India over the past two decades has witnessed multifold growth, socially, economically and technologically. However, even in the light of such growth, inefficiencies at the very system level persisted, making it difficult for people as well as enterprises to function optimally. From important aspects like opening a bank account or obtaining admission in a school to smaller functions like renewing a driver’s license or obtaining monthly ration, systems across both public and private sectors mandated archaic, inflexible rules. For instance, if one wanted to renew his driving license, he would have to go to the exact RTO office where he had first obtained his license in order to renew it. In a real scenario, one might have actually moved from the town or city where the license was obtained, making the renewal process impractical and counterproductive. The root cause for this situation is the way information is recorded, stored and retrieved, and used; making the whole system inefficient to use. In the case of the RTO office, information about registered drivers could possibly only rest at an RTO level, making access to this information at other RTOs inconvenient. This is just one instance, now replicate similar scenarios across multiple sectors like healthcare, education etc, the result is a colossal loss of time and resources as a nation.
One of the biggest problem with the system was that identity was attached to location and there was no foolproof way of validating identities as well, leading to opportunities for misuse and cheating as well. The way to tackle this massive problem was to fundamentally rethink the way the entire system functioned. A solution that was digital, portable, access controlled, shareable and verifiable was required. The approach was to provide solutions that could function across all domains and functions; a horizontal approach in comparison to the current system of verticalized silos. This radically different approach led to the development of ‘IndiaStack’ - an open API based technology stack that has the potential to transform the way we function. IndiaStack essentially consists of 4 technology stacks or layers - presence-less layer, paperless layer, cashless layer and consent layer.
Each layer has specific objectives and goals which they fulfill through strong technology solutions, as follows:
Presence-less Layer - The presence-less layer is built to ensure that individuals are able to provide verified identities at any time and place to anyone upon consent. This led to the creation of UIDAI (Unique Identification Authority of India) and the development of Aadhaar, the national identity project, where every citizen of the country can obtain a unique, permanent, digital ID (which is essentially a twelve digit number). Aadhaar also captures individual biometric details, for the purpose of authentication. This unique ID provides people the opportunity to easily provide identity proof, without the need to carry additional documentation. In fact, in theory, people need not even carry the Aadhaar card, all they need to do is to remember the 12 digit number and the authenticity of the person can be verified with a simple fingerprint scan. However implementation of such hardware has just begun and people carry a physical copy of the Aadhaar ID for instances where they are required to show ID proof. This presence-less layer through Aadhaar forms the foundation layer on which the other 3 layers rest.
Paperless Layer - The fundamental nature of IndiaStack is to power solutions that can easily store and retrieve information and documentation digitally. This could be best achieved through a paperless layer. The paperless layer constitutes of 3 solutions - Aadhaar eKYC, E-Sign and Digital Locker. The Aadhaar eKYC provides easy access to information (name, DOB, address and gender) through the Aadhaar identification system for verification processes at any time and place and on any device. E-Sign is a process that allows individuals, enterprises and government bodies to easily and securely sign documents digitally. The third part of the paperless layer is the Digital Locker. Digital Locker is a solution that enables secure digital storage of documents for people to store, retrieve and share digital documents. These three solutions together powers a paperless ecosystem that verifies, authenticates and stores information and documentation digitally.
Cashless Layer - To really move things into the digital age, payments and financial transactions need to go cashless. Going cashless, increases transparency and ease of use. The cashless layer as part of IndiaStack primarily includes UPI in addition to AEPS & APS. UPI stands for Unified Payment Interface and is a powerful solution that allows people to transfer money from any bank account to any other bank account (individuals or merchants) digitally, securely and instantly by simply creating a VPA (Virtual Payment Address) without going through circuitous steps online or offline.
Consent Layer - The electronic consent architecture enables user controlled data sharing, data flow and data retention. The consent layer is built to enable people to securely provide consent for the data flow between data providers like banks, hospitals and telcos to data requestors like banks, credit card providers etc. For instance, if a person wants to apply for a credit card, he can provide consent to the bank (where he has an account) to share relevant documentation to the credit card company to verify his credit worthiness for the issuance of a credit card.
Let us now look at how each component of the stack is set impact processes and people.
Aadhar and e-KYC - Enabling unique, easy and paperless authentication
UIDAI launched Aadhar as the national identity project, that provides a unique 12 digit identification number to people, that also links individual biometric information. e-KYC is an electronic ‘know your customer’ process that links address and identity through the Aadhar authentication system. This project was started in 2009 and has proved to be a huge success with more than 97% of adults in the country enrolled on the program. Aadhar identification has come to become the de facto identification for individuals across government and private sectors. Aadhaar captures 4 fields - name, gender, DOB and address and is a unique identification system. Aadhaar is unique in the way that it is not attached to any agency or service or government body. In comparison all other identity systems are usually attached specific departments or functions; for instance, the passport is primarily used for the purpose of travel. The core idea behind Aadhaar is to have a basic identification and verification system that can be used by enterprises to verify identity or build additional solutions with Aadhaar as the base.
eKYC is a one stop authentication process that authenticates a person based on his/her Aadhaar identification details and is a great way to speed up processes. A good example of Aadhaar and eKYC can be seen in the case of Babajob, a portal that connects job seekers and employers, especially in unorganised sectors. Babajob uses Aadhaar for verification and authentication, thus ensuring value, security and authenticity to both employees and employers.
More recently, Rang De, a non-profit organization working in the space of peer-to-peer lending in Bangalore is utilizing Aadhaar identification, eKYC and UPI for accessing loan requirements and disbursing loans to applicants, especially in the rural belt.
UPI - Powering easy, cashless financial transactions
Unified Payment Interface or UPI is a system that enables bank account holders to send and receive money immediately from one bank account to another through smartphones, without the need to enter lengthy account information or other net banking details, like IFSC codes, user IDs etc. Instead, it uses a simple virtual payment address (VPA) similar to an email ID, that people can create for themselves. An individual can attach any number of bank accounts to a single VPA and can pick any specific individual bank account before making a transfer. UPI transactions can be completed via the BHIM app or other UPI enabled apps, like banking and wallet apps. Thus, fundamentally, UPI removes the need for other payment infrastructure like POS hardware of physical debit and credit cards, making payments friction free and completely interoperable (transfer between accounts in different banks). Here is more detailed information on how UPI works.
Given the demonetization, UPI can prove to be big advantage for people to easily switch to digital transactions. For instance, post the demonetization our very own payments platform witnessed a spike of 50% in UPI transactions.
UPI is not only easy to use from the consumer front, even from an operational angle, UPI obviates international switches like Mastercard and Visa (which have been powering all online transactions so far), thus saving on high transaction costs.
E-sign and Digital Locker - Redefining documentation
E-sign allows for digitally signing documents, anytime, anywhere and on any device. It is governed by e-authentication guidelines and is a major step in reducing the amount of paper in circulation, thus ensuring significant cost savings as well as convenience. Digital Locker is the Government of India repository for documents. With E-sign and Digital Locker people can easily exchange, store and retrieve documents digitally as and when required, upon consent, without the need to physically print out documents. The application areas for this solution is practically limitless, for instance an organisation can use e-Sign to digitally sign important documentation like HR offer letters, vendor contracts and securely store them in the Digital Locker for retrieval at any point in time. Similar applications of the two solutions can be used across several other sectors like transportation, health care, banking etc in order to make processes efficient and cost effective.
In an interesting real life example, Reliance Jio leveraged e-KYC and e-Sign to easily and efficiently issue mobile SIM cards. The entire SIM activation process that previously took 3-5 days now takes only a few minutes, thus significantly improving customer experience and overall efficiency.
How IndiaStack Can Transform the Way We Function
With Aadhaar as the digital spine, IndiaStack has the ability to radically transform the way we function as individuals as well as a nation. IndiaStack is built as the core stack on which enterprises, agencies and government bodies can build their own systems and solutions to optimise and secure processes and user experience.
IndiaStack and Banking - A Future Perspective into a New Age Branchless Digital Bank
IndiaStack can dramatically transform the way banks function today. A Bank as we see it today can transform to become a completely digital entity, accessible purely in the virtual online world, but yet efficiently and effectively fulfilling all banking functionalities through secure, quick steps fulfilled online. Multiple key banking functions like account opening, money transfers, payments, loan approvals and disbursements can built via the many layers of IndiaStack. Account opening, as explained earlier can be completed instantly through a simple Aadhaar eKYC verification process. Loan approvals can be completed online with the customer providing access to the required information, documentation and other checks through the electronic consent architecture and Digital Locker. All bank related documentation can also be digitally signed through E-sign and securely stored and retrieved online as and when needed from the Digital Locker. Loan Disbursement can be routed digitally to the customer’s bank account and payments and money transfers by the customer can be initiated effortlessly through the bank’s app via UPI. UPI allows for all kinds of transfers between individuals, merchants, enterprises, government bodies etc. So, the customer has no real need to hold on to physical cash, be it making a payment at a physical store or paying school fees or even making a loan repayment, he or she can directly make payments online through UPI or other online payment modes.
These two use cases are only a few examples of how IndiaStack can be leveraged. In reality, this unique technology stack can provide organizations the power to re-imagine systems and processes. For instance, the healthcare sector can easily tap into Digital Locker to store and retrieve relevant medical record, through the consent of patients. This makes healthcare portable, meaning that people can access healthcare facilities at any place on short notice without the worry of having to carry patient medical history documents. Similarly, the travel and tourism industry can tap on Aadhaar eKYC for passenger verification, tickets can be purchased using UPI and stored on Digital Locker, and retrieved at the time of travel through the consent layer. The application opportunities for IndiaStack is massive and both private and public agencies can leverage the stack to optimise and digitize processes.
While IndiaStack has the potential to transform things, the success of the entire initiative will be defined through the success of Aadhaar, the foundation of the entire stack. Aadhaar, the biggest repository of individual information in the country has been facing concerns with regards to privacy and security, from issues like fake ID creation to compromise of fingerprints to more serious issues of data leakage. Resolving these issues and instituting sound mechanisms to prevent data breaches is what will eventually lead to the success of IndiaStack.