At an average of 280 million cashless digital transactions per day in 2022, India has clocked as one of the world’s most advanced cashless economies. This might have seemed unthinkable just a few years ago. But government policies in tandem with the rise of digital wallets and a slew of instant payment services by fintech leaders have made it all possible. These key drivers of India’s cashless transformation can be summed up in the ‘India Stack’.
For the uninitiated, India Stack is a set of APIs (Application Programming Interfaces) that enable developers to build digital solutions that can be used across various sectors of the economy. Launched in 2016, it has revolutionized how Indians transact, access services, and participate in the digital economy.
Let us take a closer look at how the India Stack is shaping a cashless economy and how it has contributed to the rise of financial innovation and fintech leaders in India.
India Stack: What is It?
India Stack is a set of digital infrastructures that enables the delivery of services to citizens through digital means. It allows the creation of a paperless, cashless, and presence-less ecosystem, which will help transform India into a cashless economy.
India Stack aims to remove friction from transactions and enable the creation of new businesses and services. It has the potential to bring millions of people into the formal economy, increase transparency and efficiency, and boost economic growth. India Stack has four major layers that together provide the infrastructure for the digital economy:
- Consent Layer: The consent layer enables the citizens to securely share their data with service providers, enabling the creation of services based on the user’s preferences and history.
- Cashless Layer: The cashless layer enables digital transactions between people and businesses without needing cash. It includes the Unified Payments Interface (UPI), which allows instant bank-to-bank transfers.
- Paperless Layer: The paperless layer enables the creation and verification of digital documents, eliminating the need for paper-based processes. It includes e-KYC (electronic Know Your Customer), enabling businesses to verify their customers’ identities digitally.
- Presence-less Layer: The presence-less layer enables the creation of services that do not require physical presence, such as digital signatures, electronic contracts, and digital lockers.
6 Major Drivers of India Stack
India Stack has several key components that enable the delivery of services in a digital economy:
- UPI: The Unified Payments Interface (UPI) is a real-time payment system that enables instant bank-to-bank transfers. As of October 2021, UPI has processed over 4.9 billion transactions worth over INR 10.3 trillion.
- Unique Identification Number: The Aadhaar number is a unique identification number that enables the identification of citizens and the delivery of services. As of October 2021, over 1.38 billion Aadhaar numbers have been issued.
- AEPS: The Aadhaar Enabled Payment System (AEPS) allows citizens to perform banking transactions using their Aadhaar number and biometric authentication.
- e-KYC: Electronic Know Your Customer (e-KYC) is a paperless way to verify a customer’s identity, enabling businesses to open accounts and provide services digitally.
- DigiLocker: DigiLocker is a digital locker that lets citizens store and access their documents and certificates digitally.
- eSign: Electronic signatures (eSign) allow citizens to sign documents digitally, eliminating the need for paper-based signatures.
The Transformational Impact of India Stack
The impact of India Stack cannot be overstated. In tandem with the rise of top fintech leaders and digital finance in India, it has completely augmented how Indians transact daily. It is paving the way for more secure, accessible, verifiable, traceable, digitised, and innovative financial services.
1. Simplified digital identity verification
One of the biggest challenges in going cashless is establishing trust between transacting parties. India Stack has simplified this process by enabling developers to build solutions that can verify identities digitally, using Aadhaar (India’s unique identification number) and other forms of ID verification. This has opened opportunities for businesses to offer frictionless, convenient, and secure digital services.
2. Easier access to financial services
India Stack has enabled the creation of a unified payment interface (UPI) that allows users to transfer funds between bank accounts instantly. The UPI has been a game-changer, enabling small businesses and individuals to access banking services without going to a physical branch.
3. Digitisation of government services
India Stack has made it possible to digitise government services more accessible to citizens. Services like birth and death certificates, land records, and other documents can now be accessed online, reducing the need for physical visits to government offices. This has not only saved time for citizens but has also reduced corruption and associated costs.
4. Enablement of e-commerce and online transactions
India Stack has made it easier for e-commerce companies to onboard customers and accept payments digitally. Payment gateways that use India Stack APIs can provide a seamless payment experience to customers, reducing cart abandonment rates and increasing conversion rates. India Stack has also created digital marketplaces connecting buyers and sellers nationwide.
5. Support for fintech innovation
India Stack has been a catalyst for fintech innovation in India, enabling innovative solutions that address the needs of Indian consumers. Fintech leaders in India are leveraging India Stack APIs to offer services like lending, insurance, and investment products to millions of users across the country. This has not only made financial services more accessible but has also created new opportunities for entrepreneurs and start-ups.
One of the best examples of how India Stack and fintech innovation in India have always been joined at the hip comes from PayTM’s revolutionary solutions. Led by one of India’s top fintech leaders, Vijay Shekhar Sharma, PayTM’s wallet in 2014 and the ubiquitous QR payment system launched later have made digital and mobile payment widely accessible and accepted across consumers, merchants, and businesses.
Widely regarded as the best financial leader in India, Sanjiv Bajaj, the Chairman and Managing Director of Bajaj Finserv and the President of CII (2022-2023), has been another visionary under whose direction the financial services company was able to lay the nascent foundations for India’s cashless revolution. An early adopter of cashless insurance claims in India and one of the first to offer EMI cards for cashless consumer finance, Bajaj Finserv continues to propel the nation’s cashless economy for greater financial inclusion among the masses.
International business leaders like Sundar Pichai, the CEO of Alphabet, have also been impacted by India Stack. Pichai’s Google Pay has taken India by storm. Now, Sundar Pichai has not only envisioned modelling Google Pay’s India experience globally but also urged the US to adopt India Stack-modelled service as the country’s payment platform of choice!
India Stack is a revolutionary initiative that has the potential to transform India into a cashless economy. By enabling the delivery of services through digital means, it has increased efficiency, fostered greater financial inclusion, and brought millions of people into the formal economy.
But this is not the endgame for India Stack. The government and fintech industry leaders need to continuously innovate the umbrella of services under it to empower India’s remaining financially underserved population. Moreover, as it continues to evolve, there is a huge possibility that the India Stack will become a blueprint for the global enablement of digital and financial inclusion. The success of India Stack going global, though, depends upon the greater collaboration between its stakeholders. With the right policies, investments, and innovations, India can become a global leader in digital innovation and pave the way for a brighter future.