These days if you want to buy something from a roadside vendor, you can do so even if you have forgotten to carry your wallet. Across India, a small placard adorns the small spaces of mostly all such micro-entrepreneurs. It displays a QR code that indicates that digital payments are accepted. For the smallest amounts in small streets and by-lanes, digital payments can be done across the country. UPI can be used offline, does not need electricity or a POS machine.

Whenever you routinely use UPI to make a digital payment spare a thought that the infrastructure you are using is being feted around the world. In 2016, India used primarily cash, and now India has the world’s highest volume of digital payments. The IMF, the Economist, the Financial Times and the like are talking about the success of India’s ‘Digital Public Infrastructure’ (DPI)also often called the ‘India Stack’.

In tech parlance, a “stack” comprises all the technologies required to operate an application including computer languages, architecture, libraries or lexicons, servers, user interfaces and experiences, and software – the apps themselves – and tools used by developers, such as APIs, which connect databases and software.

‘India Stack is the moniker for a set of open APIs and digital public goods that aim to unlock the economic primitives of identity, data, and payments at population scale.’ In simple words, the stack consists of government-backed APIs, or application programming interfaces, upon which third parties can build software with access to government IDs, payment networks and data. We all use the tools that this stack offers in various ways, so it is important to understand how it has evolved.

The foundation of the stack was the launch of Aadhar, a digital identity system. Each person received a unique 12-digit identification number that could be used to access a range of services. Today, more than 90% of the population, or about 1.2 billion people have an Aadhar. The next layer in the stack was the Unified Payments Interface or UPI. A crucial feature of the UPI system is its interoperability: users can transact with any financial player – public or private, large or small. To participate in the UPI, fintech firms were required to partner with a bank or obtain their own special license, under the close watch of regulators.

The Indian digital payments market saw steady growth at a CAGR of 50 per cent (volume-wise) and is expected to reach 411 billion transactions in FY 2026-27 from 103 billion in FY 2022-23, and it is estimated that UPI will record 1 billion transactions per day by FY2026-2027, going from 83.71 billion transactions in 2022-23 to 379 billion transactions by 2026-27, as per reports.

The next layer of the stack is Data – enabling consented secure data sharing, decided by the user. Diglocker, Abha etc all operate on the India Stack.As of February 2023, there were 152 million users of the Digilocker. The administration of more than a billion COVID vaccines through the CoWIN App was also based on the DPI.

India Stack, a “public good,” is a cost-effective innovation and data democratization tool, on which further innovations are being built. At a core level, the driving force of India Stack is open networks. The idea behind open networks is to establish a level playing field for participants in a digital ecosystem. Consequently, application developers can focus on innovating for their consumers and products, without having to bother about issues like infrastructure and permissions. In this ecosystem innovation and creativity are free flowing.   Since the deployment of the India Stack, India has been regularly organizing hackathons to develop applications for the APIs.

Some of the innovations that have made inroads in daily life are FasTag and eWaybill, which combined with GST has cut waiting times at borders from days to minutes. By design, the DPI in India collects minimal data, data is used only with consent and notice, data is federated ensuring that there are no honey pots and access to data is regulated.

Concerns of privacy of data were resolved along the way, and issues of the digital divide in rural areas and for women is also being addressed. A comprehensive Data Protection Bill is also in the pipeline. As a result, today, to verify your identity, make any payments or share documents with any authority all you need is a smartphone. These innovations are transformative for the common person, and we see their imprint on our daily lives.

The areas that are going to alter next due to the DPI are credit, logistics and ecommerce. Startups in the small lending and logistics space are already solving challenges and creating efficiency and accessibility by innovative use of the DPI. The next steps in this march are the launch of the Open Credit Enablement Network (OCEN) – a framework of APIs that allows borrowers to easily interact with lenders (loan service providers, account aggregators, etc.) and get small credit loans, and the Open Network for Digital Commerce. Because of open networks and interoperability, through ONDC a buyer can order groceries using any digital payments service provider from a shop registered to a different app, and finally a third app that provides the service can deliver the order! ONDC recently went Beta live in several major cities in the country.

The India stack is a result of phenomenal public private innovations and enterprise. Aadhar is government run, UPI is managed by a public-private venture the National Payments Corporation of India (NPCL), ONDC is a non-profit company of the government, while tech firms, start-ups NGOs and universities are all building on and using the digital edifice.

Digitization is being adopted worldwide. High income countries such as the US and the UK have adopted decentralized digital ID systems, Estonia has a sophisticated digital ID system, which is federated, and nearly 99 per cent of its population has a digital identity, while nearly 80 per cent of adult Kenyans have used digital payments, due to the country’s mobile money network. But as per analysts, the scale and interconnectivity of India’s public digital infrastructure has little parallel, with Aadhar being the largest digital identity system in the world.

The innovative and successful model of India Stack is being adopted in many countries. The Philippines and Morocco use made-in-India digital identity schemes, while Jamaica used the technology for its Covid-19 vaccination certificates. Countries such as Ethiopia, Sri Lanka, Sierra Leone etc. are also piloting a digital identity scheme. Singapore recently connected its digital payments system to UPI, and so did the UAE. Hopefully, soon when you travel abroad you would be able to use UPI in more countries.

The transformative impact of the DPI in India can be experienced in everyday life. The milk and vegetable vendors or the street food vendors have all transitioned onto the digital highway, leading to their inclusion in the formal economy. Public transport and private cars traverse highways seamlessly because of FaSTag. Citizens can pay property taxes, and avail of services of municipal bodies online, DigiYatra at airports provides a hassle-free entry and journey experience. All these have increased trust and convenience for the users. UPI Lite has been introduced for small payments up to Rs 200/- where no UPI pin is needed. The list is ever increasing and evolving every day.

In the Indian ‘techade’, as Nandan Nilekani says, ‘India is upgrading. From an offline, cash, informal, low productivity economy to an online, cashless, formal, high productivity economy’. 

Published in the Lokmat Times dated 11 July 2023 and The South Asian Times in issue dated August 21,2023 https://thesouthasiantimes.info/the-india-stack-digitally-transforming-society/?swcfpc=1