top of page
  • InduQin

‘Digital wonder of the world’: How India Stack is rebuilding the ecosystem for millions of small bus

An ambitious project to bring everyone in India the benefits of the digital world is slowly and steadily getting wider. India Stack, the disparate technology solutions and products that are being used to provide services to all citizens, is now making waves for small and medium enterprises. It is not perfect, but undeniably playing a role in access to finance.

Meghna Suryakumar is ready to make this bet based on the insights she has gained as the founder & CEO of information intelligence platform Crediwatch. She uses the example of the Jan Dhan-Aadhaar-Mobile (JAM) trinity, which is being used by the government to widen financial inclusion and ensure targeted delivery of sops.

“MSME banking is likely to be the fourth-largest segment to be empowered by fintechs — consumer banking, payments and investment and wealth management are already playing out on the strength of the framework,” she points out.

India Stack has indeed helped the country a great deal. The government's mega digital infrastructure platform to bring 1.4 billion people into the digital fold has aggressively pushed data empowerment by putting data in the hands of people, Infosys's co-founder Nandan Nilekani said at an event recently. India Stack refers to the universal suite of open API (application programming interface) programmes along with the government's biometric identity programme, Aadhaar. Combined as an integrated digital backed ecosystem, these are expected to play a crucial role in creating the country’s digital foundation and evolution. The International Monetary Fund estimates about 90% of the country’s population have joined Aadhaar’s fold and are now part of this mega digital ecosystem.

Notably, India Stack has also empowered SMBs. It has helped them do business with ease, get better financial products and other services.

Mumbai-based B2B enterprise BizzO —- which digitises day-to-day operations and bookings for SMBs — is among the companies that have benefitted from the digital transformation. Viineit Toshniiwal, the firm’s founder & CEO, says using India Stack APIs, a small business can be onboarded in a paperless manner on its platform. A user needs just Aadhaar, GST, and bank account verification to complete the KYC. “The cashless layer of UPI facilitates easy payment with no additional cost. Thus, businesses have a powerful incentive to switch to cashless transactions, as they incur no direct costs during payments. The consent layer allows the provision of offering various fintech products by these SMBs to their customers. This will facilitate ease of consumption of services which, in turn, will drive more businesses. We are enabling all this for merchants. All these layers are being utilised for seamless onboarding and providing financial inclusion products to the SMBs in India,” Toshniiwal says.

At a recent event, Nandan Nilekani, the former chairman of the Unique Identification Authority of India (UIDAI) provided some numbers. Taking the example of Aadhaar, he said so far, the technology has facilitated over 11.6 billion eKYCs — a prerequisite for opening a bank account, getting a mobile connection, etc.

Further, close to $300 billion has been transferred directly into people's bank accounts. All this was built at a very low cost using open-source technology and built for small transaction values so that everybody could take part, leading to what he referred to as data empowerment of the masses. “When you go back to 2008-09, when UIDAI or the unique identification of India was set up, only 17% of Indians had bank accounts and financial exclusion was rampant. From 2009 to 2014, we gave 600 million people a digital identity. Aadhaar took about five and a half years to reach 1 billion people on the platform and today we have about 1.3 billion on the platform. What would have taken 46 years normally happened in less than a decade.”

The account aggregator

There is one particular segment of the stack that enterprises want to tap to monetise: account aggregator (AA). These are entities that allow individuals to share and access data from one financial institution to another in a consolidated network.

India unveiled the AA network in September 2021. As the first step towards bringing open banking in India, it gives individuals control over their personal financial data, claims the government. It is touted to be a financial data-sharing system that could revolutionise investing and credit, giving millions of consumers greater access and control over their financial records. Nilekani had said this ensured that the data remained with the user. “It enables individuals or small businesses to get access to their own data, legally, safely and fully encrypted. And they can, in turn, use it to give it to somebody else to get a loan or to get some personal finance, etc. And this is what we call a data democracy,” he had said at TiEcon 2022, held recently.

According to the government, four distinct layers form the bedrock of the mega initiative: presence-less (capability of being authenticated from anywhere); paperless (digital records); cashless (e-financial transactions) and consent (secure movement of data authenticated by its owners). This ecosystem combined rural and urban India into one big market in many ways, making it easy for a small entity with limited resources to reach the hinterlands with its goods or services.

Onemoney AA calls itself India’s first account aggregator licensed by RBI. Its founder and CEO Krishna Prasad says the AA system will change the way MSMEs operate. They will recognise that it is crucial to share legitimate data to take delivery of competitive financial products that will enhance their financial well-being. Responsible financial behaviour will earn them higher credit and the cost of transactions will be low enough to attract users from the bottom of the economic pyramid, he adds.

All advantages to the user

Suryakumar explains what Nilekani terms data democracy. The government has been able to eliminate middlemen and reach the beneficiaries directly. At the same time, the user has the right to decide if her data should be shared. “While the utility of the first three layers is well established in reducing friction costs for business and lending, we believe the fourth layer — consent — offers the maximum utility for SMBs to leverage their private data to enable better risk assessment and pricing. Today, SMBs are constrained by lenders to offer hard collateral for loans in the absence of data to draw the right risk conclusions. The ability to provide private data under consent as well as the cashless layer that digitises all money flow will enable SMBs to truly raise collateral free loans, enabling them to grow significantly faster,” says Suryakumar.


3 views0 comments


bottom of page