IndiaStack – What You Need to Know?

India has set a benchmark for the world in adopting digitization. From using cash predominantly, India has come a long way to accept and remit digital payments. In fact, India surpassed China in the total volume of real-time payments this year.

According to IndiaStack’s website, Indians have completed 67 billion digital verifications and Rs 5.47 trillion worth of monthly real-time mobile payments!

Similarly, Aadhar has helped individuals get access to various government schemes. It has also simplified the KYC process for opening a bank account or procuring a driving license. Aadhar and the National Payments Corporation of India (NPCI) have transformed how people transact and avail of government benefits.

Although these different technologies simplified the operations and improved citizens’ experience, there was no way to verify their identities across all platforms. The systems were susceptible to fraud and misuse. There was an urgent need to make these systems sharable and verifiable. India needed an approach that could be applied across all functions and domains. This quest led to a new project called IndiaStack.

What Is IndiaStack?

IndiaStack is a set of open APIs that combines the National Payments Corporation of India (NPCI) projects for digital payments and Aadhar’s identity and authentication capabilities to build a unified platform, promote financial inclusivity, and encourage the entire population to embrace digitization.

There are four layers that form the foundation of IndiaStack:

• Presence-less layer: This layer helps individuals verify their identities from anywhere, anytime using their Aadhar as the digital identity for authentication. They don’t have to carry physical documentation to prove their identity. The biometric and the 12-digit Aadhar numbers are enough to authenticate an individual’s identity. It helps reduce frauds like duplicate and fake identities.

• Paperless layer: The paperless layer helps individuals store their documents digitally and verify and retrieve them whenever they need. The paperless layer comprises:
• Aadhar eKYC validates the name, date of birth, and gender of the individual
• E-sign allows individuals, businesses, and governments to store their signatures digitally and use them to sign documents.
• The digital locker allows individuals to store and share their important documents digitally.

• Cashless layer: The cashless layer enables individuals, businesses, and government agencies to do cashless transactions seamlessly and transparently. The cashless layer comprises of Unified Payment Interface (UPI), Immediate Payment Service (IMPS), Aadhaar Enabled Payment System (AEPS), and Bharat Bill Payment System (BBPS). It provides a single payment interface to all the wallets and bank accounts operating in India and democratizes payments.

• Consent layer: The consent layer allows individuals to provide consent to authorize their data to flow between data providers like banks, hospitals, and telcos to data requestors like credit card providers. For example, an individual can permit a bank to share relevant information with credit card providers to check creditworthiness and issue a credit card. Account aggregators built on data empowerment and protection architecture facilitate this data flow.

Benefits of IndiaStack

IndiaStack offers plenty of benefits to government agencies, individuals, and government-owned or private institutions.

• Individuals can avail of the benefits provided by government agencies and other entities and become a part of the formal economy. For example, customers don’t have to physically visit a bank to sign documents or submit physical proofs. They can use E-sign to sign their documents digitally and store and share them from the digital lockers.
• Government agencies have been using it to deliver services to individuals effectively and transparently. The government’s benefits are credited directly to the individual’s account. For example, individuals used their Aadhar numbers to register for COVID-19 vaccination, check their status, and download the certificates.
• Healthcare, financial, and educational institutions use it to offer products and services to individuals. A bank, for instance, can approve loans and permit bank account opening after verifying the Aadhar eKYC process. They can also disburse loans to the customer’s account through UPI.

IndiaStack has bridged the gap between individuals, businesses, and governments by stitching different technologies and digital initiatives into a unified system. International bodies like the International Monetary Fund (IMF) have hailed the project for bringing financial inclusivity and enabling Indians to participate in the digital economy more actively. 

How Does IndiaStack Work?

IndiaStack operates on open networks.

Take India’s Open Credit Enablement Network, for instance. The credits flow between the borrowers, lenders, and credit distributors through an open network. It uses a common set of standards that allows banks, individuals, and credit card providers to connect with each other. It helps individuals avail of different banking products and services without going through a lengthy onboarding process, and banks to provide quick services without compromising compliance procedures. Open networks create a level-playing field for all participants of the digital ecosystems. It promotes innovation and enables developers to focus on building innovative products and experiences than worrying about the underlying infrastructure.

Future Of IndiaStack

According to the IndiaStack website, the project will not be limited to India. Other countries can implement it to improve social and financial inclusion among their citizens.

Besides that, here are a few developments that we can expect from IndiaStack in the future.

• Interoperable KYC will save the costs for banks, insurance providers, and brokerages on onboarding customers. A single KYC agency can issue an eKYC to all these entities.
• Like a single interface for payments, the country might soon have a single and certified network for lending that will comprise a group of trusted lenders and borrowers.
• MSMEs that lose over 5% of their revenues due to non-paying customers could enforce payment terms on customers by scoring them just as credit bureaus score the borrowers.

IndiaStack is helping Indians to adopt digital-first services. Even governments have been using it to improve service delivery.

Financial institutions that undermine the potential of digital-first products and services will face a tough time thriving in competition.

Verinite is committed to helping financial institutions embrace digital transformation and building new frontiers to keep pace with customer demands and growing competition.

Need help with building future-ready digital products? Contact us to know more.