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(SACON) Nandan Nilekani - Identity Payments and Data Empowerment
The document discusses the three challenges of financial inclusion in India: access, retention, and data empowerment. It highlights the success of the India Stack initiative, which includes unique identity verification through Aadhaar, a unified payments interface (UPI), and mechanisms for secure data sharing. These innovations have significantly increased financial inclusion and improved access to services for marginalized groups while addressing privacy concerns in data usage.
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(SACON) Nandan Nilekani - Identity Payments and Data Empowerment
- 1. IDENTITY, PAYMENTS & DATAEMPOWERMENT Nandan Nilekani, 2020
- 2. 1 2 3TheThree Challenges of Financial Inclusion Access Retention Bring population in the financial system Keep them in the system Data sharing without compromising privacy Data Empowerment 2
- 3. 1 Part 1 Solving the Access Challenge Access Bringpopulation in the financial system 3
- 4. In India, back in2008… Financial exclusion was rampant 17%had bank accounts Source : A Demirgüç-Kunt, L Klapper, D Singer, S Ansar, and J Hess, “The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution”, World Bank, 2017 4
- 5. The unbanked numberin 2011 was in line with the global scenario 2011 fitted line India, 2011 Source : A Demirgüç-Kunt, L Klapper, D Singer, S Ansar, and J Hess, “The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution”, World Bank, 2017 5
- 6. By 2018 Indiahad massively jumped ahead in financial inclusion 2011 fitted lineIndia, 2018 India, 2011 Source : A Demirgüç-Kunt, L Klapper, D Singer, S Ansar, and J Hess, “The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution”, World Bank, 2017 6
- 7. Traditional development wouldhave taken half a century 46 years 2011 fitted line Source : BIS Analysis 7
- 8. This acceleration wasdue to 3 things India StackPolitical Will Proactive Central Bank 8
- 9. India Stack isa set of technologies ... Identity Layer Giving every resident a unique id and enabling them to prove “I am who I claim to be” Payments Layer Allowing anyone to pay anyone else! interoperable, fast and cheap - not just smartphones Data Empowerment To enable secure sharing of data ➔ Unified Payments Interface ➔ Aadhaar Payments Bridge ➔ Aadhaar Enabled Payment Service ➔ Aadhaar ➔ eKYC ➔ eSign ➔ Consent Artefact ➔ DigiLocker ➔ Account Aggregator 9 Identity Layer Payments Layer Data Layer
- 10. … built overtime AA: Data Fiduciary DigiLocker: Document Repository Consent Artefact 2009 2011 2013 2015 2017 2019 Aadhaar eKYC eSign IMPS: Instant Remittance UPI APB: Cash Transfers AEPS: Biometric Payments 10 Identity Layer Payments Layer Data Layer
- 11. India started byaddressing identity Verifiable identity key for inclusion 1 in 25 had unique identification in 2008 Source : 40 million Indians had passport, which was the only unique identity at the time. Aadhaar: Inclusive by Design, GSMA, March 2017 % Population With Identity %PopulationWithAccount 11
- 12. Unique identification features Biometric 123456789012 12 digit Aadhaarnumber 4 Data Points A Unique Identity - Aadhaar 12
- 13. Aadhaar Adoption -1 Billion in 5½ years Data Source - Aadhaar Dashboard (https://uidai.gov.in/aadhaar_dashboard) Noofenrolledindividuals(inmillions) 13
- 14. Aadhaar use sinceinception eKyc vs Auth Biometric / OTP/ Demographic Auth Data Source - Aadhaar Dashboard (https://uidai.gov.in/aadhaar_dashboard) 40.5 Bn 33 Bn 14
- 15. Identity Aadhaar -Impact 1.2 Bn Aadhaar IDs issued 33 Bn Aadhaar based authentications 7.5 Bn e-KYC transactions $32.4 Bn Direct Benefit Transfer to beneficiaries 647 M Aadhaar enabled accounts Data Source - Aadhaar Dashboard (https://uidai.gov.in/aadhaar_dashboard) NPCI Statistics (https://www.npci.org.in/statistics) 15
- 16. Aadhaar adoption pavesway for the largest increase in financial accounts across 140 countries 45 percentage points 2017 2011 Income gap 14 5 Education gap 29 10 Closing the gaps on marginalized groups 35 % with account 80 Gender gap 17 6 Employment gap 18 9 Source : A Demirgüç-Kunt, L Klapper, D Singer, S Ansar, and J Hess, “The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution”, World Bank, 2017 16
- 17. A survey of167,000 people over 28 states and UTs supervised by a technical and advisory board consisting of Aadhaar supporters & skeptics. Source : State of Aadhaar, 2019 17 For 8% of adults, Aadhaar was their first ever ID especially the vulnerable. Aadhaar is the first ID for 15% of homeless populations 14% of third-gender populations 92% were either Somewhat or Very Satisfied 80% of beneficiaries feel Aadhaar has made PDS rations, MGNREGS or social pensions more reliable Using Aadhaar people are 40% more likely to obtain a new SIM card within one day
- 18. 2 Part 2 Addressing the Payments Challenge Retention Keepthem in the system 18
- 19. People are seekingdigital ways to transact Users are looking for a MAGICAL payment experience. Mobile-First, Anytime, Global, Instant, Convenient, Assured Safe, Low-cost 19
- 20. How UPI Works Open, Contestable Entry Mobile Internet DigitalWallet 3rd Party Apps Consumers Business Bank A Regulated Banks (payment service providers) Payment Rail Interoperable between sources of funds Interoperable between recipients of funds Unified Payment Interface C2C Payments Instant Remittances C2B Payments Bank B B2B Payments Unregulated Fintechs Instant 24/7 Interoperable Low-cost Fintech/ Bigtech Friendly Settled in fiat money Inside the banking system 20
- 21. Customers can conducttransactions on their State Bank of India account from inside their Citibank mobile banking app. Fully Interoperable payment systems Instant 24/7 Low-cost 21
- 22. WhatsApp integration withUPI 1 million customers in beta already, potentially 400 million customers in India will be able to send money through WhatsApp Settled in fiat money Inside the banking system Source : “WhatsApp reaches 400 million users in India, its biggest market”, TechCrunch, Jul 26, 2019 22
- 23. Digital Payments 2017-18 2018-19 UPI4% UPI 17% Electronic, 53% Electronic, 48% Cards & Prepaid 40% Cards & Prepaid 35% Electronic includes: Internet and mobile banking, and other digital payments Cards & Prepaid includes: Credit cards, debit cards and prepaid payment instruments (Paper vouchers, prepaid cards and mobile wallets) UPI Impact – increasing digital payments Source : RBI Database on Indian Economy (dbie.rbi.org.in) 23
- 24. UPI transactions haveovertaken credit and debit card payments Source : Retail Payment Statistics on NPCI Platforms https://www.npci.org.in/statistics 24
- 25. 3 Part 3 Addressing Data Sharing& Privacy Challenges Data sharing without compromising privacy Data Empowerment 25
- 26. User Data isbeing appropriated Internet Platforms gather and retain user data in proprietary silos. The problem is not simply that companies are benefiting from this data. The problem is that the people aren’t Account Aggregators rebalance that equation 26
- 27. The Account Aggregator willfacilitate consented sharing of financial information in real-time Bank Mutual Fund House Insurance Provider Tax / GST Platform Flow-Based Credit Personal Finance Management Wealth Management Robo Advisors Financial Information Providers Financial Information Users Account Aggregator 3. Data Flows to FIUs End-to-End Encrypted 1. Consent to share data 2. Request Data through Open APIs 27
- 28. The Account Aggregatoris a Consent Manager 000101 AAs enable consumers to selectively share & even revoke data once shared. The AAs have a fiduciary duty to consumers 100111 0 1 0 0 1 1 AAs cannot read consumer data. They cannot resell consumer data. 28 7 AAs have in-principle approval. 1 AA has operational license 10 FIU/FIPs from leading banks and NBFCs
- 29. Digital Footprints Consented Data Sharing Business Micro-Credit Business Growth Tax Returns& Bank Statements With the Account Aggregator, Rajni can demand ● Her Tax returns ● Her Bank & Account Data ● Her Home Loan repayment record be shared with Lenders Thus, securing a loan with her richer digital footprint. Small Business Owners can get credit using data 29
- 30. With the AccountAggregator, Rajni’s lender can view her data ● Directly from Source ● Tamper-proof ● At a low-cost ● In real-time Using data, Lenders can better monitor cash flows and anticipate default before it happens! Digital Systems offer new tools to manage defaults Digital Systems enable early-warning systems & more precise regulatory intervention 30
- 31. Account Aggregators keepconsumer financial data safe & make its usage auditable But they also make it useful for consumers India is leapfrogging to a Data Democracy Data is used to sell things to consumer Data to be used to empower consumer This inverts usage of Data! 31
- 32. 1 2 3 Puttingin Perspective: Innovation in the Digital Age Access Retention Bring population in the financial system Keep them in the system Data Empowerment Data sharing without compromising privacy 32
- 33. Creating a flywheelfor Financial Inclusion Access Open Bank Accounts Retention Offer MAGICAL Payments Use Data to give credit Data Empowerment Incoming Payments e.g DBT Share Data Securely Build Trust & Encourage More Users in System 33
- 34. Platforms not Pipes Theold way of innovating was to build end-to-end solutions In the digital world, the method of innovation are platforms 34
- 35. Information Discovery Knowledge Democratization Government Services Social Networking e-Commerce e-Learning Urban Mobility One Internet, manyapplications Internet Infrastructure 35 TCP/IP, WWW GPS, Cloud Smartphones
- 36. One INDIA STACK,multiple innovative and inclusive solutions Direct Benefit Transfer Jan Dhan Financial inclusion Health Insurance Faster Payments Skilling & Education Digital Lending Tax Reform India Stack Infrastructure 36 Identity Layer Payments Layer Data Layer
- 37. Unregulated Fintechs Regulated Players India Stack ontop of public infrastructure of India Stack India Stack Way Development Friendly, Layered Innovation Building a culture of Innovation... through regulated and unregulated private players 37
- 38. Banks Clearing Houses Central Bank Analog Way ClosedSystem, Slow Innovation Unregulated Fintechs Regulated Players India Stack Way Development Friendly, Layered Innovation Crypto Wallets Stablecoins Blockchain Big Tech Way Walled Garden, Layered Innovation India Stack 38
- 39. Thinking with Technologyresolves trade-offs Regulation VS Innovation Privacy VS Personalization Ease of Use VS Fraud Prevention Regulation AND Innovation Privacy AND Personalization Ease of Use AND Fraud Prevention 39
- 40. 30 yr Architects 10yr Planners 5 yr Doers • Think Tanks • Universities • Research Labs • VCs • Policy Makers • Incumbents • Challengers iSPIRT Foundation: a Tech Think-and-Do Tank Bringing an Orbit Shift by building Public Goods without Public Money 40
- 41. What makes iSPIRTSpecial? Volunteer-driven Social Production iSPIRT is about Social Production Volunteers selflessly pay-forward for a better India. We avoid mission capture in any form. ➔ No public money (Linux, Wikipedia) ➔ No MNC money ➔ Every volunteer works only in areas where they are conflict free 41
- 42. Start Small Start Anywhere StartToday A Stack-like approach is accessible by everyone 42
- 43.