Indian Digital Technology Stacks for Success
India is second only to China for fintech adoption by users. Smart! looks at the role of the ‘India stack’ in supercharging this wave of development.
India is a nation bursting with potential. Within her borders reside 17.5 percent of the world’s population. The country is revered internationally as one of the world’s fastest‐growing economies, with a mushrooming middle class to prove it. However, these glossy statistics do not provide a complete picture. India holds the largest number of citizens living below the poverty line, at a whopping 30 percent. In addition to this, it also hosts the biggest unbanked population in the world. Financial inclusion is widely acknowledged as a key factor in driving out poverty, a point recognized by the Indian government. There have been successive efforts to address this situation. None as ambitious, or possibly effective, as the latest attempt. Technology has been crucial in the multi‐pronged endeavor, with the development of what is known as the “India stack”. For the fintech industry, this solution may deliver some exciting side‐effects.
What is the India stack?
The India stack is a technology platform that enables cashless, paperless transactions. It was originally constituted of three, now five, separate but interlinked parts. Underpinning the platform is the national Aadhar program, a unique identity number given to each citizen, supported by their biometric data. It contains records of 1.12 billion Indians, with 99 percent of the population over the age of 18 registered. It is upon this foundation that all other solutions are built.
The comprehensive data‐set facilitates:
- the Aadhar Enabled Payments System (AEPS), effectively a bank account that provides basic financial services to the nation’s poorest households;
- Unified Payments Interface (UPI) for the digital exchange of money, such as mobile P2P transfer;
- e‐KYC linked to Aadhar for instant verification, with 150 million completed in three years;
- e‐Sign utilizes biometric data to enable clients to digitally sign documents;
- and DigiLocker, which is similar to the Danish e‐Boks. It is an electronic mailbox, supported by the government, in which citizens hold digital versions of their important documents. Access can then be granted to financial providers, as determined by the consumer.
Fintech travels so little.
– Laurent Le Moal, CEO PayU, Naspers Group
It has taken the idea of “identity as a utility” and developed it on a national stage. As a utility, it is standardized and ubiquitous, creating vast applicability at both state and commercial level. It places part of the population of the sub‐continent on a digital platform, with a scale and size that is breathless in its ambition. However, to fully realize its potential, it is vital that beneficiaries have access. The latest industry figures place 750 million potential internet users in rural India, with smartphones as the primary device for access. Private industry has not been slow to monetize this opportunity. For example, JioPhone, the latest launch by Reliance Industries, will expand the low‐cost smartphone market. It will provide cheap, web‐enabled 4G devices aimed specifically at this rural consumer. Riding this wave of digital newcomers is the local fintech industry, which has experienced rapid growth in its short history. Combined with smartphone ownership, the sector is primed to bring its services and, thus, financial inclusion, to the masses.
“Fintech travels so little,” stated Laurent Le Moal, CEO PayU, Naspers Group, at the recent Money20/20 Europe. He was despairing of the trend for fintech companies to stay within their national borders, with few venturing to new markets. India is an open economy. It has the political willpower to build and develop a digital infrastructure. It has a stated ambition to overhaul its domestic financial system. The opportunities are immense, as are undoubtedly some of the challenges. Nonetheless, India will boast 635.8 million fintech users by 2021, according to Statista, a statistical research company. Combined with the applicability of the India stack, this should tempt the ambitious.