The India Stack, also known as Aadhaar Stack, is the name given to a set of APIs that allows the government, developers, businesses, and startups to use a one-of-a-kind digital structure to deliver services without contact, paper, or cash.
A Closer Look at the India Stack
Serving as the founding block of the country’s digital economy, the India Stack is an identity authentication system that stores each citizen’s name, address, date of birth, photo, and gender, and biometric data, such as fingerprints or an iris scan.
The India Stack consists of these four technology layers:
- Presenceless: In this layer, any person in the country can participate in services through a universal biometric digital identity storage system, which houses the fingerprints of all citizens.
- Paperless: In this layer, there is no need for paper or storage because digital data move’s with an individual’s identity.
- Cashless: The cashless layer democratizes payments thanks to a single interface holding the entire country’s bank accounts and wallets.
- Consent: This layer permits all data to move freely and safely to democratize the market.
People around the globe are intrigued by the India Stack because it is a major conversation starter in the fintech industry. It continues to gain interest because it is not only the largest biometric identity project in the world, but it has made India a hotbed for fintech startups. Most importantly, it has made open APIs available for payments through the UPI (Unified Payment Interface).
What is the Unified Payment Interface
The interface is an inter-bank payment protocol launched in 2016 and allows instant peer-to-peer money transfers using authenticated credentials. Currently, UPI is enabled on smartphones and feature phones and allows for the transfer of funds from one bank account to another. Nevertheless, the UPI was created to be a mass-market payment system.
More Reasons Why People Are Interested in the India Stack
Many are excited about the UPI because, over time, it will change how payment system players (PSPs) are regulated. Currently, the Reserve Bank of India (RBI) regulates all banking and payment systems, as well as regulates PSPs. To be a PSP, an entity must be regulated under RBI as a payment bank, small bank, or scheduled commercial bank. Under this structure any one of these PSPs can acquire customers and set up payment services. Some banks have already gotten on board and made their APIs available. More banks are expected to join as the UPI further enters the mainstream.
The System Is Not Perfect
Though this system has many positives, there are some downsides. Since consumers’ identities are stored on a tangible card, replacing a lost card can be challenging. Also, there have been reports of technical problems, which leave the systems down for long periods of time and forcing people to wait in long lines to get updates.
India’s courts systems also are facing plenty of petitions against the stack due to privacy concerns following two significant reports of Aadhaar consumer data being leaked. First, it was discovered that unknown individuals were selling Aadhaar personal data over Whatsapp. Then, there were reports of a government utility firm using the platform for storing data that anyone could have obtained if it had been hacked.
There are other court issues, as well. In September 2018, the Supreme Court of India disallowed the use of Aadhaar-based eKYC for all private fintech firms. These firms have appealed the ruling.
History Behind India Stack
The idea for India Stack grew out of the need to better include all citizens of the country. Since much of the population lives in rural areas, the countries had difficulties understanding and meeting the needs of their citizens. All parties involved realized they needed to come up with a better way to provide basic education, health and food services to its population.
Currently, taxes, bank accounts, farming insurance, food subsidies, pension funds, academic scholarships, cooking gas, driving licenses, financial support schemes, and mobile phone connections are linked through the stack. It has allowed governments to have clear views of consumers’ needs and how to fulfill them.
As the India Stack matures and evolves, companies that want to use real authentication systems, manage payments more smoothly, or digitize workflows will want to pay attention. It provides them with a ton of possibilities.
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