I recently returned from an investment forum hosted in London, at which various fund managers and investment professionals presented on technology and innovation as a disruptor within industries and economies. One presentation was of particular interest, not least because it combines two themes we have implemented within our private client models: technology and India.
We have previously written on India and its long-term positive economic attributes – see [‘Does One Indian Summer Indicate a Good Opportunity’ – Simon Sharrott – SEP 28, 2017] and [‘India’s Politics Under the Lens’ – Blair Campbell – March 15, 2017] – so in this article I wanted to draw attention to the extraordinary technological developments that have been taking place in the region – the concept of the ‘India Stack’.
India Stack was formulated in 2012, however, “Aadhaar” (Hindi for foundation or base), the Biometric Identification system (the base of the stack), was created in 2009 and subsequently launched in 2010. It is the largest open Application Program Interface (API) in the world and provides four distinct technological layers: Presenceless, Paperless, Cashless and Consent layers. Innovative apps can then be created to harness this digital infrastructure by tapping into the platform. The objective is to give every Indian a formal digital identity in the economy, in the form of a 12 digit code, using biometric data to authenticate their identity – fingerprints and iris scans (presenceless layer).
This digital identity can also be accompanied by what is termed a digital locker, encompassing digital copies of various documents, such as e-KYC information (proof of address, birth certificates, passport and drivers licence details), professional qualifications etc., and the e-authentication capability through an e-signing function (paperless layer).
Once identities can be established, it allows for the ability to open bank accounts. In 2014 a financial inclusion program was launched, which was subsequently taken up by hundreds of millions of Indians, where free bank accounts providing various benefits were offered to incentivise participation in the formal banking system. Using a Unified Payment Interface (UPI), Indians can now make mobile payments, using their biometric data and unique 12 digit ID number, without the need for physical cash or even a debit/ credit card, increasing payment transparency (cashless layer).
The final layer is in regards to the sharing and use of data in account opening processes, for instance, utility companies opening accounts for new customers, the sharing of medical records and numerous other users of our personal data. Data is provided from their digital lockers after being consented to at the press of the owner’s thumb on a screen (Consent layer).
While not yet complete, the technology is having the desired effect, with 1.2bn Aadhaar biometric IDs having been issued in six years, 16bn Aadhaar authentications having been processed, 4.5bn eKYC checks performed, and 730m Aadhaar linked bank accounts established. It allows millions of the poorest Indians greater access to benefits and subsidies, by providing a payment mechanism. At the same time it provides an opportunity for companies to tap into the technology and reach the masses, with the expectation of rapid developments in, amongst others, fintech, e-commerce, telecommunications and digital entertainment.
While sceptics have highlighted the fact the system can be misused as a mass surveillance system or may be vulnerable to cyber attack, with the potential breach of millions of individuals’ personal data, the benefits of such a system can not be ignored, and we watch with great interest to see developments, both to the system and the economy, going forward.