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How India Stack is Impacting Lending and Changing Digital Landscape

What is India Stack

India stack provides digital infrastructure i.e. a set of APIs to link consumers (people of India) and producers (Indian government, start-ups, developers etc). As part of the Digital India initiative by the Indian government 'India Stack'strives to solve India’s hard problems towards presence-less, paperless, and cashless service delivery. India stack has been evolving over time and is being one of the most discussed topics for a long time. The following story will provide you a perspective on how India Stack's potential is realized.

Rupa helps her husband at the farm and does tailoring for additional income. She needs money for inventory and equipment but is unable to access any credit from the formal sector. She applies for microcredit from her phone using her Aadhar card. She did not need to fill out lengthy loan applications or submit complicated documentation or queue up in bank branches on futile visits. She simply submitted the application using e-KYC and e-Sign and got an instant credit of Rs. 10,000 in her Jandhan account. 

This revolution in access to credit was made possible through the digital infrastructure created by ‘India Stack’ – the set of powerful open and programmable capabilities that build on India’s digital ID program Aadhaar. Till date, there has been 2.98 Billion Aadhaar Authentications, 1.064 Billion Aadhaar issued over the period of 6 years and 339 Million Aadhaar linked Bank Accounts. These numbers show the real picture of India Stack in numbers.

Benefits of India Stack for the Lenders

This model has been tested by the companies in the lending sector and it has been found that when fully active, India Stack carries the power to transform the way in which financial services are made available to the underprivileged society. It has some definite benefits for the lending section of the society.

Let’s take a look at some of the major benefits lenders are reaping from this model:
  • India has a huge credit gap: 90 percent of all small businesses are dependent on informal sources for credit. These micro-entrepreneurs are grossly underserved by traditional lenders because they typically do not have collateral or credit histories that make them “lend-able.” With access to alternate data with India stack lenders have experienced a broader way to reach out to a new and wider segment of customers.
  • India Stack has resulted in reduced drop off rates and has reduced the turnaround time for performing retail operations from 6 days to just a few hours. It has also resulted in reduced operational costs as well.• With the quick delivery of all the services, this model has even helped the lenders to retain their customers.
  • It is expected to bring down the costs of lending over time and enable the lenders to offer loans at better terms to a larger section of the society.
The evolution of Indian stack has directed some pivotal branches such as:
  1. Presence less layer:
    Paperless and unique biometric digital identification with open API Access was made the first objective to be achieved in the Indian stack. For this, a policy to issue a 12-digit unique identification number floated in the name of Aadhaar. At present, there are more than one billion Indians registered who have become the basis for India Stack and over 190 million accounts have been opened using the same identification platform. This identification is used for varied purposes like transferring subsidies directly into the beneficiaries' accounts or linking them to all sorts of government services. This platform has delivered direct benefits of Rs. 61,000 crores in various forms of subsidies and other welfare schemes.
  2. Cashless layer:
    This can become India Stack’s signature delivery mechanism to make India a digital cash economy. The paperless payment is a brainchild of the National Payments Council of India (NPCI). The main aim of this organization and the Unified Payments Interface (UPI) is to make the country go cashless by making mobile payments cardless and completely digital. These services allow the users to pay via a special UPI identity to use or make transactions sitting anywhere at any time.
  3. Paperless layer:
    E-KYC is another method when looking forward to the paperless layer. The benefit for the E-KYC can be realized from the fact that E-KYC simplifies the customer experience for the Aadhaar-registered individuals to open bank accounts. A consumer goods company can use the India Stack to file taxes and track the filings made by its ecosystem, of distributors or dealers to reconcile taxes, to avoid complications arising from double taxation. This automated service gives the corporate a dashboard and performance analytics on the right amount of taxes paid and owed.
  4. Consent layer:
    This accounts for the last hurdle in the race. This is done via “Digital Signature”. These signatures help in simplifying the work between parties who execute contracts digitally. Aadhaar can be used as a platform to send digital signatures on a certified or legal document as well.

On a recent visit to India, Bill Gates commented on India Stack saying, “India is on the cusp of leapfrogging!” And it truly is; considering it is the only country in the world offering such an open and secure API, India is certainly looking at enabling the government to deliver its services in a more transparent and accountable manner, to a whole new level.

The future is here and now is the time to act.
  • June 21, 2018

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