8th November brought with it one of the biggest financial and economic changes our country has seen. In a country that still relies as much as 80% on cash transactions, this one move has served as the greatest push to a digital and cashless economy, setting into motion a chain of events across many fronts. According to a study by global payments technology provider Visa, the burden of cash to the Indian economy was as much 1.7% of GDP. But, with one shift, digital payments could potentially save the Indian economy around Rs. 70000 crores over the next five years. That said though, challenges remain. Keeping records of transactions and hooking into the wider ecosystem remains complex and undocumented. The entire system of verification is complex and has created many layers, which is hindering the vision of the Indian Prime Minister.
India Stack is one important step towards the dream of creating a sophisticated digital architecture for seamless cashless transactions.
What led to the making of India Stack
Earlier if a person wanted to renew his/her driving license, they were required to visit the same RTO office where the first license was initially made. But, the person might have shifted to another state or city, making the renewal process extremely cumbersome. The root cause of the problem was in the way information was recorded and stored. Such methods of recording, storing and retrieving data led to a colossal loss of time and connectivity nightmares. Such scenarios were common in healthcare, education, passport operations, etc. This triggered the development of ‘IndiaStack’.
As defined on the IndiaStack website, “IndiaStack is a set of APIs that allows governments, businesses, startups and developers to utilize an unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery.” This an open API based stack, allows the government and private companies to easily go cashless and paperless.
Components of IndiaStack
The API comprises four layers.
- Presence-less layer – This layer eases the entire process because the physical presence of the person is not required. When any company wants to check the identity of a customer, the bank requires just the biometric data, which is then sent to the database of the government for verification.
- Paperless layer – The purpose of this step is to streamline the process and reduce the amount of paperwork. It reduces potential frauds and allows the users to access their document at any time anywhere. The two components of this layer are a digital signature and a digital locker.
- Cashless layer – This is the most important in turning the Indian economy to a cashless and a digital society. It includes the UPI, in addition of AEPS and APS. UPI speeds up the entire process of the fund transfer and works as a bridge between the financial transactions. UPI creates a virtual payment address without going to the bank.
- Consent layer – This last layer is built to move data freely and helps in data retention. The layer provides consent, which enables people to securely provide and approve consent for the flow of data between different data providers.
How India Stack will impact you?
Several factors are coming together to make our live even more digitally-linked.
Aadhar and e-KYC are already enabling paperless transactions. Aadhar facilitates authentication of one’s identity and e-KYC is the know your customer process linking the address and Aadhar of a person. All online transactions can now use Aadhar for verification and authentication, thereby ensuring value and security to both the parties.
The UPI is also empowering cashless transactions. This payment interface allows anyone with a bank account to transfer instant funds to another bank account holder using their Smartphones. It eliminates the need of debit and credit cards, thereby making the digital transaction more accessible.
With digital lockers now, you can retrieve documents digitally and provide immediate consent easily without physical documents. Companies are also jumping in to leverage the technology. Reliance Jio effectively used digital lockers to reduce the verification process for new customers from 5 days to a few minutes.
As these technology and policy approaches mesh together, a much more Digital India beckons and it is clear that IndiaStack will drive this coming movement. IndiaStack has the potential to be truly transformational in every stage of our everyday life – and that’s good reason to know more about it.
