India Stack : what goes into making the world’s biggest digital public infrastructure
On the morning of May 24th, 2013 the sun rose at precisely 5:26 AM in New Delhi, a few hours later, one policy launch announcement changed the future of India forever. That announcement enabled
- JIO to onboard 1000 customers a minute
- Zerodha to become India’s largest digital stock market broker
- banks to open new accounts for their customers in minutesThe announcement in the picture here is Aadhar-based e-KYC, which allowed institutions to utilize Aadhar data to onboard customers digitally, and brought down cost per KYC from 23$ to 0.5$
e-KYC was just one of the many releases that were going to be announced by the government, and these releases were later named the “India Stack”.
As of today, India Stack is ubiquitous in people’s lives and is probably the most effectively utilized public infrastructure in the world.
What is the India Stack?
in very simple terms, it is a set of open APIs and public goods that allow businesses, startups, governments to build products and solutions over them. You can think of it as a 3 layered cake, where the base layer is the India Stack API, the middle layer is the service provided to the user in the form of an app/website and the top is the user itself. The icing on the cake? the convenience for the users and startups + businesses.
What are the products in the India Stack?
the creators of India Stack envision 3 distinct layers it can be divided into
- The Presenceless Layer — Aadhar Authentication and e-KYC
The Aadhar Card which provides every Indian Citizen a unique 12 digit identification number, linked with biometric details such as their photograph, fingerprint and iris scans. In a way, it can be thought of as the bedrock over which all the India Stack services are built.
These services essentially harness the biometric data present in the Aadhar database for over 99% of the Indian adult population to make sure that they have ease of verification. These have now become norms at government examinations, opening bank accounts and disbursing loans in minutes. Talk about increased access to credit.
2. The Paperless Layer — DigiLocker and eSign
Imagine every important government issued document (licenses, certificates, identity proofs) you’ll ever need in your life being stored in an app, that is exactly what DigiLocker does! It stores all your important data in a digitally shareable format. The best part? you don’t even need to upload it, all of this is already present in your profiles, how you ask? It’s all linked to your Aadhar ID!
Similarly, eSign allows the user to digitally sign documents, curbing the hassles of multiple documents and signatures for any activity, be it legal or financial.
3. The Cashless Layer — UPI and OCEN
PM Narendra Modi announced demonetisation on the 8th of November 2016, this led to an atmosphere of panic, outrage and uncertainty in the nation for about 6 months, 7 years later, this very move has led to another outcome : the mass adoption of digital payments in India; making it the largest digital payments operator in the world!
UPI (United Payments Interface) is an interoperable network which connects multiple banks, users and merchants. Multiple fintech apps have been built on top of this infrastructure; PayTM, PhonePe, Google Pay to name a few. These companies have gone ahead to become unicorns and provide a myriad of financial services including Insurance, Credit and Investment. This has also led to the penetration of digital payments in tier 2/3 cities, towns and villages.
By the time you’ll be done reading this article, over 1 million UPI transactions would have occurred across India, phenomenal, isn’t it?
coming to the OCEN — Open Credit Enablement Network, which aims to completely digitize and instantize the end-to-end process of originating a loan customer, underwriting them, completing the documentation, disbursing the funds, and even collecting repayments.
In simpler words, it plans to access cashflow or revenue data for SMEs and Individuals to analyze, determine their credit worthiness and digitally disburse credit to them, this would be much faster than the traditional process banks follow to disburse loans.
the India Stack has also led to the creation of over 2000 startups in sectors like
- Payments : PayU, PayTM, PhonePe, RazorPay
- Lending : Cred, LendingKart, Incred, Navi, Rupeek
- WealthTech : Zerodha, Groww, Kuvera, INDmoney
- InsurTech : PolicyBazar, Acko, Digit
- NeoBank : Jupiter, BankBazar, Open
these startups make extensive use of the India Stack in their products and have cumulatively raised over $5.5 billion
What is next for the India Stack?
Almost every tech and product enthusiast is keenly following the next offering of the India Stack, the ONDC — Open Network for Digital Commerce. In a bid to democratize e-commerce for sellers and buyers, the government has launched ONDC in early 2023. It provides buyers freedom from dependence on platforms, users to choose from different buyers, and logistics solutions from third party service providers.
ONDC wants to become the intermediary between buyers and seller bringing more transparency into e-commerce. It is currently operating in 236 cities and has peaked at 25,000 orders per day.
India Stack is probably the greatest contribution that India can make to the world — Satya Nadella
I believe that development of digital public infrastructure is often understated, because the tangible benefits aren’t visible. The benefits are however in implementing and executing social welfare schemes in a more transparent manner and ensuring direct benefit transfer.
The development of India is heavily dependent on the growth of local economies. The India Stack aims to aid the growth of these economies by solving for payments, credit and logistics(e-commerce) and has definitely led to visible results, where sellers are emerging from across the country.
The challenge going forward is to ensure that the India Stack works more on accessibility and penetration in even the most disconnected of villages, ensuring equitable growth and distribution of development. The upliftment of the lowest layer of the pyramid or “Bharat” will be the key to driving large scale growth in the economy and it will be interesting to see how India Stack leverages its tech and experience to address these challenges.
