Back to Innovation Atlas


Open Banking

The second-most populous country in the world, India, in South Asia, has transformed its payments system in recent years.

India is the second biggest online market in the world, although, in 2020, only about half of Indians had access to the internet.

Digital India is a government programme to create a digitally powered Indian society. As part of this, BharatNet has been attempting to bring affordable broadband connectivity to rural communities.

Deloitte has estimated that by 2026, India will have 1 billion smartphone users, driven by rural users and enabled by the BharaNet programme.

In such a diverse economy, where welfare subsidies involved lots of paperwork, and there were difficulties in individual identity verification, the Indian government embarked on developing a digital infrastructure to assist efficient development. Thus, India Stack was formed, step by step.

The first component is Aadhaar.

Aadhaar, with its 12-digit unique identity number, has been taken up by 1.3 billion people (as of March 2022). The provided number is linked to the resident’s basic demographic and biometric information, such as a photograph, fingerprints and iris scans, which are stored in a centralized database.

The second component of the India Stack was the digital payments infrastructure, built by the National Payments Corporation of India (NPCI) and launched in 2016, called the United Payments Interface (UPI). In March 2022, the NPCI recorded 5.4 billion transactions.

The third component, the Account Aggregator framework, went live in 2021 through eight banks. This is a secure, consent-based data-sharing framework.

India Stack itself says ‘Where Aadhaar first helped seed India’s economy with hundreds of millions of new economic participants with bank accounts, UPI then gave those account holders an easy and cheap way to transact digitally. In a similar fashion, the third layer of India Stack helps those same account holders to leverage the data trail they leave behind as they go about transacting and operating in the digital economy.”

The Account Aggregator framework is interoperable by design, allowing a service provider which is integrating with one Account Aggregator app to make data requests to users of any other app too.  Initially aimed at the financial services industry, India Stack states, “the grander vision is to enable consent-based data sharing across a number of important sectors like healthcare and e-commerce where ordinary citizens will have the ability to leverage their own data to avail of relevant products and services like loans, telemedicine, portfolio advisory and a litany of other use cases that are waiting to be developed.”

UPI provides a set of interoperable API standards used by almost all the banks in India, including using a pluggable authentication method. This does not enforce one type of identity authentication,  which allows inclusion for those without a smartphone. It also defines the Payments Markup Language which allowed the introduction of features such as recurring payments that were previously only available through credit cards and bank mandates.

In 2019 Google wrote to the US Federal Reserve, asking for the creation of a new interbank real-time gross settlement service (RTGS) for faster digital payments in the US. In India, Google Pay provides one of the three leading mobile applications that use UPI, as measured by transaction volume.

The NPCI has set up a fully owned subsidiary to offer to license and consulting services to other countries. Exploratory partnerships have been created with Discover Financial Services in the US, the Japan Credit Bureau, and Union Pay International in China. In 2021, Bhutan became the first country to use the NPCI’s BHIM mobile payments app and to adopt UPI standards for its Quick Response (QR) deployment, and a partnership with Mashreq Bank in the United Arab Emirates offered UPI to the 2 million Indians travelling there each year. In 2021, the Royal Bank of India and Singapore’s Monetary Authority of Singapore announced they had linked up UPI and PayNow (to be operational in July 2022) to allow money transfers without onboarding the other payment system.

In January 2023, India opened up the UPI payment gateway to non-resident Indians in several countries, leading a rush of remittances-focused Fintech ventures in the UAE.

The government’s Jan Dhan Yojana financial inclusion program has led to 78% of Indian adults having bank accounts in 2021, up from 35% in 2011. The gender gap in bank account ownership has also narrowed.

India Stack was used to paying out $44 billion to women and small farmers as part of the government’s COVID-19 relief.

In order to help empower those in need of small loans, the government has provided access to authentic digital documents in a citizen’s digital document wallet through its DigiLocker initiative. In combination with transactional data, this can allow for faster review of credit histories.

The Open Credit Enablement Network (OCEN), a credit protocol infrastructure, enables consent-based access to verified information about borrowers to loan service providers. It’s hoped this will help make credit more accessible for small businesses and democratise access to credit. 

In 2021, McKinsey estimated that India has most to gain from opening financial data, compared to the EU, the UK and the USA, and estimated the GDP uplift to the country could be as high as 4-5% in India in 2030, where micro and small businesses have the most to gain from greater and friction-free access to finance.

Invest India claims that India has the highest global adoption rate of Fintech at 87%, compared to the global average of 64%.

The World Economic Forum (WEF) expects the introduction of Open Data to increase Gross Domestic Product (GDP) by four to five percent in developing digital economies such as India.

India ranked 56th out of 134 countries in Wiley’s Digital Skills Global Index 2021