What is the India Stack? How is it Driving Innovation in Industries?

Just a few years ago, shopping wasn’t as hassle-free as it is today. Constant trips to ATMs and having to lug around wads of cash inside your pockets aren’t really memorable. Today, you can make purchases as extravagant or as little as you like with just your smartphone. This transformation, one that has rewritten the rules of financial interactions, owes its existence to the groundbreaking innovation known as India Stack, a digital infrastructure that has seamlessly woven itself into the lives of over 1.2 billion Indians.

The impact of India Stack can be gauged from these numbers as reported by IndiaStack.org: 67 billion digital identity verifications, ₹14.05 trillion in monthly real-time mobile payments, and 8.6 billion monthly real-time mobile payment transactions. However, the significance of India Stack stretches far beyond mere numerical figures. Its impact reverberates through the very fabric of how society, technology, business, and finance intersect.

But what exactly is the India Stack, and how is it changing how businesses are conducted?

In this blog, you’ll learn:

  • What is India Stack?
  • What are the Components of the India Stack?
  • How Does the India Stack Benefit Businesses in India?
  • How Has the Adoption of the Unified Payments Interface Influenced the Indian Business Landscape?
  • Frequently Asked Questions About India Stack

What is the India Stack?

India Stack is a collection of open Application Programming Interfaces (APIs) and digital public goods that aims to enable data, payments, and identity on a large scale. Initially introduced in India, this initiative is swiftly gaining global adoption, fostering financial inclusion, societal advancement, and alignment with the demands of the digital era.

It helps governments, businesses, startups, and developers to harness a unique digital infrastructure. This ecosystem addresses the complex challenges faced by India in achieving presence-less, paperless, and cashless service delivery across various sectors, such as healthcare, education, and finance.

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What are the Components of the India Stack?

India Stack has four technology layers:

1. Presence-Less Layer

The presence-less layer provides universal biometric digital identities that allow people to utilize services from any location within the country, thus eliminating the need for physical presence for transactions. Notably, it includes tools like Aadhaar cards and Mobile Aadhaar, allowing secure ID verification without physical documents.

2. Paperless Layer

The paperless layer transforms record management by linking digital records to an individual’s digital identity, removing the need for excessive paper documentation and storage. Additionally, the paperless layer comprises essential elements such as e-KYC (Know Your Customer), e-Sign, Digital Signature, and Digital Locker. Here, Digital Locker acts as a secure vault for documents, while Digital Signature guarantees authenticity and integrity.

3. Cashless Layer

It introduces a unified interface linking the country’s bank accounts and digital wallets. Hence, it democratizes payment systems and improves financial accessibility.  This interoperable payment network simplifies transactions and reduces costs associated with digital financial activities.

4. Consent Layer

The consent layer facilitates secure and seamless data movement, fostering an inclusive data market. Owned by the Reserve Bank of India (RBI), this personal data store empowers individuals with modern privacy-enabled data-sharing capabilities.

Additionally, the components of India Stack are administered by various entities. For instance, the Unique ID Authority of India manages e-auth and e-KYC, while the Ministry of Communications and Information Technology maintains the eSign specification. Digilocker, a digital document repository, is overseen by the Ministry of Electronics and Information Technology. The Unified Payments Interface (UPI) is managed by the National Payments Corporation of India. Furthermore, the Account Aggregator framework is regulated by the RBI, with its technological standards governed by ReBIT (Reserve Bank Information Technology Private Limited).

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How Does the India Stack Benefit Businesses in India?

India Stack has ushered in a new era of innovation by fostering collaboration between public and private sectors, supported by a dynamic startup ecosystem and supportive governmental policies that are aimed at advancing the digital public sphere. This innovative approach has led to various benefits for businesses across India. Here are some key benefits:

1. Streamlined Operations

Components such as e-KYC, e-authentication, and Digilocker have transformed business operations. These elements streamline customer onboarding, facilitate efficient digital documentation management, and ensure secure data storage.  This minimizes administrative burdens and operational costs, allowing businesses to focus on their core activities.

2. Cost Reduction

Through streamlined operations, digitized processes, and a reduction in paperwork, businesses can effectively trim operational costs linked to document handling, storage, and verification. Thus, it results in significant cost savings for businesses. Additionally, it also allows businesses to allocate resources efficiently and simplify workflows, ultimately enhancing their competitive edge in the market.

3. Data Access and Consent

The consent layer allows businesses to access customer data with their explicit consent. This enables businesses to provide personalized experiences while upholding contemporary privacy standards and building customer trust.

4. Global Recognition

India’s comprehensive approach to digital transformation is positioning it as a rapidly growing digital economy and capturing attention globally.  This provides businesses with a unique opportunity to build credibility, expand their networks, and explore new horizons for growth and success on the global stage.

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How Has the Adoption of  Unified Payments Interface Influenced the Indian Business Landscape?

Here are some key ways the adoption of UPI has impacted businesses in India:

  1. Providing businesses with a secure and user-friendly platform for conducting transactions with customers digitally. Thus, it reduces reliance on cash transactions and manual processes.
  2. Promoting transparency and traceability in business operations by facilitating electronic transactions.
  3. UPI allows businesses to link Jan Dhan (a financial inclusion program launched by the Government of India) accounts and mobile wallets. This enables small businesses and vendors to accept digital payments, thus eliminating the need for expensive Point-of-Sale infrastructure and contributing to greater financial inclusion.
  4. Extending the reach of digital transactions to remote and underserved areas, driving participation in the digital economy.
  5. Enhancing the overall payment experience for customers, thus leading to smoother and hassle-free transactions.
  6. Improving security and fraud prevention by providing robust security measures, thereby building trust among both businesses and customers in utilizing digital payment methods.
  7. The data generated through UPI can be used to gain insights into customer behavior and preferences, allowing businesses to tailor their experiences accordingly.

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Frequently Asked Questions About the India Stack

What is the Role of Aadhaar in India Stack and its Impact on Business Operations?

Aadhaar, the unique identification number issued to every resident of India, occupies a significant role within the India Stack framework. Its multifaceted capabilities have fundamentally reshaped the country’s approach to identity verification, authentication services, and financial inclusion. This, in turn, has resulted in a substantial impact on business operations across diverse sectors.

For instance, by providing individuals with a secure and verifiable means to prove their identity online, Aadhaar has streamlined identity verification processes, simplifying the establishment of customer identities for businesses. Moreover, Aadhaar-enabled e-KYC is enabling businesses to rapidly and efficiently verify customer identities, reducing paperwork and expediting onboarding procedures.  The integration of Aadhaar has led to expanded market horizons for businesses by enabling them to serve customers in remote and underserved areas. This extension of reach has opened doors to previously untapped areas, promoting growth and diversity.

What is e-KYC, and How Does It Streamline Customer Onboarding for Businesses?

Electronic Know Your Customer (e-KYC) is a streamlined process designed to digitally verify the identity of individuals. This technology-driven approach eliminates the traditional reliance on physical documents, making customer onboarding quicker and more efficient for businesses. In essence, e-KYC allows individuals to undergo identity verification without the hassle of paper documentation. Through e-KYC, individuals can open bank accounts, access various financial services online, and even invest in mutual funds, all while bypassing the need for physical paperwork.

By streamlining the verification process, e-KYC expedites procedures that previously consumed significant time and effort. This has improved the growth of digital platforms, as they can now onboard customers swiftly and with minimal issues. Additionally, e-KYC also reduces the risk of errors inherent in manual processes and creates a more seamless and user-friendly experience for customers.

How Has India Stack Facilitated the Growth of Fintech Startups in India?

The foundational elements of India Stack, such as UPI, eKYC, Aadhaar, and DigiLocker, are driving remarkable growth in fintech startups in the country. Some of the key ways Stack India is influencing fintech startups include:

  • Accelerating customer onboarding processes and service provision
  • Enabling startups to seamlessly verify customer identities, reducing the risk of fraud and money laundering
  • Lowering transaction costs and enhancing the convenience of m fintech solutions for customers
  • Facilitating the reach of financial services in previously inaccessible areas
  • Safeguarding vital documents and ensuring customer data privacy
  • Aiding fintech startups in building innovative products and services

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Emeritus, Like the India Stack, Can Aid Your Finance Career

To conclude, the transformative influence of India Stack on businesses cannot be overstated. This innovative digital infrastructure has set a remarkable precedent for leveraging technology to streamline processes and enhance customer experiences. As we continue to witness the evolution of technology’s role in shaping finance, it has become even more important to keep learning and growing. If you are looking to deepen your understanding of finance and technology, consider exploring the finance courses offered by Emeritus.

By Krati Joshi

Write to us at [email protected]

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