Infosys cofounder and former Aadhaar boss Nandan Nilekani has been evangelising technology innovation in the financial services industry, which he believes is poised for radical transformation.
Nilekani, 60, who will be one of the main speakers at the Leapfrog conference being organised by The Indus Entrepreneurs next week, gives credit to the Reserve Bank of India for anticipating innovation and warns banks that they could be disrupted by upstart technology-based firms. In an exclusive interview to ET, Nilekani speaks about the Narendra Modi government” embrace of Aadhaar and his startup investment philosophy. Excerpts:
What is the sort of disruption that you see in the financial services sector?
The rise of smartphones; payment bank licences from RBI; unified payment interface from the National Payment Corporation of India; the huge amount of global capital coming into the payment industry will all lead to disruption. There is the rise of mobile wallets and also of ecommerce. Recharge alone is 3.6 billion transactions a month. It is up to existing banks and others to create disruption or else a new startup will come and do it. I think it is very fertile situation for that.
What about regulation?
The regulator is a part of enabling this disruption. RBI has been very forwardlooking in understanding the changes in the payment space. In the first stage they gave PPI (prepaid payment instrument) licences and brought a new set of players. That’s how the whole wallet business began. They’ve now taken it to the next step by having payment banks. The regulator has been very smart in a calibrated way. RBI has brought innovation into the sector.
What does this mean for the traditional financial services industry?
Obviously it is a challenge. Those who rise quickly to the occasion can do it. They have huge assets themselves. One thing about financial services (is that) it is about a trusted brand. Banks have millions of customers, vast distribution networks and trusted brands. They must leverage their assets and combine with new technologies to keep the lead; many of them are doing that.
At the same time because of these new trends, there is opportunity for newcomers. The new innovator will have to build a brand that gives safety, reliability, security and 99.9% uptime. Unless he provides that level of service and builds a brand from the trust point of view, he cannot compete with existing brands. On the other hand, an existing brand will have to build the technology platform that can translate trust into the digital world. So my smartphone app from an incumbent should be as good and as slick as something from a startup. Both have different challenges to deal with.
What does the SC decision on Aadhaar not being mandatory mean for financial services innovation?
It is fine print and just come out. Let me not comment on that. Innovation will continue. Aadhaar-based innovation is definitely a big area in the future. Were you surprised that the present government decided to embrace
Aadhaar the way it did?
Aadhaar is a very important and strategic platform. One side is the innovation, but from the government’s side it is a huge driver of savings. When I met the Prime Minister — I met him in July last year — he was very cognizant of the potential of Aadhaar; he had implemented it as chief minister of Gujarat. He is a technologically savvy person; he understood and he has accelerated Aadhaar deployment.
Election campaigns are different but finally governance is the thing. You need to use every advantage for governance. And Aadhaar is a huge advantage for governance.
Will you support Right to Privacy?
I wrote a letter to then Prime Minister Manmohan Singh in June 2010 saying we need to have a proper Right to Privacy (framework). I’ve always held you need balance between privacy and convenience, privacy and benefit, privacy and public good.
It is always a balance, and government has to have a framework of law and data-sharing to make sure that there is no abuse of that privacy.
It has mostly been philanthropy for your wife Rohini and you so far. Will we see you invest in a lot more startups now?
Yes. I will invest in a few startups; have done so already. It will be very selective. Why I got interested in investing in startups is because I realised that all these new technologies are allowing us to reimagine industries. We can reimagine the way retailing works, reimagine the way logistics work, reimagine the way farming will work, etc. I am interested in those kind of opportunities.
I’m not interested in the me-too kind of stuff. Also, I don’t invest in fin-tech as I do policy work. I don’t invest in Aadhaar-related startups as I’ve led the building of the system. And I don’t invest in education tech, where I only do philanthropy. These three are no-go areas for me.