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India Stack: Understanding Technology and Impact of Population Scale Digital Infrastructure


What is India Stack


India Stack is the moniker for a set of open application programming interfaces (APIs) and digital public goods that have unlocked the economic primitives of identity, data, and payments at population scale and has led to the miraculous rise of India in transparency and digital infrastructure.


India Stack has layered capabilities that India has built over the last 15 years. It is the largest open API in the world and combines processes such as identity verification, OTP verification and beneficiary authentication under one single umbrella.


India Stack’s rapid adoption by billions of individuals and businesses in India has helped promote financial and social inclusion and positioned the country for the Internet Age. It is worth mentioning, that although the name of this project bears the word India, the vision of India Stack is not limited to one country; it can be applied to any nation, be it a developed one or an emerging one.





History and Vision


India Stack is a visionary and pioneering initiative that encompasses a suite of digital technologies and capabilities, implemented through a public-private partnership between the Reserve Bank of India (RBI) and a consortium of banks. In India Stack, innovation has been through open protocols and platforms.


One of the main reasons for the creation of India Stack was to fight the financial exclusion throughout the country. India Stack, along with a strong political will and an active central bank, has made significant strides to bridge the financial gap. For example, the expansion of digital payments, facilitated by the stack, is an important driver of economic development in India and has helped stabilize incomes in rural areas and boost sales for firms in the informal sector.


With the help of India Stack, the country is at the forefront of creating a more accessible and secure financial infrastructure. There are currently 3,000-plus fintech start-ups in India. “The country is among the fastest growing fintech markets in the world with a market size of $30 billion in 2021 that is expected to reach $1 trillion by 2030.


Layers of India Stack


India Stack is a technology infrastructure consisting of four layers, namely Identity, Paperless, Cashless and Data empowerment. This can be explained in a nutshell as follows:


Presence-less Identity Layer: This is a unique digital biometric identity with open API access. This layer includes the Aadhaar card and Mobile Aadhaar and is owned by the Unique Identification Authority of India. These components help a person provide evidence for their “Identity.”


Paperless Layer: This can easily store and retrieve information digitally. It includes Aadhaar e-KYC, e-Sign, and the Digital Locker. This paperless layer is owned by the Department of Electronics and Information Technology


Cashless Payments Layer: This layer allows a citizen to pay someone else without “cash” using a fast and cheap methodology. This is an electronic interoperable payment network and includes IMPS, AEPS, APB and UPI and is owned by the National Payments Corporation of India (NPCI).


Data-Empowered Consent Layer: This layer allows the user to give “consent” for any data being shared or used. This layer is a modern privacy data-sharing framework with an open personal data store and is owned by the Reserve Bank of India. This layer incorporates the DigiLocker, Account Aggregator and Consent Artefact.




Core APIs included in India Stack


The following APIs are considered to be a core part of the India Stack. These are government-backed APIs, upon which third parties can build software with access to government IDs, payment networks and data.


1. Aadhaar

2. e-KYC

3. eSign

4. Unified Payment Interface (UPI)

5. Digital Locker

6. Account Aggregator


1. Aadhaar


Aadhaar is a twelve-digit unique code which is issued to Indian residents. The UIDAI (The Unique Identification Authority of India) provides citizens with the unique code using the person’s demographic and biometric data.


Aadhaar is not like the US Social Security number or the UK National Insurance number, as those are mostly used for purposes of social benefits and not for everything from flights to buying property to cooking gas subsidies. Here are some mind-boggling numbers, worth considering:

  • Aadhaar IDs have been issued to 1.37 billion people digital IDs, — almost 90 percent of India’s population — in less than a decade.

  • Over 103 billion Aadhar verifications have been done till Sep ’23.

  • Over 788 million Aadhaar have been uniquely linked with the Bank Accounts


2. e-KYC


An Electronic Know Your Customer allows instant digital verification of a person with the help of their Aadhaar number. Some of the details that are provided include the place of residence and the date of birth of the individual. It is worth highlighting that the cumulative number of e-KYC transactions till July 2023 is 15.83 billion.


3. eSign


eSign is enabled through an API that facilitates an Aadhaar cardholder to electronically sign documents. This is authenticated through biometric readings and through an OTP. This reduces paperwork with the authentication process and provides legal validity with this signing mechanism.


4. Unified Payment Interface (UPI)


UPI allows the transfer of money from one bank account to another. The UPI is controlled by the NPCI (National Payments Corporation of India.) One server of NPCI is connected to all the licensed banks. This allows seamless to and from bank transactions through UPI. As of November 2023, UPI saw the participation of 458 banks and recorded more than 10 billion monthly transactions worth over US $176 billion.


5. DigiLocker


DigiLocker is used as the government’s repository for documents. Also, users can sign up for services by linking their Aadhaar cards and similarly it can be used to upload documents, eSign these documents and share the documents at any time, from anywhere. In other words, DigiLocker feature allows individuals to use their Aadhaar number to get access to their legally valid electronic documents.

With over 200 types of digital documents, DigiLocker has more than 2,311 Issuers, including various government departments, academic institutions, and other organizations. More than 150 million people have signed up for DigiLocker, and the platform has access to more than 5.6 billion digital documents.


6. Account Aggregator


The Account Aggregator (AA) can be seen as a ‘data bridge’ between financial institutions. This ‘data bridge’ transfers financial information from one financial institution to the other only when the customer has consented to the information being transferred.


As of today, there are 1.1 billion AA-enabled accounts and 2.05 million users voluntarily sharing their financial data with banks and financial institutions to avail themselves of loans and get better and quicker deals on other financial products.


The development of India Stack is now going to the next level. The next layer, the open credit enablement network (OCEN), along with Account Aggregator is expected to further democratize lending and propel the fintech space forward. These tools will allow for seamless and secure sharing of financial data, making it easier for lenders to evaluate creditworthiness and extend loans to a wider section of society.


India Stack: Benefits for Population at Large


India recorded over 23 billion digital payments during Oct – Dec ‘22. India’s digital payments market is at an inflection point and is expected to more than triple from $3 trillion today to $10 trillion by 2026. As a result of this unprecedented growth, digital payments (non-cash) will constitute nearly 65 percent of all payments by 2026.


India Stack allows the government and private companies to deploy cashless and paperless technology products.

  • A digital ID card dramatically lowers the cost of confirming people’s identities.

  • Open-access software standards facilitate digital payments between banks, fintech firms, and digital wallets.

  • And access to people’s personal data is controlled through consent.


More than 1700 government schemes/ programs run by both the center and states are using Aadhaar for smooth delivery of benefits and service. Aadhaar linked Direct Benefit Transfer saved over US $32 billion to the government exchequer by curbing leakages and improving efficiency.


India Stack is accessible on fingertips, on phone, and all interoperating with each other, and at exceptionally low cost. Its comprehensive digital infrastructure makes it more effortless for people in India to access more digital services. Implementation of digital ID cards, open-access software standards, and consent-based data management has been connecting people from every stratum with the formal economy.


India has found a world-beating solution for building out and regulating the online commons that is more equitable than the US’s laissez-faire approach, more innovative than the EU’s regulation-heavy model and more transparent than many totalitarian templates.


Conclusion: Lessons from India Stack


No single aspect of the India Stack is entirely unique. However, its comprehensiveness has succeeded in building a more inclusive digital economy from the bottom up. The Indian experience offers several lessons:

  • A foundational approach providing a range of public infrastructure and policies can allow for significant synergies across various parts of the digital economy.

  • Common approaches to APIs can set up an ecosystem for data and payment flows that is open to participation by many providers, leading to innovation and choice for the consumer.

  • Interoperability is a useful tool for fostering competition in digital financial services. The India Stack ecosystem is vast, allowing existing financial intermediaries, as well as big tech firms and new fintech companies, to compete.

  • Data stays as a crucial enabler and will eventually get to substitute collateral. A level playing field for data flows is necessary to ensure fair competition.


In India, the export-oriented ICT sector, the implantation of large-scale, open digital infrastructures and enabling regulatory frameworks have enabled financial inclusion and economic growth. and shaped the growth of financial services and products as a state-supported and privately led, tech-driven fintech ecosystem, and I will write more about it in the next blog.



Sources


1. The Four Pillars of India Stack: Aadhaar, UPI, eKYC, and DigiLocker Explained

2. India Stack Website

3. What Is an Account Aggregator & Why Is It Relevant?

4. Ministry of Finance

5. Account Aggregator Finvu Secures Funding To Make Users’ Financial Data Transfer Safe

6. “India Stack Impact of Population Scale Digital Infrastructure” Dr. Vivek Raghavan, (Volunteer ISpirit)

7. What is the India Stack and why is it no longer the dream it used to be?

8. Aadhar Brochure

9. DigiLocker Leads the Charge in India’s Digital Revolution

10. Account Aggregator- India’s next digital innovation

11. UPI Payments: 10 billion Transactions A Month Done, Next Stop 100 billion

12. How India Stack Transforms India into a Cashless Economy

Introduction About India Stack

13. The Magic of India Stack: How It is Creating a More Inclusive & Accountable India

14. The India Stack: opening the digital marketplace to the masses.

15. India stack and lending reforms enablers in the evolving fintech story: Siddharth Parekh

16. “You should do what India does”: FinTech ecosystems in India reshaping the geography of finance.

17. Rise and rise of fintech

18. The rise and rise of India’s fintech sector

19. India - A Global FinTech Superpower



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