How India's Digital Public Infrastructure (DPI) Is Changing Payments

India's tech stack is building innovative payment solutions at home and abroad

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In the 2020s, infrastructure is key. From high-speed broadband to high-speed trains to renewable energy infrastructure. Every country is developing their infrastructure at pace. 

Sometimes, national infrastructure is built solely with in-country expertise. Other times, external entities such as foreign governments or international institutions may offer financial or material support.

China's Belt and Road initiative is a famous example of infrastructure development with outside help. So far, over 150 countries have signed up to Belt and Road initiatives. Some estimates put the combined value of all Belt and Road projects at over $1 trillion. 

Source: The Economist

With Belt and Road, China has built alliances, particularly in developing economies. And Chinese companies have been able to gain a foothold in new markets. There are criticisms of Belt and Road, yet recipient economies have been able to build bigger and faster than they would have otherwise.

In April 2023, the Vientiane-Kunming railway line opened. Connecting the capital of Laos to one of the most import cities in South-Western China. Laos would not have had the resources to build high-speed rail without Chinese help. 

And Indonesia has recently opened a new high-speed rail line with Chinese help. Reducing the journey time from Jakarta to Bandung (the 3rd largest city) from more than 3 hours to less than one hour. Railway diplomacy has been a big success.

A flyer for Indonesia’s recently opened high-speed rail, that I picked up from the recent World Travel Market (WTM) even in London

We can make a comparison here between India and China. While China's Belt and Road has focused mainly on physical infrastructure, India's initiative is Digital Public Infrastructure (DPI), which is centred on software and digitalisation. 

Partly, this difference in emphasis reflects the constraints of each nation. China has the economic clout to build overseas, whereas India's economy is earlier in its development. However, India is a renowned software hub with deep expertise in digitisation that can be used to revolutionise digital technology.

The concept of Digital Public Infrastructure (DPI) is India's model of scaling infrastructure. There are three key pillars:

- Identity 

- Payments

- Data

Let’s take a look at each of these, how they work, and how they scale.

Scaling Identity

In Western countries, identity (ID) isn't a problem. We can easily prove our identity with a driving license or a passport. Unfortunately 850 million people in the world have no ID at all, and an ID is a gateway to opening a bank account, getting a job, of accessing other public services.

Thanks to Digital Public infrastructure, nearly all of India's population is now part of a digital identity system called Aadhaar. Aadhaar provides a 12-digit unique ID number linked to biometric and demographic data, and is used to access various services in the country. 

With Aadhaar, or a MOSIP based system, the user’s biometric information is physically captured and then embedded on the card. Source - Gates Foundation

Aadhaar has inspired MOSIP (Modern Open Source Identity Platform). Born from the International Institute of Information Technology in Bangalore, MOSIP has been a success. The organisation has been able to deliver this pillar of DPI to markets outside of India.

One example is the Philipines. So far, it's estimated that 90% of the eligible population of the Philippines has registered for MOSIP. The solution has yet to go live, as the focus has been on getting people signed up, with the next stages to follow soon 

Scaling Payments

DPI's payment initiatives have been successful by most applicable measures. The National Payments Corporation of India (NPCI) was established in 2008 as a public-private body. The NPCI runs RuPay, a domestic card network for Indian banks, which has issued more than 750 million cards so far. RuPay claims to be up to 40% cheaper than international payment cards.

As well as RuPay, NPCI has developed Unified Payments Interface (UPI), an instant payments system. The closest comparison in Western markets would be a real-time Open Banking payments system (direct account-to-account payments).

UPI has snowballed since launching in 2016. In July 2023, UPI processed over 10 billion transactions - as a comparison, there were approximately 2 billion card transactions in the UK in the same month. The UK has a far smaller population than India, but it's a mature payments market, so this shows how big UPI has become in quite a short time period.