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IDENTITY, PAYMENTS &
DATA EMPOWERMENT
Nandan Nilekani, 2020
1 2 3The Three
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
1
Part 1
Solving the
Access
Challenge
Access
Bring population
in the financial system
3
In India, back
in 2008…
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
The unbanked number in 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
By 2018 India had 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
Traditional development would have
taken half a century
46 years
2011 fitted
line
Source : BIS Analysis
7
This acceleration was due to 3 things
India StackPolitical Will Proactive Central Bank
8
India Stack is a 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
… built over time
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
India started by addressing 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
Unique
identification
features
Biometric
123456789012
12 digit Aadhaar number
4 Data Points
A Unique Identity - Aadhaar
12
Aadhaar Adoption - 1 Billion in 5½ years
Data Source - Aadhaar Dashboard (https://uidai.gov.in/aadhaar_dashboard)
Noofenrolledindividuals(inmillions)
13
Aadhaar use since inception
eKyc vs Auth Biometric / OTP/ Demographic Auth
Data Source - Aadhaar Dashboard (https://uidai.gov.in/aadhaar_dashboard)
40.5
Bn
33
Bn
14
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
Aadhaar adoption paves way 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
A survey of 167,000 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
2
Part 2
Addressing
the Payments
Challenge
Retention
Keep them
in the system
18
People are seeking digital ways to transact
Users are looking for a MAGICAL
payment experience.
Mobile-First,
Anytime,
Global,
Instant,
Convenient,
Assured Safe,
Low-cost
19
How UPI Works
Open,
Contestable
Entry
Mobile
Internet
Digital Wallet
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
Customers can conduct transactions on
their State Bank of India account from
inside their Citibank mobile banking app.
Fully Interoperable payment systems
Instant 24/7 Low-cost
21
WhatsApp integration with UPI
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
Digital Payments
2017-18 2018-19
UPI 4%
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
UPI transactions have overtaken credit and
debit card payments
Source : Retail Payment Statistics on NPCI Platforms
https://www.npci.org.in/statistics
24
3
Part 3
Addressing
Data Sharing &
Privacy Challenges
Data sharing without
compromising privacy
Data
Empowerment
25
User Data is being 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
The Account Aggregator
will facilitate 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
The Account Aggregator is 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
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
With the Account Aggregator, 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
Account Aggregators keep consumer 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
1 2 3
Putting in
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
Creating a flywheel for 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
Platforms not Pipes
The old way of innovating
was to build end-to-end
solutions
In the digital world, the
method of innovation are
platforms
34
Information
Discovery
Knowledge
Democratization
Government
Services
Social
Networking
e-Commerce
e-Learning
Urban
Mobility
One Internet, many applications
Internet Infrastructure
35
TCP/IP, WWW
GPS, Cloud
Smartphones
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
Unregulated
Fintechs
Regulated Players
India Stack
on top 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
Banks
Clearing Houses
Central Bank
Analog
Way
Closed System,
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
Thinking with Technology resolves 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
30 yr Architects
10 yr 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
What makes iSPIRT Special?
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
Start Small
Start Anywhere
Start Today
A Stack-like approach is accessible
by everyone
42
THANK YOU

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(SACON) Nandan Nilekani - Identity Payments and Data Empowerment 

  • 1. IDENTITY, PAYMENTS & DATA EMPOWERMENT Nandan Nilekani, 2020
  • 2. 1 2 3The Three 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 Bring population in the financial system 3
  • 4. In India, back in 2008… 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 number in 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 India had 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 would have taken half a century 46 years 2011 fitted line Source : BIS Analysis 7
  • 8. This acceleration was due to 3 things India StackPolitical Will Proactive Central Bank 8
  • 9. India Stack is a 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 over time 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 by addressing 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 Aadhaar number 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 since inception 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 paves way 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 of 167,000 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
  • 19. People are seeking digital 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 Digital Wallet 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 conduct transactions 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 with UPI 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 UPI 4% 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 have overtaken 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 is being 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 will facilitate 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 Aggregator is 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 Account Aggregator, 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 keep consumer 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 Putting in 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 flywheel for 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 The old way of innovating was to build end-to-end solutions In the digital world, the method of innovation are platforms 34
  • 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 on top 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 Closed System, 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 Technology resolves 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 10 yr 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 iSPIRT Special? 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 Start Today A Stack-like approach is accessible by everyone 42