India Stack: Breaking the barriers for full digitization

Francis Fukuyama, the American political scientist in his famous book, ‘The End of History and the Last Man’ predicted that, with the demise of Soviet Union in 1991, liberal, open democracy and its associated values as practiced in the Western world will come to dominate the rest of the world eventually. This outcome, he posted, will lead to ‘end of history’, that is, if one were to look at history as the narrative of continuing evolution of political ideologies, open democracies represent its ‘culmination and fulfilment’. The whole world henceforth would settle into its “final” political ideology, and focus on development and human progress. Be that as it may, the world has actually turned insular after the initial promise, and authoritarianism and trade protectionism seem to be making its comeback with its many flavors in recent times.

But the technological revolution continued and continues unimpeded, and there seem to be an “end” around the corner in some facets of human endeavors. This “end” is fundamentally manifested by going digital in every transaction we do, and by chaining various transactions, the scope for manual intervention stands removed from our transactional world.  Like the predicted ‘end of history’ that stands far removed from reality today, only time will tell if automation mediated by digitization of transactions will spell the end of humans playing any part in it.

So, what does a genuine transaction entail?  To start with a transaction is a compact between two or more parties who trust each other. Second, as part of the transaction, the parties exchange goods or services for which money gets transferred or is promised to be transferred between them.

If the two parties don’t know each other previously, there has to be objective ways to authenticate the genuineness of the parties through independent means and thus “garner” implicit trust for each other. If the transaction is accompanied by exchange of money, there has to be secure ways to transfer money between the two parties. If one or other party is taking credit from a 3rd party such as a bank, there has to be sufficient means to ascertain the credit worthiness of the borrowing party. Once all these credentials are met, the transaction can be completed smoothly. But this retrieving and validation of user credentials are separate transactions in themselves, often manual, hence takes time or can be error prone, as customer whereabouts or credit details are hidden in some dusty ledger on a bank shelf or stashed away on the hard disk of a computer.

With the possible digitization of everything from customer details to customer data transactions, we are now poised to completely eliminate manual intervention in transactions. The India Stack, as it is called, is one such ambitious initiative or framework which aims to scale up all transactions in such a way that what took many days or months earlier can be digitally completed in a matter of seconds, and also without exchange of cash or kind.

Broadly India stack or Aadhar stack as it is called, is a set of 4 layered open APIs, (Application Programming Interfaces) perhaps modeled on the famous 7-layer OSI Networking stack. API’s and layering (one layer over other gives the name “stack”) speed up application development by ensuring standard interfaces, modularity, scalability and predictable performance. The different “layers” of India stack are

a)       Presenceless Layer

b)      Paperless Layer

c)       Cashless Layer

d)      Consent Layer

The biometric based Aadhar system whose API’s are already in place, and a key component in uniquely authenticating the user(s) for every transaction, map to Presenceless Layer. eKYC which is a key requirement for banks in customer onboarding is now entirely implemented on Aadhar API’s.

The other features forming part of Aadhar APIs are Digital Locker and eSign.  The former allows vital user records to be available on a safe digital wallet, so that it can be accessed from anywhere. eSign allows to digitally sign transactions so that user authenticity is not compromised.

UPI gateway API’s form part of Paperless Layer and Cashless Layer, and permit for transactions involving banks to be done in a standard, secure, and digital way. Almost all Indian banks offer their UPI handle these days for doing UPI based cashless and paperless transactions.

The still work in progress Digital User Consent API’s, is arguably the most problematic API and layer, since the actual task of obtaining user consent for a transaction is handled at this layer. Basically, at this layer, user is prompted to part with bank details and other key data secured by means of passwords or other authentication mechanisms, so that he or she can be authenticated for things like credit processing, financial transactions etc.  If this data gets hacked or spilled, all the user data is compromised. Especially since these APIs’ are open, anyone can figure the potential frailties of these API’s and can mount a phishing or snooping attack when a Consent Layer transaction is on.

To visualize an actual scenario, a customer applies for a loan with a bank from his mobile phone banking app, the Aadhar enabled app instantly authenticates his identity, then asks for his consent and on getting it, checks his bank records for the last 10 years or so for any outstanding debt. Credit eligibility can be determined by getting the credit score of the customer by interfacing with credit bureau. The loan application then quickly proceeds to ekYC for validating the authenticity and onboarding the customer, then verifies other records of the customer with the help of DigiLocker, obtains the customer signature using eSign for his loan application.  Similarly, from banks’ end, eSign of the loan authorizing person provides the approval for loan. With UPI, the money is transferred to customers’ account from bank, and the entire transaction is over in a few minutes without any paperwork or intervention from bank officials. In a similar manner, real estate transactions can be completed by click of a button if authenticated property records anywhere in India are accessible on digital format, and the relevant user consent is available.

Like the UPI and Aadhar which revolutionized digitization, India stack may pave the way for digital lending, digital invoice discounting , financial inclusion and microcredit which will boost further growth in the economy.

On the whole, the India stack is in principle meant for all kinds of transactions and is deemed to be the largest in the world. The API’s will help anyone to develop modular applications for a variety of purposes, and hence to cleanly and efficiently execute transactions with the mere click of a button.

Are you ready to do your next big-ticket transaction with the click of a button?