How India Stack Is Paving The Way For Financial Inclusion

Imagine getting access to financial services, and complex government services with a text message or on WhatsApp. This was the issue that is being resolved by India Stack. At the basic level, it is a form of digital infrastructure transforming the way businesses and governments in India operate. It comprises Application Programming Interfaces (APIs) that enable the creation of digital solutions for identity verification, payments, and other financial services. India Stack has helped in accelerating financial inclusion by creating a secure, open, and interoperable digital ecosystem for businesses and individuals. It has four layers that offer multiple services including Aadhaar, e-KYC, Digital Locker, and the much-vaunted Unified Payment Interface (UPI).

The Aadhaar project was a game changer and has created a single digital identity for billions of citizens. It enables businesses and governments to verify identities quickly and efficiently.

e-KYC (electronic Know Your Customer), a paperless method of verifying identity using Aadhaar has helped businesses verify customer identities in real-time, without physical documents. It has reduced the time and cost of customer onboarding for businesses, making it easier to spread the blanket of financial inclusion to a large section of the underbanked. 

Digital Locker offers a secure online repository of documents and certificates linked to an Aadhaar number. It helps users store, access, and share their documents and certificates anywhere anytime.

UPI (Unified Payment Interface) enables individuals to transfer money from their bank account to any other bank account instantly and has emerged as a success story in India. 

The India Stack has helped in increasing financial inclusion in India by making financial services accessible to the unbanked and underbanked population. According to a report by Omidyar Network, it created a digital infrastructure that enabled financial services to millions in India.

How India Stack Drives Financial Inclusion

The growing digitisation via India Stack has helped drive financial inclusion in rural India. It offers a secure platform, enables digital payments and provides access to banking services to people in rural regions. It regularised Aadhaar and biometrics for authentication and identification, which helps reduce the time and effort required to access financial services.

India Stack also provides access to digital financial services such as mobile banking, digital wallets, and UPI. 

It helps rural users make payments and transfer money without going to a bank. It is the key to providing access to credit and insurance services, enabling rural users to avail of loans and insurance policies without going to a bank.

India Stack is also helping to promote financial literacy among rural users. It provides access to educational videos and other materials on financial literacy, which helps users understand how to use the services and make informed decisions.

Today, Aadhaar is being used to reduce fraudulent identity claims and to direct government scheme benefits to the accounts of the unserved via the Pradhan Mantri Jan Dhan Yojana (PMJDY). Benefits could be accessed directly through these zero-balance bank accounts via phones and cards. This has increased financial literacy across the country, particularly in rural areas. The implementation of QR codes has improved the flow of money.

Rural fintech companies in India are leveraging the India Stack, a set of digital infrastructures that enables the exchange of data and services among different entities, to provide innovative financial products and services to the rural population. India Stack includes Aadhaar (a national biometric identity system), digital locker, e-Sign, and unified payment interface (UPI).

Using India Stack, rural fintech companies are creating digital platforms allowing farmers, merchants, and citizens in rural areas can access financial products and services, including loans, insurance, and investment products easily. For example, mobile apps use Aadhaar to verify the identity of rural borrowers and disburse loans immediately to beneficiary accounts. UPI is another important tool to facilitate seamless and instant payments for goods and services.

Rural fintech firms have been working on new products and services leveraging the digital stack. For instance, the government is working on a digital health stack to enable the creation of electronic health records and facilitate telemedicine services. Rural fintech companies are exploring ways to use his digital platform to provide affordable and accessible healthcare services to rural citizens.

In the case of the digital education stack, fintech companies can build the ability to provide educational loans and other financial products to students in rural areas.

The Way Forward

The government has inked agreements with seven countries to use India Stack, with most of the attention on UPI, MOSIP, CoWIN, and Digital Health Stack. There is also a lot of interest in DigiLocker, with a user base of more than 144 Mn. Solutions such as DIKSHA (Digital Infrastructure for Knowledge Sharing) and National Digital Education Architecture (NDEAR) are also drawing interest. UPI remains a big winner with the government talking to more than 30 countries to work out the modalities of exporting UPI and its digital stack. Singapore, France, and the United Arab Emirates have already announced plans to use UPI in their countries. 

The government is working to allow UPI payments for NRIs in Singapore, Australia, Canada, Hong Kong, Oman, Qatar, the US, Saudi Arabia, the UAE, and the UK. As India Stack adds more components to its arsenal, it will be able to assist in the creation of credit lines, the streamlining of banking, and the implementation of wealth management solutions in collaboration with fintech firms.

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