Customers are beneficiaries of investments India has made in the digital architecture
At the recent G7 Summit in France, India presented its efforts to drive digital innovation to further inclusion and empowerment. While digitization is a worldwide phenomenon, India has followed a unique path of creating public infrastructure to drive digital inclusion.
Unlike the G7 countries, India has much lower income, a very large population and low literacy levels. Extreme affordability and ubiquitous access are important drivers for mass adoption of any innovation in India. With low data costs and easy availability of affordable mobile phones, India now has more smartphone users than the US, is home to nearly 2,000 fintech startups and has attracted more than $3 billion in funding. India is the only large economy in the world with public digital infrastructure backed by public policy and regulation to support the entire ecosystem. In China, there are internet platform leaders like Alibaba and Tencent that are using proprietary customer data and deep analytics to offer a slew of innovative products, from payments to mutual funds to loans. In sub-Saharan Africa, mobile network operators have led the charge with innovation in mobile-based payments, credit and many other use cases.
India Stack, as the public digital platform is commonly referred to, comprises of three key components: digital identity in the form of Aadhaar, digital payments in the form of Unified Payments Interface (UPI) and digital data exchange in the form of account aggregators. Since these are built as public goods with open architecture, all players in the ecosystem have equal access to it and it allows for further innovation to be built on top of these basic building blocks. The first layer of India Stack, Aadhaar-based identity, enables fulfilling know your customer (KYC) requirements. In addition, it provides innovative authentication solutions such as e-sign (Aadhaar-based digital signature) and Aadhaar-enabled payments system that allows cash withdrawal using biometrics at merchant locations. The second layer, UPI, is a national switch that enables real-time exchange of digital payments between any two individuals. On top of this basic infrastructure, innovators have built solutions that allow bill payments, toll payments, dynamic invoice generation and collection. The last layer, account aggregator, which has been recently launched would be like a switch that would enable seamless exchange of digital data between data providers (like GST Network, banks) and data users (like a loan provider or financial planner) with the consent of the data owner (each of us).
By kick starting this virtuous cycle of innovation and adoption, these public digital platforms have proven to be useful in reaching an exponentially growing number of people at rapidly falling costs. This unique technology stack in India is built to scale to enable very high volume, low-cost transactions and prevents any single player from establishing monopolistic advantage over the customer and his data. What is most important is that this shifts the power balance from the providers to the customers. With the last layer of data consent being added, the customer has the right to ask and the data provider has an obligation to share the customer’s data with whoever the customer authorises—this changes the equation and empowers the customer to go to whoever is offering the best service or product and the right price.
Fintech innovators are seizing the opportunity to build customer-focused solutions on top of the digital rails laid out. Financial services in India are undergoing massive transformation and banks need not be the only ones providing a financial product. Financial services are being made available where you need, when you need and how you need them. When you shop online, along with various payment options listed, there is also an option to pay later. The option to pay later is essentially a loan being approved and disbursed to you in a matter of a few minutes at the point of purchase.
Fintech innovation in India is targeting all segments of customers, including those underserved by the banking sector so far. For instance, PaperKing provides an app for household vendors who deliver newspaper, milk, laundry and so on to manage their billing and collections. Khatabook provides a digital solution to neighbourhood kirana stores for order management and collections. Bijak provides an order tracking, payments and credit solution for agri commodity traders. These solutions not just improve their cash flow management and reduce operating costs, but are vehicles for formalization and inclusion of customers who are experiencing the power of digitization in transforming their lives. Whatever may be the need—move money, save for a rainy day, start a new business or reconcile and collect invoices—there’s a fintech solution for each and they are getting better and more accessible by the day. The customer is the biggest beneficiary of the investments India has made in the backbone digital architecture for all to ride on. It’s time for customers to embrace the digital change, shun inhibitions, try new solutions and take deliberate steps towards improving their financial lives.