Out and Watch Out. The highest rating, Stand Out, was given to countries that are digitally advanced and show significant momentum for innovation.

Winners in bringing people online were Singapore, New Zealand and the United Arab Emirates. Malaysia was perched on the edge of Stand Out.

"Not only are they digitally highly evolved, they are moving very, very fast," said Bhaskar Chakravorti, one of the report's authors and senior associate dean at the Fletcher School.

Governments in this category act as "stewards and connector" to ferry public and private sectors into the digital space, he said.

Likely to stall

While digitally advanced, the nations of Norway, Sweden, Switzerland, Finland and Denmark were the top five most likely to Stall Out, the report said. While they might be ahead of the curve, their momentum has slowed.

"European governments are not making the investments needed to advance the development of new technologies," Chakravorti said. The EU "is not a digital market union."

Mexico, India, Morocco and Russia were poised to Break Out. While not very digitally advanced, they are evolving rapidly by making infrastructure stronger.

The report said it was important for countries to understand basic aspects of digital competition:

— Digital technology is widespread and spreading fast. "There are more mobile connections than people on the planet, and more people have access to a mobile phone than to a toilet," the report said.

— Digital players wield outsize market power, it added. "Apple, Alphabet, Microsoft, Amazon and Facebook were the five most valuable companies in the world. ... Seventh overall was China's e-commerce giant, Alibaba Group. These players enjoy economies of scale and dominant market share."

— Digital technologies are poised to change the future of work, affecting as much as 50 percent of the world economy, the report said. "There is both anticipation and apprehension about what lies on the other side of the threshold of the 'second machine age.' "

— Digital markets are uneven, the report said. Politics, regulations and levels of economic development play a major role in shaping the digital industry. The world's largest internet user population, at 721 million, is China, where many of the major global players don't have entry.

India has the greatest market potential, the Fletcher School researchers said, with 462 million internet users. But it struggles with multiple languages and infrastructure challenges, although the government has tried to enable a digital market.

Fragmented EU market

The European Union has 412 million internet users, but the market is fragmented and still forming a "digital single market," the report said. In many countries, several websites or digital companies are blocked.

Around the world, digital access itself is far from uniform: Barely 50 percent of the world's population has access to the internet today, the report said.

Cash is another condition plaguing digital commerce, it said. Digital alternatives have not replaced cash in many places, despite online options. In 2013, the report said, 85 percent of the world's transactions were in cash. Even in the Eurozone, 75 percent of point-of-sale payments were in cash.

"In Malaysia, Peru, and Egypt, only 1 percent of transactions are cashless," the authors wrote. In India, where the government adjusted 86 percent of its currency, cash withdrawals were 0.6 percent higher than a year earlier.

At the bottom of the pack were Egypt, Pakistan and Peru, rated Watch Out. These countries are not digitally advanced, and they lack momentum to get there. Some actually are declining digitally, the report said.

The study authors recommended that countries improve by closing the "mobile gap," or the difference between the number of mobile phones and the number of mobile phones with internet access.

As for global titans Germany and the U.S., the report said they are in danger of losing momentum, having moved so far, so fast. The U.S. is not investing in "foundational technology" for "10 years, 20 years, 30 years from now," Chakravorti said.

Global citizens, especially young people and international students, will look away from the U.S. if it does not invest more in technology, and toward Asia, he said.

Asia is the most digitally exciting region in the world, led by China and Malaysia, the report said. Entrepreneurship and venture capital is being aimed at that region, and it can expect to see a lot of investor and entrepreneurial interest in coming years.

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