The digital payment system that has been developed in India not only allows big tech companies to participate in it but also has convenience, ease of use, low cost and financial inclusion, entrepreneur former Unique Identification Authority of India chairman Nandan Nilekani has said.
Speaking at an event titled "Big Tech and the Future of Finance" organised by the International Monetary Fund here on Wednesday, Nilekani also said that as a result of such digital payment systems, India last month did about 955 million transactions worth about USD 23 billion dollars.
Credited with building the biometric identity system UIDAI, Nilekani referred the system as the reason for ease in creation and implementation of digital payments apps and central government's financial initiative Jan Dhan Yojna.
"Today 1.2 billion people in India have a digital ID and that is the foundation for EKYC or electronic KYC so that one can open a bank account in two minutes fully compliant with the anti-money laundering and terrorism counter-financing laws," he said.
Nilekani, also the co-founder of Indian information technology giant Infosys, said: "Using UIDAI the government launched a programme in 2014 called Jan Dhan Yojana with which they opened 330 million new bank accounts".
"It's the world's largest financial inclusion program and according to studies done by the BIS (Bank for International Settlements), what India did in ten years would normally have taken 46 years to accomplish," he said.
"So, the first piece of this puzzle was the E-KYC which is essential to financial inclusion because if people don't have an identity, they can't open a bank account or get access to financial services, he said.
He said the development of unified payment interface, which is a completely interoperable, peer-to-peer, real-time payment system and instant payments was also eased due to the UIDAI.
"This was designed by the central bank and the banks themselves. But the uniqueness of this model is that big tech firms participates along with the banks," he said.
"Therefore it's a model where big tech participate participate under the aegis of the central bank and banks," Nilekani said.
He said WhatsApp has launched digital payments on a pilot basis with 1 million users and they made it as simple as sending a message.
"It's a brilliant implementation and they're now in negotiations to let all the WhatsApp users in India use this platform and there are 400 million of them, he added.
"So I think what India has shown is that all the benefits that we are talking about like convenience, ease of use, low cost and financial inclusion can be done in the existing system very well, he said.
The India model is important as that it's an open access model. It allows any big tech to participate, he added.
Nilekani said that payment is so fundamental to an economy that one needs an interoperable payment system which is very critical.
"Therefore I think they have to give us and how it's going to be fully interoperable," he said.