A year ago, the Indian government withdrew more than 86% of its currency from the system, setting the pace for cashless transactions. But, demonetization did more than just cause an abrupt drop in cash availability. As payment apps began replacing cash, the nation’s migration to digital picked up pace, allowing a new breed of digital-first startups to use technology and government data to change the way business was done in India.
IndiaStack Kickstarts Digital Migration In Business
India is the third largest mobile internet and smartphone market in the world, likely to hit 500 million users by 2017. The high usage of mobile internet has accelerated digital adoption, even in rural pockets. Aadhaar, India’s biometric identity, led to the formation of a suite of government-approved digital services called IndiaStack. This includes electronic Know Your Customer (eKYC) for address verification, eSign for legally-approved electronic signatures, Unified Payment Interface (UPI) for financial transactions through smart devices and DigiLocker, a dedicated cloud storage space for an individual’s personal documents like a driver’s licence or voting IDs. These services made digital authentication popular in India for the first time.
Through IndiaStack, businesses are tapping into multiple customers at low costs, lower turn-around time, increased efficiency and reduced maintenance. With a single Aadhaar number, an Indian can open a bank account, sign legal documents, make secure payments and store confidential data in a cloud. This secure and scalable public infrastructure with conducive policy became the foundation for technology startups to build services and digital platforms for major Indian businesses in banking and financial services, telecommunications, and governance.
One such startup is Bangalore-based Digio. During his stint with a financial services company, cofounder Sanket Nayak realized a tremendous amount of time, resources and money was getting wasted while onboarding new clients or delivering services to existing customers because of extensive paperwork. Along with former Flipkart technical lead Abhinav Parashar, Nayak started Digio, which digitizes a company’s business processes using IndiaStack, be it opening an account, loan documentation, standardizing data models across financial products or intra-business processes like human resources, operations and finance. “The promise of IndiaStack to enable a paperless, presence-less, cashless and consent-driven mode for service delivery is of immense value to the ecosystem. Large enterprises are now working with startups like ours to digitize processes earlier done on paper.”
For example, Digio has enabled digitized two-wheeler or home loan documentation for one of India’s largest NBFCs. More than 75,000 demat and trading accounts have been opened online using Digio. The startup’s plug-and-play and regulatory compliant products allow clients to accept Aadhaar-based digital signatures, perform an electronic KYC, automate workflows within companies and collect electronic mandates for payment collections. Large enterprises such as Life Insurance Corporation of India, ICICI Bank, Kotak Mahindra Bank, YES Bank, L&T Financial Services, Zerodha, FINO Payments Bank, Capital First as well as fintechs like Lendingkart, KrazyBee, Credy amongst several others use Digio’s services.
Although the IT Act recognized e-signatures as early as 2000, it was not until Aadhaar’s full-fledged implementation last year that e-signatures and paperless verification became popular. Digital document and workflow management platform ezedox has built a digital platform that completes customer onboarding in minutes. Cofounder Veerendra Mishra and his team have built a suite of products that help organizations complete essential workflows using only digital platforms and no paper. Mishra says, “The goal is to legally digitize company processes, eliminating the use of paper and wet signatures. We are working on many advanced solutions to make the solution more inclusive and easy to adopt. Our platforms can be used by any industry, but fintech is the most receptive now.”
Following reports of a leak in the Aadhaar database, there have been considerable concerns over security and storage of data. Now, the challenge for startups is to build safe verification platforms, which can be achieved through blockchain technology. Several Indian banks, including the key regulator Reserve Bank of India are now exploring the use of blockchain for secure financial services, but some startups are already ahead. Bangalore-based Signzy is among the only startups in India that uses AI and blockchain to authenticate user identities, run compliance checks on customers and identify fraud risk. Some of India’s biggest banks and NBFCs like ICICI Bank, Aditya Birla and State Bank of India work with Signzy. Cofounder Arpit Ratan says, “The ongoing challenge in the digital world is that a customer expects decisions to be made quickly. AI helps us solve fraud risks in real time. This brings down the time and cost involved in onboarding multiple customers for our clients.”
Banking Sector Laps Up Digital Services, Will Others Follow?
The banking sector in India is more receptive to technology services provided by such startups. A report in World Bank stated that financial service providers in India prefer Aadhaar-enabled eKYC for customer verification, especially in rural India. The enhanced adoption of digital services by Indian banks has opened possibilities for other industries. Specifically, India’s legal industry, which is heavily reliant on paper-driven processes, could benefit from the use of Aadhaar-enabled digital services. LegalDesk.com, a DIY platform for legal documentation, presented its eNotary technology at an event last year, which uses a combination of Aadhaar-based authentication gateways to verify legal instruments remotely.
Through its technology-based initiatives such as Digital India, Skill India, Startup India and Make In India, the Indian government is upping the ante for digital inclusion. Demonetization may have sparked a new approach to financial transactions, but set the ball rolling for digitization in India.