Over the past few years Indian Fintech has witnessed too many unicorns driven by the rapid market adoption. Although many companies try to take credit for pioneering this shift or claim to lead the way, this shift is a result of factors that are beyond the control of individuals and private entities. And before we move on to understand the drivers, we need to understand platform businesses along with the complicated intertwined web of systems.
Platforms are models where the system or software merely facilitates interaction between parties. A simple two-way platform would connect buyer and seller or payer and receiver. Simple examples of platform include internet marketplace such as e-bay and Amazon, niche or specific services include Uber, AirBnb, or Tinder. But it goes further, platforms can be multi-modal, enabling multiple parties to interact through the system. Such complicated platforms include the airline ticketing systems connecting agents, aggregators, and airlines for processing reservations and settlements.
And as you might have guessed it, in order for platforms to work, everyone must play along. For instance, swiping on Tinder is no good unless there exists a counter-party to match with. This also means that others should be able to access and use the platform – in other terms, the platform must obtain critical mass. Furthermore, platforms rely on other services to successfully deliver benefits; such as payment gateways for e-commerce payments, login or email verification, etc..
Hence, success of platforms can be attributed to adoption which itself is driven by confounding factors such as enabling technologies and services. For instance, success of e-bay was much driven by PayPal and subsequently the Credit Card enabled payment gateways along with internet and PC penetration across the United States. If you are from GenZ, back in time dial-up connections took more time to connect than any Taylor Swift song and pages loaded in minutes not milliseconds.
The last decade was a transformational one for India in terms of technology infrastructure, not only the hardware but also for the supporting services. To put things in perspective, most internet users in the west experienced an incremental journey from dial-ups to broadband connections to recent 5G spectrum; whereas, bulk of the internet penetration in India was through 4G. Also, unlike the west rather than moving from a web browser to mobile experience, most Indians leapfrogged, starting off with mobile experience that too using super apps such as Jio world.
Well, if you have already thought through – affordable smartphones enabled by Android along with increased processing power per chip and affordable mobile internet powered by sudden advent of Reliance Jio have served as enablers. Although this enabled numerous web-based applications and platforms such as online tutoring, this was insufficient for financial services. Two more services held the key to unlock the massive disruption in financial services.
Unlike an email or mobile verification used for web-services, financial services require KYC – Know Your Customer. And this process was mostly offline until UIDAI – Unique Identification Authority of India introduced the Aadhar, which served as a central repository of verified individual identities. Once an Aadhar was registered, the individual identity could be verified using web services.
Similarly, unlike the west, Visa and MasterCard duopoly, given high transaction charges, was not a viable option for the numerous small ticket transactions. Moreover, the card payment infrastructure is facilitated using RFID tags which necessitate investment; in stark contrast, the simplicity and low cost of QR code prints reduced the adoption inertia for vendors. Considering the Indian context, the practical approach of NPCI (National Payments Corporation of India) while developing UPI (Unified Payments Interface) leapfrogged India past Magnetic Strips, Chip Cards, and RFIDs.
Finally for the last mile technology that actually caters a usable application to the user by making use all the technology we have discussed so far, the start-up ecosystem had already created PayTM and BharatePe. But even with everything in place, India still faced the ‘so what?’ moment. A nudge was insufficient to generate the critical mass – minimum number of active users necessary to make platforms work – to a nationwide shift.
And that catalyst was Demonetization! Despite having touted a bulk of other motives followed by mixed reaction from critics for the crippling effect on ground, one thing that Demonetization did right – as agreed by all statistics so far – is driving digital shift of routine transactions. Needless to say that it saved millions of VC dollars that would have been otherwise spent on cash back and similar offers to incentivise user behaviour. Connecting the dots looking backwards, everything falls in place – but now you might realise that the success of digital transformation has been a combination of too many rights!
Feature Image Photo by Rodion Kutsaiev on Unsplash
Savvy Munshi 
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