Digital: A revolution in the making in India

September 2016 02 Digital: A revolution in the making in India

Contents

Foreword 4

Message from Confederation of Indian Industry 5

1. Jan Dhan, Aadhaar, Mobile: Foundation of Digital Infrastructure 6

2. 4G, Fiber and Satellite: Providing Seamless Connectivity 18

3. Technology Innovation: Boosting Rural, Women, Governance 32

4. Digital Wallets, Payments Banks, UPI: Moving to Cashless 40

Contributors 51

Contacts 51

References 53

03 Digital: A revolution in the making in India

Foreword

“Everything comes to us that belongs to us if we create the capacity to receive it.” – Rabindranath Tagore

Recently India became the fastest growing large economy in the world outpacing China. The secret ingredient behind India’s exponential rise in the world economy is its massive young population. Citizen empowerment is the key agenda for the government, and there are several initiatives active for the effective socio-economic growth of citizens.

With this publication, our attempt is to provide an analysis of the initiatives taken for better governance and empowering citizens using digital platforms. It discusses the possibilities of leveraging mobile services, skilled IT workforce and Aadhaar-based authentication system to enable a digital economy. The key for digital economy is digital banking and finance systems which will need digital literacy and high trust factor. Accordingly, it also delves into different aspects of the development of a digital society and looks at the technology adoption and related challenges.

We believe that the growth and development agenda for the next few decades should not only focus on economic progress to cater to rising aspirations of young Indians but also in achieving that in a sustainable manner. To this end, the technical and managerial capabilities of public and private sector, under the comprehensive framework of Digital India, can be leveraged to take India into the digital age.

Deloitte hopes that you and your colleagues find this report a useful stimulant in your strategic thinking.

Hemant Joshi

04 Digital: A revolution in the making in India

Message from CII

With the rise of the 21st century, India’s communication-starved rural areas. telecom sector fostered the The superiority of optical fibers for socio-economic growth as more and carrying information from place to more parts of India got connected. place is leading to their rapidly From, banking, education, e-commerce, replacing older technologies. Optical rural connectivity, nothing has been fibers have played a key role in making untouched by innovations in the possible the extraordinary growth. Telecom Sector. Satellite based systems, though expensive, are the only means available India’s telecom sector is still going for providing reliable communication to strong and has been one of the most some of the remote and inaccessible dynamic sectors that has not only areas like islands and mountains and evolved with time but has also played a are therefore, being planned and crucial role in shaping India’s vibrant introduced for such areas. Thus economy. In other words, India’s Satellite communications play a vital telecom sector has certainly been a role in the global telecommunications vital cog in the wheels of its system. development. Digital Wallets, Payment Banks, UPI is Jan Dhan Aadhaar Mobile (JAM) expanding in a big way. India is Number Trinity referred to as a “game witnessing an exponential growth in changing reform” has become the zest the area of digital payment in recent of the season. The Jan Dhan Aadhaar times. With ever-increasing internet Mobile Trinity holds the key to one of and mobile penetration, the country is the greatest reforms in India, i.e. direct all set to witness a massive surge in the subsidy transfers. adoption of digital payments in the coming years. Rural India will ultimately define the core strength of the industry, since the CII Telecom Convergence sheer volume of potential connections Summit will deliberate on some is immense. Inclusion of rural users in of the topical issues of the Sector and the customer base will strengthen the help charting a roadmap defining the network and enable it to deliver growth path in the times to come. multiple services in

Umang Das

Summit Chairman & Chairman, CII National Sub-Committee on Telecom Infrastructure

05 Digital: A revolution in the making in India

JAM (Jan Dhan 240M+, Aadhaar 1B+, Mobile 1B+): Foundation of Digital Infrastructure India has been known as the “Land of trend. The GDP share of the agriculture Villages” and this has been the biggest sector has dropped from 51.81% in 1950- strength as a massive share of population 51 to 17.9% in 2014-15, while the Industry i.e. almost 60% belong to the rural part of (24.2%) and Services (57.9%) sector has the country. The advent of Industrial era shown a significant increase over the same and urbanization changed the agriculture period.1

Figure 1: Major Sector Performance since 1950 (%) 60 57.9 55 51.81 54.64 50 50.98 45 42.56 44.18 41.95 40 39.92 35 38.25 37.22 35.39 33.25 30 29.02 26 27.16 25 26.49 24.49 23.02 24.2 20 20.48 18.21 19.3 17.9 15 14.16 10 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11 2014-15

Agriculture & Allied Services Industry Services

Source: Planning Commission

The lacklustre agriculture sector has inclusion of rural population is necessary to government needs to identify the citizens, shifted the focus of employability and close this gap. The rural development has create a platform for transfer of services economic development to the urban equal importance as the urban growth to and ensure last mile delivery of services to India i.e. industry and services sector. The achieve overall progress of the country. The the underprivileged. declining importance of agriculture has advent and rapid adoption of technology Identity: The identity of the citizens is the become a threat to the socio-economic brings new and innovative ways to deal topmost priority and requires elimination development of rural India. The widening with this situation in India. of duplicate entries and can be used socio-economic gap between rural and for efficient delivery of all services. An urban India is a worrying factor as it The economic empowerment of citizens automated system using technology and deprives rural India from basic rights such demands a continuous connect between biometrics has helped several countries as Banking, Healthcare, and Education. the citizens and the government. For a in Europe and the US. The home grown The economic empowerment and financial successful service provision model, the Aadhaar card provides secure and safe

06 Digital: A revolution in the making in India

solution for citizens’ identity in India. to ensure that benefits, such as subsidies schemes. According to the Economic reach the citizens at the appropriate time. Survey, about INR 3.78 lakh crore or 4.2% Delivery platform: Bringing the entire The unprecedented penetration of mobile of the GDP, is currently spent on key country into the financial ecosystem will phones provides the opportunity for the subsidies. The inefficient distribution provide a platform to deliver government last mile delivery. system leads to wastage of resources benefits to the citizens directly by rather than using for other developmental eliminating middle men and thus removing The JAM Trinity is the consolidation of three activities. The JAM Trinity would ensure leakages and pilferages. The Prime Minister critical projects i.e. Jan Dhan, Aadhaar and last man delivery of benefits eliminating Jan Dhan Yojana (PMJDY) is helping in Mobile connectivity (JAM) expected to drive multiple mid-channel layers and empower financial inclusion and provides a platform financial inclusion measures to bring about citizens directly using technology. for benefit transfer to the right people at overall empowerment. It is a key reform to the right time. deliver the Direct Benefit Transfers (DBT) scheme along with subsidies2, minimum Last mile access: It is a major challenge wage payments and other government

07 Digital: A revolution in the making in India

Jan Dhan: Including Unbanked, Eliminating Leakages

Indian gross domestic product (GDP) grew be aware of or able to afford these services. at 7.6% in 2015-16 up from 7.2% in 2014-15, People from weaker sections of the society outpacing the growth of China to become tend to rely on traditional financial activities the fastest growing major economy in the such as saving, borrowing and managing world3. Despite India showing economic day-to-day expenses without any access to growth rates higher than most developed banks, savings accounts, debit/credit cards, countries in the recent years, a majority of insurance, etc., and depend on informal the country’s population still does not have means such as cash-on-hand, basic access to banking infrastructure. pawn-brokers, money lenders, etc. Most of Financial inclusion is a relatively new the time, these choices are insufficient, socio-economic concept in India to provide risky and expensive. affordable financial services to the underprivileged, who might not otherwise

Figure 2: Advantages: Formal Financial System

Fighting Poverty Enables the poorest and most vulnerable in society to step out of poverty and reduces the inequality in the society

Economic Development Helps individuals and families for better management of their financials as well as collectively develops communities and drives economic growth

Financial Decision Making/ Entrepreneurship Empowers people with the skill and knowledge for right decision making and fights financial uncertainties. Start & grow business with micro finance schemes

Better Education Enables people to pay for education and in turn supports a new generation of educated and informed individuals

Leakage Proof Service Delivery Connects the individual to the government for last man delivery of government services thus preventing leakages and pilferages

08 Digital: A revolution in the making in India

Programs Pradhan Mantri Jan Dhan Yojana (PMJDY) is provide financial access but it will also a national mission for financial inclusion in channelize all the government benefits India, which encompasses an integrated (from Center / State / Local Body) to the approach to bring about comprehensive beneficiary’s accounts. The Direct Benefit financial inclusion of all the households in Transfer (DBT) will remove multiple layers the country. It helps the citizens with of intermediaries for a smooth flow of universal access to banking facilities with at benefits with least leakages and pilferages. least one basic banking account for every household, financial literacy, access to The first phase of PMJDY, which was from credit, insurance and pension facility. The 15 August 2014 to 14 August 2015, government also provides RuPay debit improved the financial inclusion in India cards to the beneficiaries which has an significantly. Currently, the mission is in its in-built accident insurance cover of INR second phase with a healthy progress 1,00,000. The Jan Dhan Yojana will not only report.

Table 1: Progress report - Jan Dhan Yojana

Balance in Accounts % of Zero Balance- Bank Type Rural (million) Urban (million) Total (million) (INR crore) Accounts

Public Sector Banks 108.7 85.3 194 34235.01 24.15% Regional Rural Banks 35.9 5.8 41.8 7302.35 20.29% Private Banks 5.2 3.3 8.6 1590.9 36.61% Total 149.9 94.5 244.4 43128.25 23.93%

Source: PMJDY website as on 24 September 2016

The scheme also provided 190 million RuPay cards and 125.2 million accounts are linked with Aadhaar card.4

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Other Programs Challenges The PMJDY mission is helping transform •• Payments Banks: Payments banks are the socio-economic condition of the virtual banks that will provide banking underprivileged citizens. Nevertheless, it solutions mainly through mobile phones faces many challenges that need rather than traditional bank branches. attention and focussed efforts. The Reserve Bank of India provided guidelines and licenses to 11 entities •• Duplicate accounts: The rise of in August 2015 to work as payments duplicate accounts under PMJDY is a banks. This is a step to counter the lack worrying factor for banks. As per report of physical banking infrastructure in India by MicroSave, 31% of multiple account and will help in bringing more population holders having a bank account under under financial ecosystem through PMJDY are actively using alternate bank technology. For example, the India Post account.6 In multiple cases, single person payments bank’s proposal was cleared has opened more than one account in with a budget of INR 800 crores which different banks under the PMJDY mission. will open 650 operational branches by The absence of KYC norms resulted in September 2017 and will scale-up further many duplicate accounts. by 2018-19.5 The extensive outreach of •• Dormant and zero balance accounts: the Department of Posts will boost the As per a report by MicroSave, there financial inclusion program. are 28% dormant accounts (i.e. no •• M-Banking: Many telecom operators transaction in the last three months)7 and are providing mobile based banking 24.31% zero balance accounts.8 Rising services in India for easy money transfer. dormant and zero balance accounts are The banking services such as M-Pesa are causing concern to the banks as they helping underdeveloped and developing hardly provide any return. Though public African countries in financial inclusion. sector banks might find it sustainable, private sector banks do not find this a •• Micro-financing: Microfinancing viable business proposition.9 initiatives in India such as Bandhan (Society and NBFC), Microcredit •• Banking literacy: The lack of banking Foundation of India, Saadhana Microfin or financial literacy has been preventing Society, Grameen Koota, etc. are bringing many users to take advantage of these individuals as well as small and medium services. The transaction frequency businesses under financial ecosystem. and amount could be increased when people are aware of the schemes such as •• Digital Wallets: The digital wallets are Suraksha Bima Yojana and Jeevan Jyothi rapidly gaining momentum in India due Bima Yojana. There is a rising demand to mobile and data proliferation. With for Bank Mitra (bank correspondents) 12-15 digital wallet players, the mobile who are usually not properly trained with wallet market is expected to reach $6.6 accurate knowledge, skill and attitude. billion by 2020 in India. Third-party mobile operators such as PayTM, Oxigen, •• Logistics: The government as well as MobiKwik are successfully providing private players need to work on offering services such as utility bill payment, more POS centers and ATMs to increase phone and DTH recharge, shopping, the frequency of transactions. There etc. Some wallet operators have created are 1 million POS, 160,000 ATMs and platforms interoperable with IMPS 1,15,000 bank branches in the country. (enabling instant transfers to bank 188 million RuPay cards have been issued accounts), offer peer-to-peer transfers via to the public. While the demand has been mobile apps and are working on physical created by issuing debit/credit cards, the cash-in, cash-out locations. logistics should be improved to meet the demand.

10 Digital: A revolution in the making in India

11 Digital: A revolution in the making in India

Aadhaar: Single Identity, Single Window

Citizen identity is an important aspect of identification to all the citizens, including effective governance. For a developing children and infants. Aadhaar card is country like India with a population of 1.33 expected to act as a one-stop solution for billion, wide geographical presence, and citizen identity in India and empower the diverse culture, citizen identity helps in a citizens by providing a digital platform to two way communication between the authenticate anytime and anywhere. government and public. It improves the relationship between the state and its Program citizens, and creates new avenues to The Unique Identification Authority of India redefine relations between the privileged (UIDAI) is a program started by the central and the less powerful in the society. Similar government in 2009 in India with an to the social security number in developed objective to provide a 12-digit unique nations, the government of India is also identity number called Aadhaar to each attempting to establish an identification citizen. This number is mapped to the method by which every citizen is registered citizen’s biometrics and demographic data. in the country. The government has taken As on August 2016, the program has issued up the Unique Identification Authority of more than 1 billion Aadhaar cards to the India (UIDAI) initiative to provide a single Indian citizens.10

Aadhaar Authentication Process

Aadhaar authentication helps a citizen to provide identity anytime, anywhere to avail different services in the country. In case of an Aadhaar authentication, the Aadhaar number along with the Aadhaar card-holder’s personal identity data is submitted to the Central Identities Data Repository (CIDR) for matching. CIDR verifies the correctness on the basis of the match.

Demographic matching: Demographic matching refers to the usage of Aadhaar authentication system for matching Aadhaar number and the demographic attributes such as name, address, date of birth, gender, etc. It helps in authentication in case of:

•• Automated KYC checking in banks

•• Address verification while availing a service such as telecom service, LPG, etc.

•• Eliminates fake and duplicate identities

Biometric matching: Biometric matching is the use of Aadhaar authentication to match biometric attributes of a resident in the CIDR, thus providing authentic identification of the citizen. It is being used as authentication in case of:

•• Identity verification in banks while opening new accounts or applying for loans

•• Telecom service providers before issuing a new connection

•• Identity authentication for better governance

One-Time-Password (OTP) based authentication: In this case, an OTP is sent to the registered mobile number of the resident seeking Aadhaar authentication. The resident shall provide the OTP during authentication, which is matched with the OTP in CIDR for authentication. OTP-based authentication is used in case of:

•• Banks for authenticating customers during an internet banking transaction

•• E-commerce companies before completing a cash-on-delivery transaction

12 Digital: A revolution in the making in India

Associated Programs Aadhaar is being used as the important authentication parameter by many departments and service providers for efficient service delivery.

•• Pahal Scheme: Through this scheme, the LPG consumer can link their Aadhaar details to the LPG account to get the subsidies directly deposited in their bank account. Due to the Direct Benefit Transfer (DBT), the government managed to save INR 14,672 crore by October 2015.11 Figure 3: Aadhaar Achievements LPG Connections Mar 31,2014: 28.2 million Mar 31,2016: 122.8 million Ration Cards Reached 114 million in March 2016 from 12 million in 2014

MNREGA Job Cards 59 million cards has been issued by March 2016

NSAP Pension Schemes 9.5 million schemes linked with Aadhaar by March 2016

Epic Cards 310 million EPIC Cards have been linked with the Aadhaar card by 2016

Source: Ministry of communication & IT

•• Jan Dhan Yojana: The Pradhan Mantra Jan Dhan Yojana (PMJDY) which has an objective to bring Indian citizens under the financial inclusion program uses Aadhaar as the only authentication document sufficient to open an account. Aadhaar eases the process of verification and helps in providing RuPay card, zero balance accounts, and insurance schemes to the citizens.

•• Acquisition of Passport: Aadhaar card now helps citizens to get a passport in 10 days where police verification will be done at a later stage. Aadhaar number is now mandatory to get a passport in India.

•• DigiLocker: The digital locker is a key initiative to provide citizens a shareable private space on a public cloud and making all documents / certificates available on this cloud by linking the 12-digit Aadhaar card number. Self-uploaded documents can be digitally signed using the eSign facility.

•• Digital Life Certificates: The Digital Life Certificate i.e. Jeevan Pramaan is a biometric- enabled digital service for pensioners to provide easy, hassle-free seamless experience of getting the life certificates. With this initiative, the pensioner’s requirement to be physically present in front of the disbursing agency or the certification authority will become obsolete as their details can be digitally accessed by the agency through their Aadhaar Card numbers.

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Challenges •• Migrants: Three out of 10 people in India Though there is good progress in Aadhaar are internal migrants as per the UNESCO card registration in India with more than report “Social Inclusion of Internal 1 billion registration and 93% of adults Migrants in India”. The number of internal (age > 18 years) having been registered, migrants may cross approximately 400 the project still needs to take care of a million according to Census 2011.12 Due multitude of challenges. The privacy of to the massive migrating population, individuals and national security are existing state policies have failed to major challenges as the project deals with provide legal or social protection to sensitive data like the demographics and these people. In absence of proof of biometrics of the citizens of the country. identity and residence, many people The reachability of Aadhaar in remote find it difficult to apply for Aadhaar cards parts of India, availability of documents and thus do not get the benefit of direct to register for Aadhaar, migrant transfer schemes from the government. population, participation of banks and •• Identification procedure: The Aadhaar private parties and the availability of identification procedure requires proper required infrastructure for last mile identity and residential proof for Aadhaar connectivity are some of the major registration. The lack of these documents challenges. allows a person to get an introducer •• Privacy and Security: The UIDAI project to vouch for someone’s identity which collects and stores the demographic is a weak link in the process. The as well as biometric information of the carelessness during registration has citizens for authentication purpose. resulted in duplicate records which The rising issue of cyber security weakens the authentication process and and theft is a major challenge for the can lead to the misuse of this facility. storage, safety and privacy of the huge •• Lack of associated infrastructure: amount of sensitive data. The Aadhaar The government has successfully issued authentication links personal information Aadhaar cards to the citizens in the to various databases maintained by country but needs to improve access banks, income tax offices, ration cards, infrastructure such as bank branches, electoral polls, airline and railway banking correspondents, ATM machines, ticketing, internet and telecom service POS, internet connectivity, etc. for providers to name a few, which creates a comprehensive financial inclusion. huge concern for individual privacy and could compromise national security.

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Mobile: Complementing the Traditional Channels

Mobile has become an integral part of life In June 2016, RBI released ‘Vision-2018’ for transactions like fund transfer, online for almost everyone in the last decade. payment and settlement systems in India payments, etc. The OTP service helps The evolution in communication to encourage greater use of electronic authenticate the transaction. technology is not only making life easier payments by all sections of society so •• Apps enabled by government: The for the end users but also provides as to achieve a less-cash society. The Digital India initiative has developed millions of opportunities for the vision seeks to create policies for mobile multiple easy-to-use apps to provide government to connect to the citizens banking to facilitate faster payment information to the targeted segment of and provide better governance. Currently services. It will enhance the options the population. These applications also India is the 2nd largest telecom market in for customer registration for mobile help in a two-way communication as the world with 1.05 billion subscribers out banking services, enable wider access it works as a citizen grievance system of which 1.03 billion use wireless means to mobile banking services in multiple and takes feedback from the public. For to communicate.13 There is an languages for non-smartphone users, example, MyGov, mPassport Seva, mobile exponential rise in terms of internet and encourage innovative mobile-based seva, Kisan suvidha, etc. are working on users as well as smartphone users in the payment solutions. The National Payment providing information directly to the end country. Corporation of India (NPCI) has connected users. all the banks with mobile banking The lack of banking infrastructure poses a permissions and Telecom Operators Challenges serious problem mostly in rural India for offering GSM services through its USSD Mobile phones provide a one-stop getting money from banks to the last aggregation platform. solution for last mile delivery but the man. Only 27% of the villages have banks price war in the Indian telecom sector and within 5 kms.14 To address this banking Initiatives the intense competition brings new infrastructure challenge in India, RBI has •• Mobile-based information: The challenges to the last mile solution of JAM licensed 23 new banks including 2 high mobile penetration in India trinity. universal banks, 11 payments banks and has provided an opportunity for the 10 small finance banks.15 The high •• Customer authentication: Though government to send information to penetration of mobile phones provides there are strict rules on background people directly. The registered mobile appropriate solution to serve the rural verification while allotting a SIM card in number acts as a last mile delivery to give population via payments banks. RBI is India, most of the rural and semi-urban important information to the end user. also pushing mobile banking option for areas do not follow the regulation and Citizens are able to get subsidy based other banks. SIM cards are available without prior information directly on their mobile verification. This will create a problem phone rather than visiting a nearby Program while authenticating a person from bank. The government is also providing Keeping in mind the successful initiatives the mobile number and may increase the information on various schemes by of delivering financial services through duplication. mobile phones for highest reachability. mobile by many countries, the Government •• Literacy: Mobile literacy is one of the of India constituted an Inter-Ministerial •• Mobile-based booking system: biggest challenges as most of the rural Group (IMG) to create a framework for Registered mobile numbers are slowly population uses mobile phones for voice- delivery of basic financial services using becoming a one-stop solution for based calls only. To bring mobile as a last mobile phones in 2009. Mobile banking different government and private service mile delivery platform, the government policies in India aim to enable funds booking. Citizens can book LPG gas, pay needs to educate people on how to avail transfer from an account in any bank to utility bills (electric bill, water bill, etc.), services and understand the information any other account in the same or any other book train, and bus tickets directly from on mobile phones. In addition, the bank (inter-operability) on a real-time basis the mobile phone. applications and messages should be in irrespective of the mobile network the •• Transaction security: Mobile phones local languages and easy to understand customer has subscribed to. are being used as authentication devices and use for common man. in case of banking activities, financial

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Recommendations of the residents and pass them in batches literacy to rural and unprivileged citizens. The economic growth of the largest to the CIDR. The involvement of registrars, With proper remuneration, training democracy in the world in the last few sub-registrars for aggregation of the data and skills, BCs can spread the banking years has been highly commendable. Yet puts a question mark on the integrity, knowledge to a mass population. Samwad the country is known to be one of the authenticity and security of this data. The is an interactive platform for financial poorest in the world. Corruption, government should provide extra efforts to literacy and uses ICT technologies such malnutrition, unemployment, and poor protect this data and take necessary steps as SMS, IVR and mobile applications to literacy rate are the biggest barriers in to ensure the authenticity of data entered deliver the subject in different languages to India’s growth. A sustainable long-term in the CIDR. different demographics.16 growth is not possible when the gap between rich and underprivileged is wide. Improve interoperability: The efficient Encourage private participation: Private To achieve sustainable economic growth, service delivery demands an interoperable participation of banks and non-banking the country needs to focus on the ecosystem. Innovative delivery channels sectors will speed up the process of socio-economic development of the such as mobile banking, digital wallets, financial inclusion effectively. However, underprivileged. The JAM trinity is a great etc. need to enhance the interoperability the private participation is low in Jan Dhan initiative that aims to increase the between banks and non-banking service Yojana due to many dormant and no-frills effectiveness of welfare measures by providers to create an efficient payment account. The private banks find it difficult making use of available technology. It is system. Biometric and demographic to sustain a business model where return an attempt to improve the subsidy identification needs to integrate with credit is low and operating cost is high. The break- regime by bringing underprivileged information and credit bureaus to build even cost per account is INR 120 and Jan citizens into the financial ecosystem. The an effective credit system to help citizens Dhan accounts do not seem to provide seamless integration between Jan Dhan, obtain loan at reasonable cost as well as much return. Issues with distribution Aadhaar and Mobile will help in direct avoid bad debts. of territory to open Jan Dhan accounts benefit transfer to the people and where there are no penetration of private remove intermediaries. Priority to financial literacy: Financial bank branches is another reason for low literacy is equally important as the access participation. There is an urgent need to Data privacy: Security and privacy to institutional finance to empower a encourage the private banks for Jan Dhan of sensitive data (i.e. Biometrics and citizen. Financial literacy will create a participation by resolving these issues. Demographics) is a big challenge. The new knowledge-empowered generation Central ID repository is the single location and will encourage citizens to raise their Infrastructure readiness: The lack where the personal data is stored. With voice against corruption, black marketing, of infrastructure in the last mile is a big full-fledged launch, large databases informal lending, etc. While classroom- challenge for the success of the program. will be created to provide access to based medium of financial education is The lack of physical banking infrastructure different government as well as private expensive and lacks customization, the space can be fulfilled by ATMs and POS organizations such as banks, e-commerce interactive way of delivering financial machines in the rural and remote India companies, etc. and is prone to falsification, education via Banking Correspondents to encourage transaction related activity. misuse, etc. As per the agreement (BCs) with the help of ICT is more efficient Government, banks, payments banks, and various collection agencies in the form of and effective to reach target audience. mobile operators should make sure that registrars, sub-registrars and enrolment Integrating BCs into the banking business there is enough infrastructure at place for a agencies across India will collect the details model will help in spreading financial successful last mile connectivity.

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17 Digital: A revolution in the making in India

4G, Fiber and Satellite: Providing Seamless Connectivity Current State of Broadband Broadband internet has emerged as one of the key driving forces of development in the 21st century. Many countries have actively included broadband development in national policies. Benefits of broadband are not confined only to social needs but are also widely realized in economic and environmental aspects as highlighted in figure 4.17

Figure 4: Benefits of broadband

Economic • Creates new markets, industries and job opportunities • Positive effect on GDP – doubling broadband speed increases GDP by ~0.3% • Increases competitiveness – lowers costs and greater access to foreign markets

Social Environmental • Increased connectivity across societies • Reduces use of paper • Improves quality of life through delivery • Saves energy and fuel used for Dataof landscape key services in India commuting Benefits of • Impetus to citizen empowerment & Broadband delivery of utilities • Social programs like Financial inclusion, DBT, Digital India, etc.

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Data landscape in India

Table 2: Data usage by device

Number of users Technology Applications Data consumption % usage in India per device type per month (in PB)

698 million 2G • E-mail 38 27 Feature phone • Social networking apps % • Web browser apps

220 million 2G/3G • Mobile video streaming/ 81 Smartphone gaming • Location based apps 57 • Social media apps % • Shopping apps

2.5 million 3G • Mobile video streaming / 2 1% gaming Tablet - cellular • Reading apps • Shopping apps

12 million EVDO/3G • E-mail 8 5% • Video streaming Dongle • Lifestyle/social media websites

10 17 million Wi-fi/Wi-Max • Lifestyle/social media 15 % websites Wired & Fixed • Location based websites wireless

Source: Nokia MBiT, Ericsson, TRAI, Deloitte Research

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India has grown by leaps and bounds in Figure 5: India broadband subscribers the ICT space in the past 20 years. Growth in mobile voice telephony drove much 160 Wireless Broadband Users ~89% of the development in the last decade. Broadband internet is the current engine of 140 growth in telecommunications in India and 120 rest of the world. As highlighted in table 100 2, among all internet-connected devices, 80 mobile handsets dominate data landscape 60 in India. With falling prices of smartphones, 40 Fixed Broadband Users ~11% there is an increasing substitution of 20 feature phones by smartphones. Going 0

forward, smartphones are expected to play Subscribers (million) a significant role in data demand.

As highlighted in figure 5, fixed-line broadband accounts for ~11% of Wired Subscribers broadband subscribers in India, while Mobile Device Users (Phones + Dongles) wireless broadband accounts for ~89% of broadband subscribers. Source: TRAI, Deloitte Analysis

Broadband delivery Delivery of broadband involves various components and technologies used at various stages of the internet value chain as highlighted in figure 6. They are broadly divided into broadband wholesale infrastructure connectivity services and broadband access services.

Figure 6: Broadband delivery value chain

Value Chain

Connect to National Long Domestic Fiber to Towers / Enterprise SME Connectivity Retail Services Submarine Cables Distance Transmission POPs, AGs, etc. Connectivity

Undersea Core National Metro Backhaul (FTTT) Enterprise SMEs Retail Cables

Wholesale Infrastructure & Connectivity Services Access Services

Dominant Technology Fiber Fiber Fiber Micro-Wave Fiber 3G/LTE 3G/LTE

Competing Copper, VSAT VSAT, Copper, Copper, Fiber Technologies - Copper Microwave Fiber Micro-wave, Fiber WiMAX, WiFi WiMAX, LTE WiMAX, LTE

Fiber Growth Potential

Drivers for Usage  High demand  Most  High demand  Increase in  Demand for  Medium to  Medium to of Fiber for bandwidth networks are for bandwidth bandwidth bandwidth high high  Future proof already  Reliability and demand  Higher SLAs Bandwidth Bandwidth fiberized uptime  Reliability  Reliability, requirement requirement   Future proof uptime &  Future proof  Future proof security  Reliability  Future proof Source: Deloitte Research

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Broadband wholesale infrastructure Figure 8: Broadband access technologies and connectivity technologies: As highlighted in figure 6, optic fiber has Wireless emerged as the dominant technology Broadband in deployment of broadband wholesale infrastructure and connectivity. Hence, Advanced investment in optic fiber, especially for Wireless DSL Services deployment in national backbone and (AWS) backhaul, is essential for supporting Broadband Access broadband fixed-line and wireless access Technologies technologies. Wi-Fi Optic Broadband access technologies: With Fiber the evolution of fixed-line technologies and liberalization of spectrum usage in India, a VSAT number of broadband access technologies are being used today for fixed-line and wireless broadband services. Figure 7: Drivers of wireless broadband in India

Wireless broadband - 3G and LTE/4G: With the advent of wireless broadband and smart devices such as smartphones, Availability tablets and dongles, there has been • Expanding 3G & 4G coverage a paradigm shift in data consumption • RoW issues faced by ISPs in expanding fixed-line coverage behavior of internet users in India and Mobility across the world in the past six to seven • Changing data consumption behavior years. With 89% share of subscribers, • Rising usage of phone applications ‘on-the-go’ wireless has emerged as the most Data Affordability dominant broadband access method used • Falling data prices • Rising use of bandwidth intensive applications in India, driven by a number of factors highlighted in figure 7. Device Affordability • Reducing average smartphone prices

Source: Deloitte Research

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Wireless broadband is well-positioned to drive India’s broadband penetration going forward due to the factors mentioned above. As highlighted in figure 9, 4G can become dominant technology in case of high data usage scenario.

Figure 9: Wireless subscriber base by technology (million)

2G 3G 4G 63 100 40 18 18 25 348 10 10 128 1 0.5 18 178 10 240 346 240 1 79 216 85 180 489 85 180 269 337 699 421 180 237 527 85 202 240 299 148 324 122 830 348 830 779 830 779 78 779 760 760 729 686 636 644 620 760 568 518 491 707 563 368 449

High data usage scenario Medium data usage scenario • By 2017, 4G users would be more than Base case scenario • By 2020, 3G and 4G technology would 3G users due to significant increase in 3G would remain more dominant than 4G be equally dominant, post which 4G • supporting devices and better network can dominate coverage

Source: Deloitte Research

22 Digital: A revolution in the making in India

•• Digital Subscriber Line (DSL): DSL service. It can be a significant enabler accounts for nearly 70% of wired internet in providing connectivity to remote and access rural areas in India, which are otherwise unviable for other fixed-line and wireless •• Fiber to the Home / Enterprises technologies. Wi-Fi offloading helps (FTTH): As highlighted in figure 10, reduce data load on cellular networks by FTTH currently accounts for only 0.5% of interworking with cellular network and fixed-line access. Developed economies using Wi-Fi access point to deliver data to like UK and OECD countries are aiming the user. at broadband speeds of 100+ Mbps. As bandwidth consumption in India •• Advanced Wireless Services (AWS): reaches OECD levels, alternate fixed-line AWS refers to the next phase of mobile technologies might be needed to fulfil telecommunications that goes beyond those needs. the LTE standards and provides data access at speeds higher than 4G. Telcos •• VSAT: Satellite internet access is and tower companies in India will have relatively expensive compared to other to ramp up fiber connectivity to towers contemporary technologies and is only to do the ground work in preparation of suitable for internet access in remote 5G, which will require significant capital locations where other forms of internet investment. connectivity is ruled out. Satellite communications so far have been used Figure 10: Fixed-line technologies in India only in enterprises. In addition, regulation allows only the use of satellites launched 70.0% by ISRO for satellite communication. Procurement of satellite capacity on foreign satellites through Department of Space often results in delays. There 17.5% is a need to open the sector to private 7.7% players. 3.9% 0.5% 0.3% •• Wi-Fi: Wi-Fi is used prolifically at homes and business establishments alike for providing wireless internet access typically through fixed-line broadband

Source: Broadband: The Lifeline of Digital India – Deloitte, November 2014

New internet technologies are being developed and tested that have the potential to provide innovative means of internet access in rural and remote areas where other infrastructure cannot be deployed. Project Loon and Television White Space (TVWS) are two such key technologies. Project Loon provides high-speed cellular internet coverage by setting up a network of helium balloons floating in stratosphere and setting up a radio link between the helium balloons and ground based stations. TVWS refers to unused TV channels between active ones in the VHF and UHF spectrum. TVWS signals can penetrate foliage and works well in difficult terrain. These can be used for wireless internet transmission in remote and hilly areas.

23 Digital: A revolution in the making in India

Challenges Every broadband technology is supported by five network components – access, backhaul, domestic transmission, national long distance, and international long distance. As highlighted in table 3, the choice of connectivity medium for every network component is largely governed by data volume, data speeds, and other requirements of the technology.

Table 3: NetworkOptimal components connectivity to support broadbandto support technologies data/bandwidth demand Optimal connectivity to support data/bandwidth demand

Technology Access Backhaul Domestic National Long International Long Transmission Distance Distance LTE/4G IP Microwave IP Microwave/ Fiber Fiber Fiber (eNode B) Fiber (FTTT)*

3G IP Microwave IP Microwave/ Fiber Fiber Fiber (Node B) Fiber (FTTT)

AWS/5G IP Microwave Fiber (FTTT) Fiber Fiber Fiber

DSL Copper Fiber/Copper Fiber Fiber Fiber

FTTx Fiber Fiber Fiber Fiber Fiber

Wi-Fi IP Microwave Fiber/Copper Fiber Fiber Fiber (UBR)

VSAT Satellite Satellite Satellite Satellite Satellite

* Pre-dominantly fiber is used in backhaul Optic fiber connectivity has emerged as the most optimal choice for domestic transmission, national backbone and for international connectivity. While there have been significant developments in India in fixed-line and wireless broadband in the past 10 years, we are faced with a number of challenges on our way to realizing the ‘Digital India’ vision. The slow pace of fiber deployment can create impediments in multiple growth initiatives as highlighted in figure 11:

Figure 11: Potential challenges arising from slow broadband deployment Can slow down the start-up The digital disconnect between ecosystem India and China will rise

Future broadband access Overall consumer technologies like 5G will broadband experience not be successful as they will not improve are hinged on complete Impact of backhaul fiberization current slow pace of optic Top government programs fiber The ‘Make-in-India’ aimed at financial deployment inclusion like Aadhar and initiative which is expected Direct Benefits Transfers to evolve to become will not get fulfilled robotics based will suffer

Implementation of GST across India will be difficult The smart cities initiatives will get delayed

Source: Deloitte Research

24 Digital: A revolution in the making in India

Broadband speed definition Low investment in fiber According to Akamai, the global average Fiber is critical to drive various internet connection speed was 6.3 Mbps broadband technologies including in first quarter of 2016, whereas average wireless. Yet, India continues to remain speed in India stood significantly lower. highly under-fiberized, with cumulative India ranks 114 out of 189 countries fiber-deployed-to-population ratio at ~ worldwide in internet speeds.18 The 0.1x (v/s US: 1.2x and China: 0.7x) and only NTP-2012 defines minimum broadband ~20% of towers (for incumbents) currently download speed of at least 512 Kbps.19 fiberized v/s the required ~70-80% Various industry leaders have highlighted required to support 4G today and 5G in the urgent need for increasing the future.20 As highlighted in figure 12, India minimum broadband speed to at least 2 stands far behind developed countries Mbps, and the importance of a scalable and some of the major developing backbone network infrastructure which countries in fiber deployment. can support higher speeds in future. Hence, there is a need of an updated definition of broadband for implementation of digital services such as e-governance, smart cities, delivery of mobile video and mobile banking that define the Digital India vision.

Figure 12: Population vs Fiber deployment

1381 1320

1060

417 323 99

US India China Population (Mn) Cumulative fibre deployed (Mn f-Km)

Source: Sterlite investor presentation, May 2016

Most telcos are not left with significant financial resources to make heavy investment in fiber after paying for expensive spectrum along with other statutory charges.

25 Digital: A revolution in the making in India

Policy and Implementation respectively. Technical standards Low rural demand for broadband challenges have not been followed due to lack The success of many initiatives targeting Policy and implementation challenges of technical skills of ground-level growth in rural areas is hinged on have been identified in deploying workers. There is lack of guidelines demand for broadband, which has broadband network infrastructure and legislation to have mandatory remained low. A number of factors have through discussion with industry experts. provision of ducts for fiber contributed to low demand for These can broadly fall in the following deployment in buildings. broadband data in the rural areas as categories highlighted below: ––Use of other infrastructure: highlighted below: OFC deployment has largely •• Policy •• Lack of digital literacy and been expensive and inefficient as Clarity on licensing for digital awareness: The computer literacy considerable costs are involved in infrastructure roll-out: Currently IP-1 rate in India was reported as 6.5% in obtaining permits and right of way. Government policy is a key lever which 2012. 21 Low digital literacy, especially Lack of awareness and absence of can accelerate the pace of broadband in rural areas has led to low awareness government policies around ‘dig once’ infrastructure roll-out. Policy needs of internet and lack of skills to access have resulted in high cost of OFC to tap into potential of all ecosystem internet and make use of broadband deployment. players to drive roll-out of digital services. broadband infrastructure. Roll-out by ––Bottlenecks in network roll-out •• Limited affordability of device and Telcos and ISPs are primarily driven ––Rights of Way (RoW): There is data: Though prices of smartphones, by demand and return potential. Telco lack of standard guidelines for RoW which have now become the anchor infrastructure players have a key role to process in India due to disagreement devices for a majority of users, have play and can potentially form the fulcrum between Center, States, and declined in the past few years, they still to drive broadband infrastructure municipalities. In addition, there is are fairly high for low-income users. roll-out at a faster pace. Currently IP-1 lack of standardized charges for RoW Similarly, we have seen a decline in data licenses put a restriction on portfolio approvals as States and municipalities prices. This has driven adoption of mobile of infrastructure player to only passive view broadband network deployment internet in urban areas. However, prices infrastructure. However, end-to-end as source of revenue which leads to of smartphones and broadband data will digital infrastructure includes both huge variation in RoW charges from have to reduce further to drive adoption passive and active components which place to place. Finally, there is lack of and usage in semi-urban and rural areas. are more closely integrated like in case of SLAs for time bound RoW decisions, micro-sites, fiber, small cells, distributed •• Lack of relevant content: A major which leads to delays in deployment antenna systems etc. This has hindered barrier to adoption of broadband in both and time over-runs in projects. potential roll-out benefits from being urban and rural areas in India has been ––Others: For wireless network realized which were done in the case of the lack of relevant content for public. For deployment, clearance is needed roll-out of voice networks. Infrastructure a vast section of population, many G2C from multiple entities such as players are reluctant in deploying services are absent and even in areas SACFA and Term Cell, which can digital infrastructure due to fear of where they are present, their usability is result in penalties and impediments being subjected to licensing costs and low, especially on small screens. in network roll-out. There is lack associated rules. The government can of Center’s/DoT’s involvement ease policy to enable faster roll-out. in providing solutions to local •• Implementation impediments in network roll-out. ––Efficient & sustainable roll-outs ––Inter-play between various •• Financing technologies: The government ––High cost of debt and low liquidity: should have clearly defined policy for Most telcos are already under a lot of using various technologies depending debt taken to finance the spectrum upon demand and investment acquisitions in the recent auctions. requirements. Revenue sharing and meeting debt ––Standardization: Lack of GIS obligations have resulted in low liquidity mapping and route planning has and high cost of debt. This has also resulted in non-traceability of hindered the pace of broadband sections of existing fiber deployed infrastructure roll-out in India. and incorrect network topology,

26 Digital: A revolution in the making in India

Recommendations The challenges identified on the demand and supply fronts of high speed broadband need to be addressed suitably to realize the vision of digital India. Some of the broad recommendations that can address the barriers are discussed below:

Figure 13: Recommendations to address challenge areas

Technology choice for • Evaluating technical characteristics for each type of infrastructure broadband • Network dimensioning on the basis of demand and demographics infrastructure

Policy changes to • Upgrading broadband definition promote deployment • Policy to encourage infrastructure players to deploy broadband of infrastructure • Policy on Rights of Way

Increasing broadband • Increasing investment in broadband network deployment infrastructure • Incentives for private players to invest in rural infrastructure investment

Improving • Ensuring efficient & sustainable network roll-outs implementation of • Role of government and other players in implementing broadband broadband infrastructure infrastructure

Demand measures to • Increasing digital literacy and awareness drive broadband • Increasing affordability of data adoption & • Creating relevant content & services consumption

Source: TRAI Performance Indicator Report-March 2016, Deloitte Analysis

27 Digital: A revolution in the making in India

Technology choice - broadband There are major technical characteristics to be considered leading to the best-fit solution for each type of infrastructure as highlighted in figure 14:

Figure 14: Technology considerations for fixed and wireless solutions

Fixed Solution Throughput (DL) Protocol Robustness CAPEX Scalability Maintenance

FTTx (GPON) > 1 Gbps IP

xDSL (vDSL2) < 300 Mbps ATM/IP (1)

HFC (DOCSIS 3.0) < 400 Mbps IP (1)

BPL < 500 Mbps IP (1)

Wireless Solution Throughput (DL) Bandwidth Range CAPEX Robustness Interoperability

LTE/LTE – A < 100/300 Mbps 1,4 – 20 MHz 5 – 100 km

Satellite < 24 Mbps 1 – 40 MHz 100 – 6000 km (1)

Wi-Fi (802.11ac) < 433 Mbps2 20 – 160 MHz 35 – 115 m (indoor)

DC-HSDPA + < 84 Mbps 5 – 20 MHz < 50 km

Notes: (1) If infrastructure already existent; (2) type AC600, 5 GHz band Legend: Better Average Worst Source: 3GPP specifications, ITU specifications, IEEE specifications

Best Fit Solution

FTTx (GPON) Extreme reliability, high throughput, future proof technology xDSL (vDSL2) Proven, cheaper to adopt and maintain technology LTE High throughput, good legacy interoperability, high mobility technology Satellite Global coverage, severe conditions appropriate technology

Source: Deloitte Research

28 Digital: A revolution in the making in India

Technology choice is also significantly influenced by demand. Network infrastructure is dimensioned on the basis of demographic information and broadband demand forecasts. Services to be provided should be defined along with definition of each network layer i.e. last mile, access, backhaul, and core. Figure 15: Demand clusters and technology mapping Requirements Recommendations

Fast and reliable Cluster A • FTTx (GPON) connections • High users capacity • High scalability LTE-A

Green Field

FTTx (GPON)

Requirements LTE-A • Need of mobility • High scalability Brown Field • Need for low infrastructure cost FTTx (GPON) Cluster B DC-HSPA+ /LTE-A

Requirements Recommendations • Existing telecom infrastructure is available FTTx (GPON) Municipal • Need for governmental Area office/school/hospital

• Strong wireless coverage DC-HSPA+ Montain Suburba • High mobility /LTE-A ous Cluster C n Area • Poor wireless coverage • Low mobility Satellite Rural • Lack of basic Area infrastructure

Demand clusters

Cluster Urban A

Cluster Semi-urban B

Rural Cluster C

Source: Deloitte Research

29 Digital: A revolution in the making in India

Policy changes - Broadband Increasing broadband infrastructure investment •• Upgrading broadband definition: Increasing minimum broadband speed •• Increasing investment in broadband definition will have significant positive network deployment: Investment in impact on the broadband experience broadband network in India’s investment of users. In the long term India should levels are low in comparison to other aim to achieve broadband speeds at the countries, as highlighted in figure level of those in OECD countries. The 16. Considering the limited financial minimum broadband download speed resources with telcos in India after paying should increase to 2 Mbps soon. for spectrum, government investment in broadband network deployment •• Policy to encourage infrastructure should be comparable to that of some players to deploy broadband: of the leading developed and developing Infrastructure players should be countries. allowed to deploy end-to-end digital Figure 16: Broadband infrastructure investment ($ Billion) infrastructure necessary for supporting broadband without subjecting them 320.00 to licensing rules and costs that would otherwise make infrastructure deployment cost inefficient.

•• Policy on Rights of Way: The three critical issues in RoW centered on Investment should uniformity of procedure, cost and increase in broadband infrastructure deployment timelines should be addressed through policy actions: ––The central government should create guidelines towards a standard process 27.00 2.00 11.00 15.91 for obtaining RoW for laying fiber, which should be followed by all agencies. NOFN estimates NOFN committee USA NBP France NBP China ––Standard charges for RoW should be (2011) revised put in place for all agencies. This will estimated for help control RoW costs in laying optic BharatNet (2015)

fiber. Source: TRAI, Deloitte Research ––Introduce SLAs to ensure time-bound •• Incentives for private players to invest decisions on grant of RoW. This will help in rural infrastructure: Incentives in avoiding delays in Fiber deployment. could be provided to them by reducing USOF obligations or through other It is also important to ensure that there is innovative revenue sharing methods to agreement between the Center, States and cover rural connectivity. For example, municipalities so that the RoW policies are implementation adoption models could implemented at the ground level. be used, where operators are asked to adopt rural areas/gram panchayats for deployment of broadband infrastructure against discounted USOF payments.

30 Digital: A revolution in the making in India

Improving implementation of Demand measures for broadband broadband infrastructure In addition to investment in supply side measures to deploy and strengthen •• Ensuring efficient and sustainable broadband network infrastructure, the network roll-outs government should take adequate steps to ––Fiber deployment standards: generate demand for broadband, especially Sustainable fiber deployment should in semi-urban and rural areas. ensure that all technical standards regarding route planning, GIS mapping •• Increasing digital literacy and and laying fiber are documented and awareness: Addressing digital literacy followed. Adequate training should be and increasing awareness will help drive imparted to ground-level workers for adoption of broadband. Towards this this. objective the government has launched ––Creating utility corridors and National Digital Literacy Mission (NDLM) ‘Dig Once’ policy: There should be which aims at imparting IT training to 5.25 mandatory creation of utility corridors million people.22 The program should along the medians of highways. This is be further strengthened through the an efficient way of deploying fiber along involvement of private players. highways as it avoids repeated digging •• Increasing affordability of data: up for deploying fiber. The government could increase the ––Fiber deployment with other affordability of data by introducing utilities: With increasing focus on subsidies for mobile broadband in rural minimizing cost of fiber deployment, areas. The subsidies could be planned for deploying it with other utilities where the short-term, until data prices reduce feasible is the most efficient approach sufficiently. as additional costs are minor and no separate RoW approvals are needed for •• Creating relevant content and laying fiber. services: The state has to play an important role in creating digital content •• Role of government - implementing and services relevant for the use of broadband infrastructure. public in urban and rural areas. It will Where government is deploying be important that the digital content is broadband network: available in local language for generating ––The center should conceptualize public interest. As more government network and allow States to execute the services will be delivered online in urban network, on lines of Power. and rural areas, broadband adoption will ––Governments should partner with increase. managed services players to deliver network efficiently, and thereafter maintain it on an end-to-end basis.

Apart from the existing solutions, emerging internet technologies like Project Loon and TVWS, discussed earlier, should be taken into account to provide innovative solutions to India’s broadband demand and supply side challenges.

31 Digital: A revolution in the making in India

Technology Innovation: Boosting Rural, Women, Governance In 70 years of our independence, in spite of decades. The share of urban population Governing such a rapidly the constraints and challenges we faced in has grown from 25.7% in 1991 to 31.2% in managing such a densely populated and 2011. While the population growth over the changing economic and diverse country, we made considerable 2001-11 decade was 17.69%, urban social landscape and progress in addressing key issues in public population grew at 31.8%. health, sanitation, primary education, rural providing opportunities for development, and various social The growth and demographic dividend increasingly aspirational development measures, without large scale present an unprecedented opportunity for adoption of Information and India in the global economy in the coming people to realize their Communication Technologies (ICT). As we decades. As India becomes a thriving dreams require continuous embark on the digital journey to enable market for goods, services, and talent, next phase of economic growth by there also arises new set of challenges in investments in physical, efficiently adopting the latest technology managing the growth, in a sustainable digital, and policy innovations in mobility, analytics, cloud, manner, with efficient use of resources. and Internet of Things, a key question that infrastructure. •• Robust consumer sector - India’s arises is whether such large-scale consumer market is expected to grow 3.6 investments in technology are necessary. times from 2010 to 2020. Of the sectors To appreciate this, we need to understand that comprise this market, education the way in which our country has evolved in and leisure is expected to grow four-fold the past 25 years. reaching $296 billion by 2020.

India over the past 25 years has seen •• Thriving market for talent - Almost tremendous economic growth, thanks to one-half the Fortune 500 companies will the economic reforms initiated in 1991. The be based in an emerging market25 country’s GDP growth rate in 2015 was •• Rapid urbanization - India will be 38% pegged at 7.57% a sea change from the urbanized by 202526, with eight high- ~1% growth rates witnessed in 199123. The performing states to contribute 52% of relaxation of Import restrictions and the incremental GDP. It is expected that just opening up of the Indian economy to 49 metropolitan clusters will account for foreign investors, saw significant foreign about 77% of India’s incremental GDP, capital in key sectors such as 72% of its consuming-class households, infrastructure. By 2015 India became the and 73% of its income pool from 2012 to world’s leading foreign investment 2025.27 destination in the world24.

The demography of India presents a unique opportunity, unmatched by any country in the world. As per Census 2011 data, 64.9% of the country’s population is between 15 and 64 years. Further, the median age is just 26.2 years, one of the youngest in the world. India has also seen significant migration to urban cities over the past two

32 Digital: A revolution in the making in India

In this context, investments in technology assumes significance. ICT is an important One of the key benefits of tool to effectively manage economic growth and social development in a sustainable implementing ICT solutions manner, which requires harmony among economic progress, social inclusion, and for governance is the higher environmental protection. The United Nations (UN) encourages member states degree of transparency and to utilize ICTs in designing public policies and providing public services, as they efficiency that it brings in embark on 2030 agenda for sustainable development through Sustainable citizen services. Development Goals (SDG). The foundations of sustainable development include a The United Nations Department of professional, responsive, and ethical and Economic and Social Affairs (UNDESA), ICT-enabled public administration.28 in its flagship publication, benchmarks e-government development achieved There is a correlation between by the UN member states. The survey e-governance and global competitiveness uses a performance rating to provide an of countries, as we can understand from indicative assessment of the diffusion of the World Economic Forum in its Global e-government of national governments, Competitiveness Report 2015-201629. relative to one another. Countries in the The countries that have a good position survey are grouped into four categories, in e-government development are more depending on their E-Government competitive. While correlation is not Development Index (EGDI). As compared causation, it is fairly practical to assume to the numbers in the 2014 UN survey, that the competitiveness of economy the trend signals that more countries is driven by the factors conducive to are advancing toward higher levels of progress in the economy, and a high level e-government. of technical capability and adoption of technology in public and private sector has In the 2016 survey, India’s EGDI ranking a positive effect on the overall economy. falls within the third category, grouped E-government brings about new business as Middle-EGDI (between 0.25 and 0.5), models and revolutionizes industries, along with 66 other countries, while the paving the path for future innovations that global average EGDI is 0.49. The total list can drive long-term growth.30 is topped by the UK, with an EGDI score of 0.919. As we embark on our digital journey, Other advantages include - improved we should learn from the successful convenience for citizens, reengineered implementations from around the world and improved back-end processes and and adopt their best practices. services, improved robustness of delivering large scale welfare measures, and cost reduction.31

33 Digital: A revolution in the making in India

Table 4: Best practices from the world

European Union Rio de Janeiro Uzbekistan

Dementia is widely recognized as a public The city of Rio has leveraged ICT to better Uzbekistan faced issues related to an health priority. Although there is no cure the data collection system and coordinate insufficient number of people paying for for the disease, ICT enables individuals to its city services in real time. The city’s communal and housing services. It was get an earlier, more accurate diagnosis and multiple sectors, including transportation, noticed that one of the key reasons for this personalized treatment. energy, public safety, health, and problem was the lack of information about The EU has funded project Dem@ communications, are monitored by staff how much to pay and for which services. Care that uses smart mobile sensors to from 30 different municipal sectors. The The Uzbekistan government released a monitor health parameters, emotional operation center was established to website that provides essential information and cognitive status of users, and activity improve the city’s emergency response and includes a handy tariff calculator levels. Using this innovation, hospitals system following the troubles faced in the to assist in payments and check the and public health institutions can provide 2010 floods. Essential data is obtained, accuracy of bills. A feedback mechanism is a more timely diagnosis and optimized with the help of Big Data analytics, with incorporated into the website, in the form personalized care solutions. important information such as weather of a discussion forum where members 11 academic and industrial partners from forecasts, so that officials can respond to discuss problems encountered daily. all over Europe are a part of this program, problems in a timely and multi-sectoral, and have been working since 2012 to integrated manner. improve differential diagnosis and create effective interventions for people afflicted with dementia in various settings.

34 Digital: A revolution in the making in India

Current Status in India implementation timelines, measurable Governance Redefined outcomes, and service levels. 31 mission In India, e-governance initiatives have mode projects were further classified as evolved over a period of years through central (Banking, Insurance, Passport, various projects launched by the center, MCA21, UID, Income tax, etc.) state and state governments. Successful (Agriculture, Land records, PDS, Education, projects include computerization of railway Health, etc.) or integrated projects (e-Biz, reservation, digitization of land records e-Courts, e-Procurement, etc.) in Karnataka - Bhoomi project, electronic payment of pensions and subsidies, To provide the core infrastructure digitization of passport seva kendras, necessary to support NeGP, various Aadhaar-based Direct Benefit Transfer, and initiatives such as State Data Centers many others. (SDCs), State Wide Area Networks (S.W.A.N), Common Services Centers (CSCs) The framework for e-governance during and middleware gateways i.e. National the last decade was defined by the National e-Governance Service Delivery Gateway eGovernance Plan (NeGP), approved (NSDG), State e-Governance Service in May 2006. With a vision to make all Delivery Gateway (SSDG), and Mobile government services accessible to the e-Governance Service Delivery Gateway common man in the locality, through (MSDG) have been developed over the common service delivery outlets, ensuring years. efficiency, transparency, and reliability of services at affordable costs, NeGP In 2015, NeGP, and various other initiatives comprised 31 mission mode projects and aimed at providing ICT-based governance 8 components32. Mission mode project is and citizen services were unified under an individual project that focuses on one Digital India program, which provides a aspect of e-governance, such as banking, more integrated approach for planning and land records, or commercial taxes, etc. development of digital infrastructure and Such projects have clearly defined scope, services.

Table 5: Key initiatives of Digital India Program

Digital Infrastructure as a Core Governance and Services on Digital Empowerment of Citizens Utility to Every Citizen Demand

•• Availability of high speed internet •• Seamlessly integrated services across •• Universal digital literacy departments / jurisdictions •• Unique digital identity •• Universally accessible digital resources •• Real-time services (online / mobile) •• Mobile phone and bank account •• Availability of digital resources / services •• All citizen entitlements portable and in Indian languages •• Easy access to common service center available on cloud •• Collaborative digital platforms for •• Sharable private space on a public cloud •• Digitally transformed services for participative governance •• Safe and secure cyber space improving ease of doing business •• Citizens not required to physically submit •• Cashless financial transaction Govt. documents

•• Geospatial Information Systems (GIS) for decision support systems & development

35 Digital: A revolution in the making in India

One of the key pillars of Digital India program is e-Kranti33, which redefines NeGP with focus towards transformational and outcome oriented e-governance initiatives. Key themes include – leveraging emerging technologies such as cloud, mobile, and social, making use of agile implementation models, promoting replication and integration of e-governance applications, and localization of languages.

Key focus areas of e-Kranti include technology for Education (e-Education), Health (e-Healthcare), Farmers, Financial Inclusion, Planning, Justice, Security, Planning and Cyber Security.34

Education Health Security Justice

•• Broadband connectivity for •• Online medical consultation •• Mobile based emergency •• Interoperable criminal schools services and disaster justice system i.e. e-Court, •• Online medicine supply response e-Prosecution, etc. •• Free Wi-Fi •• Pan-India exchange of patient •• Massive Online Open Courses information (MOOC)

Agriculture Financial Inclusion Cyber Security

•• Real-time price information •• Mobile banking •• National Cyber Security Coordination Center to be set up to ensure secure •• Online ordering of inputs •• Micro ATM program cyber space •• Cash, loan, relief payments through •• Citizen Services Centers / Post Offices online/mobile banking

e-Kranti has identified 44 mission mode projects classified under center, state, and integrated projects. This also includes the previous mission mode projects identified in NeGP and are current under implementation.

36 Digital: A revolution in the making in India

Women Empowerment ranks as one of the top five causes of Agriculture Research One of the key aspects of leveraging the death among adult women between the ––Crop insurance App – information demographic dividends envisaged for India ages of 20 to 59, and India has the most related to Govt. crop insurance scheme is through increasing the participation of number of cases globally, with 2,20,000 ––Agri Market App – provides market women in work force35. When we talk about total deaths in 2014, according to WHO. prices of crops in the markets within 50 women empowerment, it’s largely about Operation ASHA in India, in partnership km radius three key aspects – decision-making power with Microsoft research, has developed In addition to government initiatives, through financial independence, personal a portable biometric tracking system there are other commercial solutions safety & security, and mobility. Technology called eCompliance that helps to take TB from technology entrepreneurs aiming can play an important role in all these treatment to rural communities and to the to address the challenges in improving aspects in enabling women achieve greater slums. This technology helps in completing agricultural productivity. One such example independence and empowerment. the treatment regimen, and prevents the is an Internet of Things (IoT) based solution development of new drug-resistant strains for dairy industry from Stellapps40, which When it comes to women’s safety and of the disease. Operation ASHA makes uses sensors and machine-to-machine security, many new kinds of mobile-based use of fingerprint recognition and SMS technology to monitor the health and applications are paving the way for women messaging to make sure that patients are productivity of cattle and ensure the to feel more secure in public places. One adhering to their treatment regimens. quality of milk by tracking key quality such example is Safetipin, which collects Digitization of records also helps to parameters across the dairy supply chain. information about public places. It follows provide targeted counselling and allows for Such technology-based solutions from a safety audit, measuring nine parameters, accurate reports to be produced.38 private sector complement government that includes availability of police, lighting initiatives in improving the agricultural on the streets, state of the walk path, Rural Development economy and rural livelihood. presence of people specifically women on The connectivity and data infrastructure the streets, and public transport and ‘eyes envisaged under Digital India program will on the street’. Each audit gives the safety usher the next phase of rural development. score of an area and appears as a pin on Initiatives such as Kisan call center, Rural the map. Individual users are given the BPO scheme, and Common Service option to pin unsafe places themselves as centers in villages brings digital access to well. City authorities can use this app to rural areas which can help them access collect data on a large scale, and also to information about weather, market price ensure better planning and governance.36 information for agricultural produce, and other employment and job opportunities.39 Another such example is Indian Railways’ A few applications include: mobile app - R-Mitra - that contributes to •• Location based intelligence - Wide ensuring women’s safety. 27 to 30 million adoption of remote sensing technologies individuals use the railways daily, and are for discovering key natural resources potentially subject to various types of like water helps improve agriculture crimes. R-Mitra (Railway Mobile Instant productivity. Similarly, using GPS and Tracking Response and Assistance) alerts other latest location-based technologies the nearest RPF inspector and divisional for navigation and resource mapping security control room of emergencies when can help fishermen locate key a button is pressed. With the pressing of catchment areas and also prevent them the button, the victim’s physical location is from inadvertently crossing national sent to the control room and can ensure boundaries immediate action by tracking the user. The app can been developed to operate offline •• App-based service delivery as well, in an SMS mode by using a helpline ––Kisan Suvidha – omnibus mobile number.37 app that gives access to relevant information in weather, market prices, Similarly, when it comes to women’s agro advisory, plant protection, pest health, many technology based solutions management practices, etc. are being launched in the market. One ––Pusa Krishi – information related to such example is Operation ASHA in India, farm machinery, resource conserving which has a portable biometric tracking cultivation practices, and new varieties system for monitoring Tuberculosis. TB of crops developed by Indian Council of

37 Digital: A revolution in the making in India

Challenges •• Change management – E-governance projects bring about substantial changes •• Connectivity – one of the biggest in the way government processes challenges in achieving the milestones are designed and implemented, set out for digital India is to ensure that and they emphasize collaboration the connectivity and data infrastructure between various departments in is functional and continuously state and central governments. For maintained across the country. With example, for implementing a smart increased adoption of e-governance city solution, a number of government for delivering citizen services, we need departments such as Education, to ensure that the remotest parts of Health, Transportation, Safety, the country are connected with the Urban development, etc. in the state national broadband network and are government that usually operate in silos, fully functional throughout the year. have to work together. Bureaucrats, While the National Optical Fiber Network especially at the grass roots level are (NOFN) has undertaken the goal of accustomed to a certain way of working, providing broadband connectivity to and successfully transitioning the work over 2,00,000 gram panchayats in environment towards a transparent, India, we should also make sure that accountable, and service-oriented culture mobile communications infrastructure remains a key challenge is equally developed and covers all parts of the country in delivering mobile first •• Digital literacy and talent – Successful solutions. Availability and efficient usage adoption of digital as the main channel of spectrum remains a challenge in this for citizen services requires that the case. recipients are sufficiently equipped to transact in the channel. This also •• Data security and management - means doing away with complex user Data is a key policy driver in today’s interfaces, and adopting user-centric world. Many developed nations have design principles in designing solutions taken initiatives to share information that are intuitive and easy to understand and make government data accessible for the common people. Availability of to its citizens, in a bid to increase their design expertise and skilled manpower participation at local governance. India is in government for emerging technologies traditionally a data starved country, but like mobility, and UX design is a challenge. the adoption of Digital India initiatives is poised to generate substantial amounts •• Localized services – In a diverse country of big data that can be used to generate such as ours, every city / village have key insights on governance and also unique characteristics and challenges effectively monitor public development associated with it. For Bangalore, it could projects. While there are commercial be urban mobility and traffic issues, solutions and expertise available within whereas for Pune or other industrialized the country to implement such large- cities, it could be that of pollution and air scale big data analytics solutions, the key quality. The technology infrastructure challenge that remains is to ensure that and backbone created for NeGP mission the data is secure against viruses and mode projects should lend itself to create other malicious cyber attacks. customized and localized applications relevant for local needs.

38 Digital: A revolution in the making in India

Recommendations e-Governance applications. 42 •• Leveraging private sector talent - •• Data security - Data protection to India has a unique advantage of having ensure confidentiality, integrity, and skilled technical and managerial talent availability of data is not compromised. in technology, especially the leadership An end-to-end encryption system can cadre, in implementing large-scale be implemented to protect the privacy transformational projects around the of users across data storage and world. Effectively utilizing the technical transmission using various security tools. and managerial talent from the industry In addition to that, giving access only to to implement and monitor high-impact authorized personnel using Identity and programs is key to adopting latest Access management tools protects the technological innovation for social confidentiality of the data. To ensure good. One such example of successful data security is maintained at all times, Government-Industry collaboration is a continuous monitoring system using the Aadhaar project. To enable better Database Activity Monitoring (DAM) collaboration, suitable mid-career methods and periodic security audits opportunities should be created for and vulnerability assessment tests to private sector professionals with relevant identify gaps in the security policies can experience and skills in e-governance be adopted. projects, to help interested professionals •• Connectivity - An optimal mix of have a long-term association with fixed line optical fiber, and wireless government services. communication networks in licensed •• Localizing service delivery through (3G, 4G) and unlicensed spectrum Open APIs – Platforms and Application (Wi-Fi) should be used to have fail safe Programming Interfaces (APIs) form the broadband networks across the country. building blocks of digital transformation. Experimental initiatives like Google’s Successful digital applications such as Project Loon, which provides internet Uber, Google, Facebook, etc. follow a connectivity through balloons in remote platform approach to product design parts, and other network optimization wherein the core product is extended techniques like Wi-Fi / mobile data offload by third-party applications enabled should be evaluated and implemented in through APIs. World-wide initiatives on a suitable manner to create a robust and open government focuses on Open APIs failsafe connectivity infrastructure across to expose the information collected by the country. the government for public usage. These In 70 years, we have come a long way Open APIs can be used to develop from our socialist roots. The last 25 years localized applications by startups and of economic reforms have created the private sector enterprises to extend the economic growth necessary to bring core digital India platform and provide millions of people out of poverty and create localized services. One such initiative a space for ourselves in the globalized along these lines is India Stack.41 It’s a world. Our development agenda for the set of APIs that form the building blocks next 25 years should not only focus on to develop applications leveraging economic progress to cater to rising the technology backbone envisaged aspirations of young Indians but also in in Digital India. Various components achieving that in a sustainable manner. included within the stack are Aadhaar Effectively adopting the latest technological to authenticate, e-KYC and DigiLocker innovations in digital, mobile, analytics, for use of documents, use of digital and social technologies by leveraging the signatures and a unified payments technical and managerial capabilities from interface (UPI). This initiative, hopes to government and private sector will help us expand the reach of Apps in the financial manage the transition better and establish services, healthcare, and education India’s leadership position in the new world sectors. Such API-driven integration order. would bring in a significant change to 39 Digital: A revolution in the making in India

Digital Wallets, Payments Banks, UPI: Moving to Cashless India’s tryst with cash is ongoing; however, but all connected devices (Pay on TV, etc.) digital payments are projected to pick and making online payments the new up and go to 15% of GDP by 202043 as checkout standard. innovation and acceptance of digital payments increase. Amidst heightened Different strokes for different customer expectations, Indians will folks conduct more digital banking activities. India needs a payments infrastructure to Simple to complex transactions such bring the benefits of a digital economy to as checking accounts, bill payments, the common man. Banks therefore need money transfers, financial investing, to focus on restructuring their payments shares transactions and others are likely offerings into winning propositions. A to be done using digital channels. With multitude of payments services is the need smartphone availability increasing and of the day and value creating solutions will costs plummeting, mobile-based payments coexist. In this chapter, we discuss three are bound to increase. The launch of promising payments constructs and their 4G services in the country is a step in role in India’s tryst with becoming cashless. enhancing payments using not just mobile Figure 17: Moving to Cashless: Payments constructs with a promise

1 Digital Wallets Increasing options and convenience

Insights along 2 Payments Banks 3 themes Reaching the grassroots

3 Unified Payment Interface Masterstroke of high policy

40 Digital: A revolution in the making in India

Digital Wallets: Increasing as more phones have NFC technology, it Options and Convenience increases the odds a customer will use a digital wallet on checkout. The success E-wallets, a payment instrument of the mobile wallet can be gauged by conceptualized to eliminate cash changing the growth in the value and volume of hands is a promising proposition that transactions over the past few years. The has got banks and nonbanking operators number of mobile wallets in India has been such as Telecommunication and Fintech estimated at around 135 million, whereas companies to come up with wallets. the number of credit card users is ~24.5 Once a user preloads an amount onto million.44 the wallet, he or she can spend on daily services such as utilities, food and travel, Given the promise of wallets and their provided the wallet is accepted at the critical role in driving volumes, the path point of sale. Using mobile serves a dual ahead is one that wallet providers must purpose; one, the medium eliminates the tread carefully. They face certain challenges need to carry a physical card, and second and must make certain strategic choices it allows operators the opportunity to to create a unique selling proposition. scale up. What provides wallets an edge Wallet providers have begun altering over other payment systems is that wallets their strategies. A case-in-point is them are aggressive on cashbacks. As more shifting from an “online only” to “in-store merchant point-of-sale (POS) terminals get purchases” to open up to the plethora of Near Field Communication (NFC) enabled, transactions.

Figure 18: Challenges faced by wallet providers

Lack brand recall among rural population 1 Fear of adoption among users due to transacting online Inadequate 2 merchant tie-ups Unearned Interest on 3 money sitting in the wallet 4 as opposed to a bank a/c

Figure 19: Strategic choices ahead Observations Implications for wallet providers

• People use wallets for offers / cash Wallet providers would need to ensure loyalty Influence of backs programs keep pace and tailor them loyalty programs • Incentives increase the adoption Providers should aim at allowing interaction on shoppers of wallets with loyalty programs - seeing rewards alongside accounts, across devices

• Wallets presently cater to the Scale up - Wallet providers will need to cater Outreach of banked and super banked to the underbanked going forward, opening wallets • This trend hasn’t percolated up many more avenues for them down to the unbanked

Must cross sell to their existing customer Wallet base and allow even small payments to be companies • Need to stay relevant – Wallets made via digital wallets holding face increased competition as Example – Paytm is launching electronic Payments Bank cost of switching for customers Aadhaar based e-KYC for user verification in Licenses has lowered with more banks on an effort to provide enhanced security the horizon

Source: Industry News45 41 Digital: A revolution in the making in India

Payments Banks: Reaching Regulatory Restrictions imposed the Grassroots by the Regulator ensure PBs are Payments Banks (PBs), an agenda in designed to reach the grassroots India’s financial inclusion initiative, are •• Must have a mandatory focus on rural conceptualized to provide access and India – At least 25% of a Payments bring the unbanked population under the Bank’s physical access points (own or ambit of formal financial services. Census others’ network; not branches) have 2011 had pegged Indian households to be in rural centers having access to banking services at 59%. Although this number has gone up due to •• Cannot Lend – A Payments Bank the Jan Dhan Yojna, a large number of the cannot undertake lending activities. accounts remain inoperative. This is where With a mandate to operate as “deposit the basic mobile will be the differentiator by taking institutions”, they are designed increasing outreach and catering to a larger to channelize money into the formal share i.e. 83% of the addressable market. banking system Payments banks are expected to use •• Can offer payments and remittance mobile as the channel of delivering banking services through various channels – services over the traditional branch “Remittances” are allowed by RBI with banking channel, thereby increasing access the intent of taking money from urban to banking services. areas to rural areas. The chances migrants will switch channels for remittance services from the current informal and formal channels that charge higher transaction fee 9%-1.5% to the PB channel that will charge lower fee, is high

Figure 20: What PBs additionally need to reach the grassroots

Access the grassroots

Pre- Requisites 1. Mobile over Bank Branches 2. Technology Muscle 3. Capital Expenditure for creating network 1. Mobile over Bank Branches 2. Technology Muscle 3. Capital Expenditure for creating network

42 Digital: A revolution in the making in India

Running sustainable businesses at the grassroots Given their unique structure, Payments Banks will need to dovetail their business model to build volumes to break-even and profitability.

•• Connecting with customers via multiple touch-points

Figure 21: Assisted methods in rural areas

Railway / Bus

Business Milk Correspondent Booth

Mobile Token Recharge Service Outlets Providers

Kirana Village Store Mandis

•• PB license holders are likely to deploy mobile connection and a bank account asset light business models and play with an operator will definitely increase around with their offerings. They will cost of switch for the customer. differentiate their business models in ––Deploying “Tokenization” technology terms of new and targeted product to address customer concerns around offerings, products requiring varying security for mobile-based payments as degrees of technology in the user technology becomes more mainstream. interface, lower for rural and higher ––Some such as Paytm will allow digital for urban, till the time they achieve withdrawal of funds, without any cash economies of scale. Either way, their exchange. It plans to launch debit cards solutions should be structured around with Quick Response (QR) code for the moving to a cashless economy. Some people void of smartphones.46 examples: ––SBI, on the other hand is facilitating ––Offering mobile talk time, especially cardless transactions by scanning QR by mobile groups with PB offerings. A code on the mobile.47

43 Digital: A revolution in the making in India

Unified Payments Interface: Masterstroke of High Policy Unified Payments Interface (UPI) by National Payment Corporation of India (NPCI) is expected to change the payments landscape in India. Digital banking is being transformed by the path-breaking technology powering UPI. Using smartphones, it is expected to facilitate instant transfer of funds under a lakh to Aadhaar number/mobile number/virtual address (without the IFSC code) across multiple banks. Although transactions on this platform are currently predominantly person to person (p2p) and ~5,00048 transactions a day, they are projected to significantly increase as merchants join the platform.

The interface intends to democratize payments by bringing everyone on the digital net. The coming of small p2p transactions online will move India toward a cashless economy. By virtue of coming online, transactions can also be tracked, leading to lower overall tax evasion. Benefits of lower tax evasion will then be passed on to consumers, in terms of lower transaction rates. Removing intermediaries in the payment process will also reduce transaction costs.

44 Digital: A revolution in the making in India

Table 6: UPI – Path breaking Technology

Parameter Unique Payments Immediate Payment National Electronic Real Time Gross Interface (UPI) Service (IMPS) Funds Transfer (NEFT) Settlement (RTGS)

Frequency of transfer Uses IMPS - Real time - Real time - Enables Funds are transferred in Funds are transferred Enables instant transfer instant transfer through batches real time through mobile phones mobile phones and internet

Processing time 24/7 service, transacting 24/7 service, transacting Limited processing time Limited processing time on holidays on holidays - not on holidays or - not on holidays or during non-bank hours during non-bank hours

Prerequisites Requires beneficiary Requires beneficiary Requires beneficiary Requires beneficiary bank name & mobile information such as information such as information such as number/virtual Bank A/c number & Bank A/c number, IFSC Bank A/c number, IFSC address/Aadhaar mobile number code code number

Maximum Transaction INR 50 – INR 1 lakh Mobile/Internet: INR 1- INR 1 – INR 10 lakh INR 2– INR 10 lakh Value (per INR 10,000 (using MMID) transaction) Mobile/Internet: INR 1- INR 2 lakh (using IFSC)

Inter-operability at the Does not require payer Payer and payee should Payer and payee should Payer and payee should core and payee to use same be a part of the IMPS be a part of the NEFT be a part of the RTGS Payment Service network network network Providers (PSP)

Inter-operability at the Yes. Can use multiple Yes, across banks and No, can only use own No, can only use own fore banks (live with 21 banks mobile operators bank bank and more are likely to join. May include e- wallets) without going back to a specific bank a/c. UPI app can be used to access other Bank’s accounts and a cross section of merchants who are tied up with other Banks.

Authentication MPIN - Single click, dual Mobile Money Identifier 2 Factor Authentication 2 Factor Authentication authentication (MMI) code for transactions

Transfers Push (Payer initiates Push (Payer initiates Push (Payer initiates Push (Payer initiates payment to payee) payment to payee) payment to payee) payment to payee) & Pull (Recipient is empowered to initiate a payment request)

Use cases P2P, Bill Split, Utility Bills, Fee payments, OTC, Focuses on retail / Focuses on business / B2B, Cash on delivery utility bill payments, individual fund transfers corporate fund transfers options for online recharge, trading, shopping, EMI, donation, donation, insurance, e- Toll charge, online commerce, retailers, shopping travel

Source: Deloitte Research 45 Digital: A revolution in the making in India

Challenges Smartphone users transacting online are ~ 18% of the addressable market.

22-25 million smart phone users banking online

220 million smart phone users

636 million bank accounts

1,035.12 million mobile phone subscribers

Figure 22: Teething issues anticipated in UPI’s uptake

Security Concerns Issues in effective seamless and instant Customers hesitate transacting transactions online in order not to expose Money debited from Payer but not credited to bank accounts to online fraud. Payee, calls for stabilization of the product for technical glitches.

Push Merchants No Cashbacks Unlike ‘wallets’, UPI does not allow cash Service providers will have to push backs to be credited to the user. merchants to urge consumers to use the platform.

Does it come down to the better App? Will Banks ‘Opt Out’? The UPI interface is Bank and Device agnostic. Once a customer of a certain bank downloads the UPI app of another bank and begins transacting, he is open for acquisition by that bank.

Source: Deloitte Research

UPI, the payment technology being patented Enhancing adoption of the UPI interface will be a result of greater interoperability as more banks join the interface, greater availability across soft-wares, improved bandwidth and lower transaction costs for users. Although catering to a mere 18% of the current addressable market, once merchants, consumers and banks are on this open platform, daily transactions on the interface are likely to grow exponentially. The open architecture of the platform will lead to greater innovation from banks and better user experience. UPI is an opportunity that will not only be embraced by Payments Banks but also coexist with wallets (by virtue of opening up opportunities for them). It excludes e-wallet providers for now but they could be included in the future.

46 Digital: A revolution in the making in India

47 Digital: A revolution in the making in India

48 Digital: A revolution in the making in India

About Confederation of Indian Industry The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering with industry, Government, and civil society, through advisory and consultative processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in India's development process. Founded in 1895, India's premier business association has over 8000 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 2,00,000 enterprises from around 240 national and regional sectoral industry bodies.

CII charts change by working closely with the government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business opportunities for industry through a range of specialized services and strategic global linkages. It also provides a platform for consensus-building and networking on key issues.

Extending its agenda beyond business, CII assists the industry to identify and execute corporate citizenship programmes. Partnerships with civil society organizations carry forward corporate initiatives for integrated and inclusive development across diverse domains including affirmative action, healthcare, education, livelihood, diversity management, skill development, empowerment of women, and water, to name a few.

The CII theme for 2016-17, Building National Competitiveness, emphasizes the industry's role in partnering the government to accelerate competitiveness across sectors, with sustained global competitiveness as the goal. The focus is on six key enablers: Human Development; Corporate Integrity and Good Citizenship; Ease of Doing Business; Innovation and Technical Capability; Sustainability; and Integration with the World.

With 66 offices, including 9 Centers of Excellence, in India, and 9 overseas offices in Australia, Bahrain, China, Egypt, France, Germany, Singapore, UK, and USA, as well as institutional partnerships with 320 counterpart organizations in 106 countries, CII serves as a reference point for Indian industry and the international business community.

49 Digital: A revolution in the making in India

50 Digital: A revolution in the making in India

Contributors

PN Sudarshan, Partner Monish Shah, Partner [email protected] [email protected]

Neeraj Jain, Partner Abhishek V, Director [email protected] [email protected]

M. Manikanda Prabhu, Manager Rabani Gupta, Manager [email protected] [email protected]

Anu Peisker, Manager Kumar Anurag, Manager [email protected] [email protected]

Rajat Kohli, Senior Consultant Soumya Dalai, Executive [email protected] [email protected]

Arpit Dwivedi, Consultant Shashank Lodha, Executive [email protected] [email protected]

Nikita Antony, Executive [email protected]

Acknowledgement Deepak Sidha Executive Officer [email protected] CII Contacts

Deloitte Confederation of Indian Industry Deloitte Touche Tohmatsu India LLP Northern Region) - Sub-Regional Office 706, B Wing Plot No. 246-F, Sector-18, Udyog Vihar, ICC Trade Towers Phase IV, Senapati Bapat Road Gurgaon - 122 015 Pune - 411016, Maharashtra Tel: +91-0124-4014073 Tel: +91 (0)20 66244600 Fax: +91-0124-4014070 Email: [email protected] Email: [email protected] www2.deloitte.com/in www.cii.in

51 Digital: A revolution in the making in India

52 Digital: A revolution in the making in India

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1 Sector-Wise Contribution of GDP in India. See: http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php 2 Know the Power of ‘JAM Trinity’: Jan DhanYojana, Aadhaar and Mobile number. See: http://finpeace.in/blog/ know-the-power-of-jam-trinity-jan-dhanyojana-aadhaar-and-mobile-number/ 3 India's growth at 7.6% in 2015-16 fastest in five years. See: http://economictimes.indiatimes.com/news/economy/indicators/ indias-growth-at-7-6-in-2015-16-fastest-in-five-years/articleshow/52522153.cms 4 PMJDY Progress Report, Please see: http://pmjdy.gov.in/account 5 India Post to open payments bank with 650 branches. See: http://www.newindianexpress.com/business/news/ India-Post-to-open-payments-bank-with-650-branches/2016/06/01/article3461459.ece 6 Duplication of accounts under Jan Dhan Yojna on rise: Survey. See: http://indiatoday.intoday.in/story/ duplication-of-accounts-under-jan-dhan-yojna-on-rise-survey/1/618870.html 7 Duplication of accounts under Jan Dhan Yojna on rise: Survey. See: http://indiatoday.intoday.in/story/duplication-of-accounts-under- jan-dhan-yojna-on-rise-survey/1/618870.html 8 PMJDY Progress Report. See: http://pmjdy.gov.in/account 9 Why private banks lag on the Jan-Dhan front. See: http://www.thehindubusinessline.com/money-and-banking/ why-private-banks-lag-on-the-jandhan-front/article6801622.ece 10 Aadhaar Card Progress Report. See: https://portal.uidai.gov.in/uidwebportal/dashboard.do 11 Direct benefits transfer in LPG saved Rs 14,672 crore of subsidy last fiscal. See: http://www.business-standard.com/article/ economy-policy/direct-benefits-transfer-in-lpg-saved-rs-14-672-crore-of-subsidy-last-fiscal-115101300789_1.html 12 Could Aadhaar be the game changer for footloose labour? See: http://indiatogether.org/ aadhaar-uid-address-proof-for-internal-migrants-economy 13 TRAI Performance Indicator Report. See: http://www.trai.gov.in/Content/PerformanceIndicatorsReports/1_1_ PerformanceIndicatorsReports.aspx 14 Making Aadhaar compulsory jeopardises privacy rights. See: http://www.theigc.org/blog/ making-aadhaar-cards-compulsory-jeopardises-privacy-rights/ 15 23 new banking licences granted under Raghuram Rajan. See: http://www.business-standard.com/article/ finance/23-new-banking-licences-granted-under-raghuram-rajan-115091800010_1.html 16 Samwad- A Platform for Continuous Financial Literacy. See: http://blogs.cdfi.in/2016/04/01/ samwad-a-platform-for-continuous-financial-literacy/ 17 Analyzing the effect of broadband on GDP – Ericsson. See: https://www.ericsson.com/res/thecompany/docs/ corporate-responsibility/2013/socioeconomic-effect-of-broadband-speed.pdf 18 State of the internet Q1 2016 – Akamai. See: https://www.akamai.com/uk/en/multimedia/documents/state-of-the-internet/ akamai-state-of-the-internet-report-q1-2016.pdf 19 National Telecom Policy – 2012 – DoT. See: http://www.trai.gov.in/WriteReadData/userfiles/file/NTP%202012.pdf 20 India needs 50 million Km of new mobile backhaul fiber. See: http://spectrumfutures.org/ india-needs-50-million-km-of-new-mobile-backhaul-fiber/ 21 Recipe for 100% digital literacy before 2021 – Live Mint. See: http://www.livemint.com/Industry/XmQNrsrg8zWfOFKHuMDtfJ/ Recipe-for-100-digital-literacy-before-2021.html 22 Overview of NDLM. See: http://www.ndlm.in/overview-of-ndlm.html 23 World Bank. Accessed from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=IN 24 Times of India. India pips US, China as No. 1 foreign direct investment destination. See: http://timesofindia.indiatimes.com/india/ India-pips-US-China-as-No-1-foreign-direct-investment-destination/articleshow/49160838.cms 25 NASSCOM. NASSCOM Perspective 2025: Shaping the Digital Revolution. See: http://www.nasscom.in/ nasscom-perspective-2025-shaping-digital-revolution 26 India’s economic geography in 2025: states, clusters and cities 2014. See: http://mckinseyinsightsindia.com/Documents/ India%E2%80%99s%20economic%20geography%20in%202025%20-%20states,%20clusters%20and%20cities.pdf 27 Understanding India’s economic geography. 2014. http://www.mckinsey.com/global-themes/asia-pacific/ understanding-indias-economic-geography 28 Transforming our world: the 2030 Agenda for Sustainable Development, UN. See: https://sustainabledevelopment.un.org/ post2015/transformingourworld 29 http://www3.weforum.org/docs/gcr/2015-2016/Global_Competitiveness_Report_2015-2016.pdf

53 Digital: A revolution in the making in India

30 United Nations E-Government Survey 2016. Department of Economic and Social Affairs [pdf]. 31 Rao, R. ICT and e-Governance for Rural Development. Center for Electronic Governance, Indian Institute of Management, Ahmedabad 32 National e-Governance Plan. See: http://meity.gov.in/content/national-e-governance-plan 33 Approach and Key Components of e-Kranti: National e-Governance Plan 2.0, 25 March 2015. See: http://pib.nic.in/newsite/ PrintRelease.aspx?relid=117690 34 Digital India Program. See: http://www.digitalindia.gov.in/content/ekranti-electronic-delivery-services 35 India Will Struggle to Cash In on Its Demographics, Bloomberg, 13 April 2016. See: https://www.bloomberg.com/view/ articles/2016-04-13/india-will-struggle-to-cash-in-on-its-demographics 36 Women’s safety in smart cities, Live Mint, 13 July 2016. See: http://www.livemint.com/Specials/W6PyDWoKS6UMJdJFqS25kJ/ Womens-safety-in-smart-cities.html 37 Indian Railways brings R-Mitra app for women’s safety, 21 August 2015. See: http://indianexpress.com/article/technology/ tech-news-technology/indian-railways-brings-r-mitra-app-for-womens-safety/# 38 How Digital Tech Is Improving Women’s Health and Wellbeing in India, 7 March 2016. See: http://www.huffingtonpost.co.uk/ vicki-hearn/tech-women-india_b_9398532.html 39 Role of ICT in Rura India, Vishwadeep Singh, July 2016. See: http://afeias.com/wp-content/uploads/2016/08/kurukshetra-english. pdf 40 Stella Apps website. See: http://www.stellapps.com/ 41 India Stack. See: http://www.indiastack.org/ 42 Very Large Databases, Deloitte, September 2016. See: https://www2.deloitte.com/content/dam/Deloitte/in/Documents/ technology-media-telecommunications/in-tmt-very-large-databases-noexp.pdf 43 http://www.moneycontrol.com/news/cnbc-tv18-comments/digital-payments-to-contribute-15-to-indias-gdp-by- 2020google_7130541.html 44 http://www.thehindu.com/business/Industry/techsavvy-indians-shop-with-cashless-wallets/article8320850.ece 45 Phone radar, September 2016. See: http://phoneradar.com/paytm-bank-india-stack-offering-aadhar-ekyc-authentication-digital- signatures/ 46 http://www.livemint.com/Companies/bi91FFdrT4RRFNmkK3sbqN/Paytm-launches-QR-code-payment-option-for-wallet-app.html 47 http://www.business-standard.com/article/finance/sbi-launches-card-less-payment-solution-for-offline- transactions-116050500863_1.html 48 http://www.bgr.in/news/after-upis-success-npci-to-file-patent-on-unified-payment-interface-technology/

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