Leapfrog of the Century: India’s Envious March Towards Digital Dominance
[ Blog by: Rajat Deshpande, CEO and Co-founder of FinBox.]
We have heard the tale of two Indias.
One is a fast-developing cosmopolitan and technology-savvy populace that shops online and dines at Michelin star restaurants, the other is a laggard cousin that’s trying to upskill itself fast and enter the global economy. We call them India and Bharat – as if the country is two neat halves of people – the digital elite and the have-nots.
As riveting as this narrative is, it’s untrue.
This divide may have existed once but it no longer does. Today, there is only one India – a melting pot of contradictions, leapfrogs, and accelerated upward digital mobility. As a founder solving the for formal credit access through technology, it’s a reality one encounters daily.
Consider this – more than 50% of all e-commerce orders in India come from smaller non-metros. An average Indian consumes more than 18 GBs of internet per month – almost double the global average of 11 GBs. At the same time, we have 750 million smartphone users – as compared to 320 million feature phone users.
And landlines? We skipped them.
There are around 23 million-odd fixed-line connections active in India – less than 5% of smartphone users. This is what a digital leapfrog looks like. It’s when an economy hops, skips, and jumps to upgrade its people to the cutting edge of technology.
The architecture of a digital revolution
The progress is gradual when it comes to modernizing physical infrastructure but our digital infrastructure has leapfrogged. With the Digital India revolution, we are on a path to hyper-digitize businesses, data, and even public infrastructure – payment systems, land records, and service delivery such as welfare distribution and subsidy transfers!
While it seems like a natural evolution, it’s a feat of massive proportions. In the west, companies are still figuring out real-time payments – IMPS and UPI achieved this almost a decade ago.
The foundation of this digital infrastructure lies in JAM – Jan Dhan, Aadhaar, and Mobile numbers. This trinity powers billions of rupees of direct subsidy transfers to millions of Indians every month – completely digitally and with minimal human intervention.
Once we built the infrastructure, we learned to harness its power to build other use cases on top of it. One must lay down the rails before the trains can run.
Now, we have UPI, GSTIN, e-KYC, e-sign, and Account Aggregation among dozens of other digital solutions that are the envy of the world.
The promise of an inclusive, prosperous future
How did India do this? What can we learn from this leapfrog?
First, India developed this digital infrastructure as a public good -allowing both the public and private sectors to innovate. Unlike the closed-loop, proprietary systems built by private players, IndiaStack is open for all – and this enables seamless authentication, authorization, and transfers of funds/information transfers between institutions, intermediary channels, and citizens.
Second, it developed a strong legal framework around financial services. India’s Payments and Settlement Systems Act designated the RBI as the authority on payments. The RBI then formed the NPCI – giving it enough operational freedom for innovation while maintaining regulatory oversight.
Third, the focus has been to boost entrepreneurship and ties into the goal of improving the ease of doing business.
The local Kirana store now accepts digital payments, makes its financial accounts on apps, accesses instant credit and banking services through the internet – and sells to the world through eCommerce marketplaces.
From raggedy khatas to neobanking
If one were to look at the current velocity of the technological revolution underway, a few predictions come through.
One, it’s all but given that the most thorny problems will be solved through this digital infrastructure. Be it land acquisition, land records, trade financing, contract enforcement, or doubling farm productivity – entrepreneurs are hard at work creating digital solutions for these centuries-old issues.
Second, the stage is set for deeper financial empowerment. In 2009, only 25% of Indians had bank accounts. Today, over 80% of the country is covered by banking services. However, just coverage isn’t enough and true financial empowerment means citizens accessing financial services more often and with more ease.
With the opening up of UPI rails for linking credit and digital banking initiatives by the policymakers and the regulators, we’ll see increased adoption of products such as sachet-sized loans for micro-entrepreneurs, cash-flow-based lending for MSMEs, and 100% digital and instant embedded finance use cases such as micro-insurance, investments, and working capital loans.
Third, the entire infrastructure will become exponentially more powerful once the network effects kick in. Powered with APIs across the network, the digital leapfrog will result in more inclusive service delivery, fewer frauds and leakages, and a state of innovation that fosters innovation in India and for the world!
India’s prominence once came through its trade. Its future economic dominance will come from its fertile digital infrastructure producing the most cutting-edge solutions for problems that even the most developed countries haven’t managed to solve yet.
[Please note: a fintech infrastructure company that enables enterprises to launch FinTech products such as business loans, credit cards, working capital financing, and buy-now-pay-later. He can be reached at firstname.lastname@example.org.]