India is growing at 7%, making it the fastest growing major economy in the world, but everyone already knows this. It will be the youngest country with an average age of 29 and contribute to 25% of the global working force by 2020. Some paradigm changing government initiatives like Digital India and Aadhaar are driving the institutionalisation of unorganised markets (~15 million mom-and-pop stores which run on cash) and digitisation of 1.2bn+ people setting India up for some incredible multi-decade growth.
I first read about ‘the fintech revolution’ in The Economist a few years ago. But we see no greater fintech revolution than what is happening currently in India. According to KPMG and NASSCOM, Indian fintech transaction value is set to increase from US$33 billion in 2016 to US$73 billion in 2020. Let’s take a closer look at some of the drivers of this.
- National ID Database
- Bank Accounts for Everybody
- Rapid growth in Mobile
- The India Stack
- New Payment System
- Demonetisation
- The Opportunity for Australia
National ID Database
"The system in India is the most sophisticated that I’ve seen. It’s the basis for all kinds of connections that involve things like financial transactions. It could be good for the world if this became widely adopted."-Paul Romer, chief economist at the World Bank
Since implementation in 2009, the Aadhaar act has biometrically identified 1.1bn Indians (~90% of the population) and created a single national database on the cloud. It provides an identity card with a unique lifetime 12-digit code, verified by fingerprints and iris scan. This is a comprehensive authentication tool, which is very effectively tackling the problem of fake and double identities, leakage of payment benefits and tracking real economic activity. Population in some of the most rural, remote areas of India are now on the official system for the first time. Aadhaar is estimated to save the government about $2 billion a year, and this could rise to $7 billion by March 2018, or 0.35 percent of gross domestic product, according to research firm CLSA. This will add considerably more in economic activity and tax revenue in a country where only 2-3% pay tax. See the incredible penetration India has managed in just 6 years.
