The India Stack Reference – 2022 and Beyond
December 30, 2022
India Stack is a moniker for formidable digital infrastructure which includes Identity, Payments, and Data Management. It is a set of APIs (Application Programming Interfaces) and digital infrastructure that was developed in India in order to enable and facilitate the delivery of various digital services to citizens and businesses. The design is secure and scalable and is used to build a wide range of applications and services to harness the power of the Internet and digital technologies. It aims to solve 3 challenges/issues:
- Increase Financial Inclusion through digital identity for all citizens
- Faster and low-cost digital payments services within the formal financial system
- Allowing Data sharing with customer consent
History of India Stack
India’s fintech journey began in 2009 with the creation of two institutions viz., the National Payments Corporation of India (NPCI) and the Unique Identification Authority of India (UIDAI) known as Aadhaar. The below diagram shows the different components of the India Stack:
It allows the governments, businesses, startups, and developers of tech services to utilize a unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery.
4-layers of India Stack
- Presence-less: Universal biometric digital identity allows individuals to enjoy any service provided anywhere in the country
- Paperless: Digital records move with an individual’s digital identity eliminating the need to capture and store vast amounts of paper records
- Cashless: Single interface to all the country’s bank accounts and wallets
- Consent of India: Allows data to move freely and securely to democratize the market for data
India Stack is the largest open API in the world. The idea is that established and startup enterprises can use these APIs to build innovative solutions focused on improving access to services for the general population.
Presence-less and Paperless layers
At the core of India Stack lies the basic identification layer that establishes the individual identity. The paperless layer builds on top of the identity layer and enables the use and storage of digital records associated with an individual. The presence-less layer is under the ownership of the Unique Identification Authority of India (UIDAI), such as Aadhaar. The paperless layer is under the ownership of the Ministry of Electronics and Information Technology (MeitY), such as customer identity verification (e-KYC), digital signature (eSign), and online document storage (DigiLocker).
Aadhar – “Universal ID”
Aadhaar is a 12-digit unique identity number. These are linked to biometrics (fingerprints) and as time goes by, authentication by Aadhaar is required for access to more and more services and subsidies. Aadhar made the following two possibilities:
- eKYC (Know Your Customer) enables paperless and rapid verification of address, identity, etc.
- e-Sign enables users to attach a legally valid electronic signature to a document.
Digital Locker
DigiLocker is an Indian digitization online service provided by the Ministry of Electronics and Information Technology (MeitY), Government of India under its Digital India initiative. DigiLocker provides an account in the cloud to every Aadhaar holder to access authentic documents/certificates such as driver’s licenses, vehicle registration, and academic mark sheet in digital format from the original issuers of these certificates. It also provides 1GB of storage space to each account to upload scanned copies of legacy documents. India Stack could fast-track the move to digital payment systems across the developed world and mark the end of cash.
Cashless Layer
This layer empowers individuals to make transactions through mobile phones without the need for debit, credit cards, or net banking. Any UPI client app may be used and multiple bank accounts may be linked to a single app. This layer is under the ownership of the National Payments Corporation of India (NPCI) and offers services such as the Unified Payments Interface (UPI).
Unified Payments Interface (UPI)
UPI is an instant real-time payment system developed by the National Payments Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. Users can transfer funds instantly between two bank accounts using mobile. Users need to register their mobile numbers with the bank. The user needs the UPI ID of the recipient to transfer the money. It runs as an open-source application programming interface (API) on top of Immediate Payment Service (IMPS). The Reserve Bank of India (RBI) regulates the transactions.
Aadhaar Enabled Payment System (AePS)
AePS, under NPCI, is working to speed-track financial inclusion in the country. AePS is a bank-led model which allows online interoperable financial inclusion transactions at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication. The only inputs required for a customer to do a transaction under this scenario are:
- Aadhaar card linked with the bank name/account
- Aadhaar Number
- Fingerprint biometric of holder captured during enrollment
- MicroATM
Aadhaar Payment Bridge (APB)
The Aadhaar Payment Bridge (APB) System, is one of the unique payment systems implemented by NPCI. It uses the Aadhaar number as a central key for electronically channelizing the Government benefits and subsidies in the Aadhaar Enabled Bank Accounts (AEBA) of the intended beneficiaries. The APB System sub-serves the goal of Financial Inclusion and provides an opportunity for the Government to attempt financial re-engineering of its subsidy management program. The implementation of the APB System has also led to the electronification of a large number of retail payment transactions. Earlier, these were predominantly either in cash or cheque.
Benefits of APB
- Eliminates inordinate delays, multiple channels & paper-work involved in the existing system
- Transfers benefits & subsidies in a seamless & timely manner and directly into the Aadhaar Enabled Bank Account (AEBA)
- Customer need not convey the change in bank account details to the Government Department or Agency
- Customers need not open multiple bank accounts for receiving benefits and subsidies from various social welfare schemes. Customers need only one bank account to start receiving benefits and subsidies directly into his/her AEBA.
Consent Layer
This layer enables a Secure Consent-Based Data Sharing Framework To Accelerate Financial Inclusion. Data Empowerment and Protection Architecture (DEPA) is predicated on the notion that individuals should have control over how their personal data is used and shared. DEPA is designed as an evolvable and agile framework for good data governance, given the rapid pace of change in this arena. It empowers people to seamlessly and securely access their data and share it with third-party institutions.
DEPA seeks to provide a foundation for 3 key building blocks:
- Enabling regulations
- Cutting-edge technology standards
- New types of public and private organizations with incentives closely aligned to those of individuals
Summary
India stack has enabled open networks to establish a level playing field for members of a digital ecosystem. Application developers can employ creativity and innovation to focus on building the best consumer experiences and products instead of having to worry about infrastructure, permissioning, and access. In the future, it will extend to digital products and services in sectors of health, education, agriculture, commerce, financial inclusion, and good governance.
Grep Digital has used the India Stack extensively to build identity, and payments solutions. Connect with us to partner in your adoption of the India Stack and build seamless solutions.
Credits: https://indiastack.org
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