From: nikhil.kamath
India’s digital transformation, spearheaded by the India Stack, offers significant opportunities for entrepreneurship and innovation. The core philosophy behind this transformation is to create foundational “public rails” upon which private innovators and markets can build services, similar to how the internet or GPS enabled new companies [00:13:17].
The India Stack: Digital Public Infrastructure (DPI)
The India Stack is a set of open Application Programming Interfaces (APIs) and digital public goods that facilitate digital services at a population scale [00:14:00]. This approach aims to include everyone and drive societal transformation [00:30:46].
Key Components of the India Stack
Several key components form the backbone of India’s digital infrastructure:
- Aadhaar
- Initiated in 2009 as a unique identification project, it was designed to be digital from the outset, enabling online, real-time verification [00:09:51].
- Its primary drivers were efficient benefits transfer for welfare programs and providing a fundamental ID to the many people in India who lacked formal identification, especially for migration and formal system inclusion [00:11:40].
- By 2013, 600 million people had an Aadhaar ID, scaling to 1.3 billion users by 2024 [00:14:45].
- eKYC (Electronic Know Your Customer)
- Built on Aadhaar, eKYC allowed for online verification of identity, including name, address, date of birth, mobile number, sex, and email ID [00:15:35].
- It was accepted by regulators (RBI, DoT, TRAI, IRDA, SEBI) as sufficient KYC for opening bank accounts, getting mobile connections, or buying mutual funds [00:16:03].
- eKYC dramatically accelerated banking penetration, reducing the time needed to achieve widespread banking from an estimated 46 years to 9 years [00:17:31]. It also enabled Reliance Jio to enroll a million mobile customers a day in 2016 [00:18:20].
- eSign
- Launched in 2015, eSign facilitates digital signatures for various documents, such as property transactions or contracts [00:19:00].
- DigiLocker
- Also launched around 2015, DigiLocker serves as a secure, general-purpose digital wallet for all kinds of documents, from driver’s licenses and PAN cards to high school graduation details and mark sheets. It stores billions of documents securely on the cloud or phone [00:19:25].
- UPI (Unified Payments Interface)
- Launched in April 2016, UPI is a fundamental protocol that facilitates real-time, inter-bank payments [00:23:36].
- It enables payments between different bank accounts and mobile apps, making sending money as easy as sending an email or WhatsApp message [00:24:41].
- The BHIM application, launched by the Prime Minister in December 2016, popularized online payments [00:22:38].
- UPI processes 14.4 billion transactions per month [00:23:12].
- It is being extended for cross-border transactions, with an existing connection between UPI and Singapore’s Fast Pay, allowing real-time remittances [00:25:39].
- Fastag
- Designed in 2010, Fastag assigns a unique ID to every vehicle, linked to a digital wallet or bank account [00:37:45].
- It streamlines highway toll collection, processing 2.5 billion transactions a year [00:38:09].
- Fastag is a platform for other vehicle-related digital payments, such as congestion charges or parking [00:38:41].
- Account Aggregation
- Conceived in 2016, Account Aggregation allows individuals to securely and consensually share their financial data (e.g., bank statements, mutual fund details, tax returns) in real-time with financial information users, such as lenders [00:33:52].
- It facilitates reducing friction in financial activities like loan applications for both individuals and businesses [00:36:40].
- BECKN Protocol (ONDC - Open Network for Digital Commerce)
- Developed by the same architects as UPI, BECKN is a general-purpose transaction protocol designed to “unbundle” transactions, particularly in e-commerce [00:43:10].
- It allows customers to use any app to order from any supplier listed on the ONDC grid and use any delivery agent [00:44:15].
- ONDC, using BECKN, handles 12 billion transactions a month [00:45:37].
- Other applications and future of AI in various industries include mobility (e.g., Namma Yatri for auto rickshaws, which processes 50,000 transactions a day with drivers paying a daily SaaS fee instead of a percentage commission) [00:45:42], and energy (e.g., Unified Energy Interface for buying/selling electricity) [00:45:58].
- This approach aims to open up markets and disrupt existing monopolies/duopolies [00:47:55].
- Finnet
- Finnet is an architecture that integrates traditional financial systems with cryptographic techniques, such as those used in blockchains, focusing on immutability and transparent reconciliation of transactions [00:55:59].
- It aims to enable high-volume, low-cost transactions by allowing the tokenization of assets (e.g., bank deposits, bonds, stocks) for rapid trading, which can then be “un-tokenized” back into traditional assets [01:00:01].
- Potential use cases include new types of ETFs (Exchange Traded Funds), tokenized deposits, and collateralizing private assets [01:00:32].
- CBDC (Central Bank Digital Currency)
- CBDC is seen as another category that will integrate into the Finnet framework [01:01:30].
- Its primary use is expected to be in wholesale cross-country transactions, enabling faster settlement [01:01:39].
AI Opportunities in India
AI, particularly large language models (LLMs), is rapidly becoming a commodity globally due to massive investments by Western companies [00:49:42]. This trend is beneficial for India, as it will lower the cost and increase access to AI technology [00:50:17]. Instead of building foundational LLMs, India’s focus should be on leveraging this technology at a low cost to deliver value to its population [00:50:40].
- Indian Language AI: A top priority is to develop AI solutions for India’s 22 official languages, and hundreds more dialects [00:51:00]. This will bridge the communication gap and make the entire knowledge system accessible to those who do not speak English or use a keyboard [00:51:11]. For example, a farmer in a village could speak in Hindi to a computer and receive information on planting techniques in their mother tongue [00:51:43].
- Voice-Controlled Automation: Given that many people in India cannot read or write, voice interaction with computers will be a crucial way to access digital services, making it a significant future use case [00:52:54].
- Pervasive AI: AI is expected to become like electricity, integrated into every component and aspect of daily life, aiming to improve people’s lives [01:02:10].
Entrepreneurial Opportunities in India
The combination of the India Stack’s foundational digital infrastructure and the accessibility of AI presents unprecedented entrepreneurial opportunities in India [01:04:04].
- Building on DPI: Entrepreneurs can build innovative applications on top of the DPI layers. Examples include:
- A company in Lucknow helping street vendors order supplies via an app and pay with UPI, saving them hours daily and increasing their productivity [00:40:48].
- Jar, an app enabling daily micro-savings through automated small deductions via UPI, a digital evolution of the traditional ‘pyme deposit’ system [00:41:50].
- Disrupting Industries with BECKN: The BECKN protocol allows entrepreneurs to create new business models that disrupt traditional aggregators, such as charging a fixed SaaS fee to service providers (e.g., auto drivers) rather than taking a percentage of each transaction [00:47:00]. This can foster more competitive markets and create new opportunities [00:47:55].
- Leveraging Commoditized AI: Entrepreneurs should focus on leveraging easily accessible AI models to solve specific problems for the Indian population, particularly in local languages and through voice interfaces [00:50:40].
While the abundance of opportunities can be overwhelming, the key for young entrepreneurs is to focus on a few specific areas and innovate within them, leveraging India’s unique digital infrastructure [01:04:14].