Digital Financial Services: India Stack and its Role in Financial Inclusion Shreya Chatterjee, IFMR LEAD India Stack is a publicly available Application Programming Interface that gives programmers and organizations secure access to propriety software applications. Each API within the India Stack is owned and governed by separate entities like the National Payments Corporation and the Unique Identification Authority of India. Effectively, India Stack enables the development of products and services that could open up many opportunities in the financial services, healthcare and education sectors of the Indian economy. For example, the India Stack infrastructure offers an alternative to replacing costly and time consuming procedures such as collection and storage of paper records (bank statements, ITR, KYC, etc.), scrutiny of “wet signatures”, and secure handling of physical cash. Thus, utilizing India Stack can reduce the overall operational costs to acquire and serve low income customers (by as much as $ 1.5 Billion (Microsave, 2016) ). Furthermore, it could reduce client verification (KYC) and account opening time to a few minutes – vastly improving customer experience, and translating to very significant implications for the financial inclusion drive in India. Source: iSpirt website What is India Stack composed of? Component What it does Progress so far Aadhaar A unique biometric identity card • The UIDAI has provided Aadhaar cards to 93% of the population and generated 298 Billion transactions.53% of bank accounts under the PMJDY are Aadhaar seeded E-Know your Customer (E- KYC) Includes a public digital safe deposit locker for issue, storage and use of documents • 41 banks, 31 regional rural banks , 15 Non-banking financial institutions and 5 cooperative banks have integrated the E-KYC application • The government’s digital locker initiative has 40 Lakh sign-ups, with a majority of sign-ups from the demographic 21 to 30 years and heavily skewed towards men. E-signature A digital security process that enables customers to request a secure digital signature from a central government server to remotely sign documents. • Currently provided by 4 service providers – e-mudhra, C-DAC, (n)Code solutions and NSDL ltd. Unified Payments Interface UPI platform, launched by NPCI, is a system built on the existing IMPS platform that powers bank accounts of participating banks, facilitates P2P and P2B transactions in a singular mobile application • While as many as 29 banks have concurred to provide UPI service to their customers, 21 banks have already joined the UPI as payment service providers (PSPs). Presence less Providing a naconally accepted, unique ID Consent Driven Secure movement of data based on user consent Paper Less Providing digital means of storing KYC documents and acceptability of digital signatures based on unique ID Cash less Accessing bank accounts and mobile money using the unique ID and authenccacng digitally
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
DigitalFinancialServices:IndiaStackanditsRoleinFinancialInclusionShreyaChatterjee,IFMRLEAD
India Stack is a publicly available Application Programming Interface that gives programmers and organizationssecureaccesstoproprietysoftwareapplications.EachAPIwithintheIndiaStackisownedandgovernedbyseparateentitiesliketheNationalPaymentsCorporationandtheUniqueIdentificationAuthorityofIndia.Effectively,IndiaStack enables the development of products and services that could open upmany opportunities in the financialservices,healthcareandeducationsectorsoftheIndianeconomy.Forexample,theIndiaStackinfrastructureoffersanalternative to replacingcostlyand timeconsumingprocedures suchascollectionandstorageofpaper records(bankstatements,ITR,KYC,etc.),scrutinyof“wetsignatures”,andsecurehandlingofphysicalcash.Thus,utilizingIndiaStackcanreducetheoveralloperationalcoststoacquireandservelowincomecustomers(byasmuchas$1.5Billion(Microsave,2016)).Furthermore,itcouldreduceclientverification(KYC)andaccountopeningtimetoafewminutes – vastly improving customer experience, and translating to very significant implications for the financialinclusiondriveinIndia.
Source:iSpirtwebsiteWhatisIndiaStackcomposedof?
Component Whatitdoes Progresssofar
Aadhaar Auniquebiometricidentitycard • TheUIDAIhasprovidedAadhaarcardsto 93% of the population andgenerated298Billiontransactions.53%ofbankaccountsunderthePMJDYareAadhaarseeded
E-KnowyourCustomer(E-KYC)
Includes a public digital safe deposit lockerforissue,storageanduseofdocuments
• 41banks, 31 regional rural banks , 15Non-banking financial institutions and5 cooperative banks have integratedtheE-KYCapplication
• The government’s digital lockerinitiative has 40 Lakh sign-ups, with amajority of sign-ups from thedemographic 21 to 30 years andheavilyskewedtowardsmen.
E-signature A digital security process that enablescustomers to request a secure digitalsignature from a central government servertoremotelysigndocuments.
• Currently provided by 4 serviceproviders–e-mudhra,C-DAC, (n)CodesolutionsandNSDLltd.
UnifiedPaymentsInterface
UPI platform, launched by NPCI, is a systembuilt on the existing IMPS platform thatpowersbankaccountsofparticipatingbanks,facilitates P2P and P2B transactions in asingularmobileapplication
• While as many as 29 banks haveconcurred to provide UPI service totheircustomers,21bankshavealreadyjoined the UPI as payment serviceproviders(PSPs).
PresencelessProvidinganaconally
accepted,uniqueID
ConsentDrivenSecuremovementofdatabasedonuserconsent
PaperLessProvidingdigitalmeansofstoringKYCdocuments
andacceptabilityofdigitalsignaturesbasedonuniqueID
CashlessAccessingbankaccountsandmobilemoney
usingtheuniqueIDandauthenccacng
digitally
IndiaStack–Includingtheexcluded
India Stack provides open source infrastructure that can build a healthy, competitive and informed productecosystem,buildingcustomerfacingsolutions.AccordingtoTracxn1-astart-updatatracker,over800fin-techstart-ups have emerged in the last three years and of these 22% are involved in alternate lending, 5% in bankingtechnologyand19%inmobilewalletsandpayments.Avarietyofmodelsbuiltontheinfrastructurearebeingtestedoutonthefield.Someexamples:
• Amobileapp,usingtheIndiaStackinfrastructuredesignedbyCapitalFloat,theonlinelendingplatform,waspiloted among retailmerchantswho use Ekowallets for remittance transactions,whowere than able toreceivesmallticketloansduringthesameday,disbursedandappliedfordigitally.
• SuvidhaMicrofinance partneredwith Axis bank to provide its low income customers loans at their retailoutletsusinganassistedmodelwiththeirretailstaff-whereinthecustomer’spreviousfinancialtransactionswereusedtoassesscreditworthiness,theKYCprocesswasentirelydigitallyimplementedandtheloanwasdisbursedthroughaprepaidcardandmadeavailablein24hours.2
WithIndiaStackitisexpectedthatsimilarcollaborationswithinthefinancialecosystemtodelivertargetedproductsfor low-income households in a securemanner, enabling faster, transparent and inclusive platforms for financialgrowth.Itisexpectedthatthesedevelopmentswillprovideasignificantimpetustothecountry’sfinancialinclusiondrive,andallowtheextensionofcrucialfinancialservicestotheverylastmile.
Aretheconsumersreadyfordigitallyprovidedsolutions?
WayForwardIndia stackholds thepotential to createa seamless systemwhereall individualsandbusinesses can transact inapaperless and cashless fashion.Utilizing the India Stack architecture is bound to have very significant impacts onIndia’sdrivetoextendfinancialservicestoeachandeveryoneofitscitizens.However,fortheseaimstoberealized,thereisaneedforimprovementinconnectivityinfrastructure,bridgingthegendergapintheownershipanduseoftechnology, andencouraging all theplayers in theecosystem to adoptdigital payments at all pointsof the valuechain.Furthermore,stakeholdersmustalsopayattentionandcloselymonitordatasecurityandprivacyconcernsofconsumers.
1TracknStart-upSurvey20162iSpirt,“IndiaStackandLendingPilotPartnerUpdate”,June16,2016
FinancialAccountsandAccess:-63%ofIndianshavebankaccountsandthePMJDYitselfhasadded25
Crorebankaccountsapproximately.-23%oftheseaccountsarezerobalanceaccounts.
MobileOwnershipandUsageofInternet-1059Millionmobilesubscribersand97%ofthese
connecconsarewireless.(TRAI2016)Indiahas220Millionsmartphoneusers.17%womenand27%menusesmartphonesinIndia.Only9%ofthosewithlowereducaconlevelsareonline.(PewResearchCentre,
2015)
DigitalLiteracy-45%ofurbanIndiansalongwith51%ofurbanIndians
havelowdigitalliteracy-Womenare12%morelikelythanmentobedigitally
illiterate(FinancialInclusionInsights2015)
Related Documents
