ONDC – Big Bang moment for eCommerce

 

The universe after the Big Bang evolved and is still evolving continuously. Not as a centrally controlled and managed process. But, as an ecosystem with each component in its trajectory, impacted by, and impacting, the other ecosystem building blocks. Zooming in further, the lifeforms also evolved from the single-cell wonders in the primordial soup to the atomic-age man through continuous innovation by nature what we know as mutation across the ecosystem. Every new innovation adds or subtracts functionalities and capabilities, with some succeeding to sustain and some failing and perishing. The technological progress we made as a human race from wheel to spacecraft also followed this incremental innovation across the ecosystem. That is the “Order of Nature”.

 Very often, success in the natural order arises in a simple yet fundamental paradigm shift, and successful players are those who quickly adapt to the evolving paradigms, cooperating and collaborating with the ecosystem. Thought leaders from Darwin to Schumpeter to Niall Fergusson in the modern era, have argued that, “This is the age of digital Darwinism, in which it is not the strongest or most intelligent that survives, but the one that most successfully uses technology to adapt to change.”

When it comes to eCommerce w can see that it has evolved out of line with this natural order of the nature. Two or three giants with deep pockets building up stranglehold in each domain tuned to maximise their shareholders’ interest.

There is extensive innovation in this model. But limited to innovation to maximise their self-interest through a centrally managed process, to meet the requirements of their typical user group and/ or enhancing their user group through a cookie-cutter approach.  Any outside innovation has no chance to survive unless it is subservient to or sold out to the biggies. [1] It is an uncontrolled that is engulfing commerce, eventually taking control of it all and leading to stifling diversity. Much like the magma chamber of a dormant volcano, this keeps the lid on growth and evolution. This has already set alarm bells ringing across the world, with many developed countries trying to mitigate through regulation, be it the America Innovation and Choice Online Act in the US, the Digital Markets Act in the EU or UK’s Digital Markets, Competition and Consumers Bill,

It is here that the idea of ONDC has come in with a big bang. Encouraging innovation and specialisation across the ecosystem with all of these building blocks communicating among them and interoperable through an open-source protocol. This allows and encourages lots of people to work on different building blocks and come out with a plethora of solutions for diverse user groups and not to straight jacket users or shape the users into a straight-jacket. As Howard Moskowitz observed in his research paper; there is no single optimum, but there are multiple optima for every use case. Some will fail and some will succeed and the winner is society, as a whole and not shareholders of a few enterprises.

This will address the challenge of market concentration and associated practices that are a challenge in the platform-centric world today.  This will encourage a natural order of continuous innovation with some succeeding and some failing with the overall ecosystem marching forward.

The Build for Bharat Hackathon organised by ONDC recently in collaboration with Industry demonstrates this. 100,000+ participants in 2,100+ teams from across the country coming together with outstanding solutions with most of them having a working model and monetization plan shows. This shows how Open Model will unleash creativity across a wider cross-section of big and small enterprises and individuals. This is what excited representatives from 20 VCs who attended the hackathon final.

Now it is clear why I have the audacity to term ONDC as the Big Bang Moment of eCommerce that can totally transform the world of commerce in the near future.

 

“When money, rather than innovation or value, is your competitive advantage, that’s when things get boring and stagnant, and monopolies take root.” —Hank Green

Implementing ONDC – A Journey

 

Standing on the shoulders of giants…

I read somewhere that in the early nineties when India attempted computerisation of the banking sector which was one of the major early attempts at computerisation across a domain, there was very high resistance from the bank unions who were worried about job loss. The idea was then sold as a provision of the Advanced Ledger Posting Machine (ALPM) to reduce the drudgery of the staff. India has come a long way since then.

The launch of the National Stock Exchange (NSE) as one of the earliest fully computerised stock exchanges, as against the “ring-based trading” that was prevalent in India and across the world, was a bold attempt in computerisation of the capital market. Establishing of National Securities Depository Ltd (NSDL) for dematerialised holding and trading of shares helped India leapfrog from being the most backward, to one of the most modern settlement systems in less than five years.

UIDAI was India’s attempt to build a population-scale digital ID solution first time in the world using open-source technology.  This project aimed to provide each individual with a unique ID.  The factors that contributed to its runaway success were very clear and simple problem definition (one unique ID for every person) which limited the extent of data collection required to issue the ID and functionalities offered which were only ID issuance and authentication), ensuring that there is no vendor or technology lock-in for any component, with the help of opensource technology (even when the use of proprietary solutions was absolutely essential, as in the case of biometric deduplication and authentication, a plug and play architecture ensured this vendor neutrality), the solution that was linearly scalable by design based on open source technology stack helped in making Aadhaar highly cost competitive. UIDAI brought in private sector participation to establish national-level enrolment capacity, and crucially there was no cost to the citizen as the cost of enrolment was borne by the government. The payment to the enrolment agency by the government against successful enrolment helped in the enrolment agencies being outcome-focused and result-oriented. Government’s thrust to UID-based benefit distribution created a demand-pull leading to UID penetration of more than 95% of the population in a short time.

The UID project proved that a Digital Public Infrastructure can drive dramatic transformation in benefit distribution as well as in service delivery. The next big initiative in this direction was UPI for broadening the adoption of digital financial transactions.  The unbundling and interoperability of the building blocks of customer interface for payments and receipts using QR code while the funds being held and transacted by the banks helped to create a very cost-effective fintech ecosystem that could spread across the country, and helped adoption of this method by merchants and consumers across all segments of society. The Demonetization provided a significant demand surge, positioning India to account for over 40% of the global volume of financial transactions.

New Kid on the block

Building on the foundation of these successes, we have ventured onto a new initiative to solve a problem that is challenging both developed and developing countries equally. The problems of a few large tech platforms using proprietary technology hijacking the market in many domains like consumer goods, food distribution, ride-hailing, travel and tourism etc., which in turn leading to business practices that are not in the best interest of the business enterprises (especially small enterprises) and consumers.

The initiative was triggered by the COVID pandemic. DPIIT Ministry of Commerce and Industry) wanted to find a solution to the supply disruption of everyday needs impacting the consumers and small merchants. A Steering committee, established with participation from both the government and the private sector deliberated and decided that the solution should not be a stop-gap arrangement in times of pandemic; but a solution that will transform commerce to address the challenge of exclusion of small businesses and the limitation of choices to the common consumers. This forum was expanded to have eminent members like Nandan Nilekani,  R S Sharma, Adil Zainulbhai, Anjali Bansal, Dilip Asbe, Suresh Sethi, Kumar Rajagopalan, Pradeep Khandelwal and Arvind Gupta with Anil Agarwal, the then JS in DPIIT as the coordinator and now continue as the advisory council. Later, Anurag Jain joined this council with Sanjiv JS DPIIT coming in as the coordinator. ONDC being the latest initiative in the DPI world in India let us delve deeper into how the solution was shaped and how it is proceeding.

In every business transaction, there are two sides. One is the payment for goods or services by the buyer(s), and the other is for making the inventory visible in the digital market by the seller(s) and searching for, choosing of, and contacting for products/ services by the buyers.

UPI took care of the payment side. ONDC is now attempting to do the same magic in the products/ services side by democratising commerce through the un-bundling of building blocks of commerce and making them interoperable to create an Open Network instead of walled gardens of platforms

Challenges Galore

In the case of UIDAI, while the biometric deduplication and authentication for the population of India, was a technological challenge that had no existing solution, which was solved by the brilliant team of UIDAI,  the process requirement for onboarding is relatively straightforward and funded by the government with no cost to the person being enrolled.  In the case of UPI, we have only one SKU (i.e. the money) to be exchanged, and that too digitally. The user interface can be really simple to handle and harmonised for this single SKU. The entities providing end-user interfaces are only a handful and the money is handled by a well digitised and highly regulated banking sector.

When it comes to commerce involving products and services, the challenges are multi-fold. SKUs are in millions, belong to diverse categories of goods and services, ranging from street food to laptops, and from auto-hailing to credit and insurance.

These require different user interfaces for different products/services for different kinds of buyers, and complex business processes for order processing, inventory management, packaging, warehousing, logistics and grievance handling for sellers, which necessitates their own nuances of rendering of information and handling information flow. The sellers come from different domains some well-regulated, some partly regulated and some entirely non-regulated. No regulatory mandate to participate or no “demonetisation” to create business compulsion or no linked benefit delivery to encourage adoption,

One Step at a Time

So ONDC is taking a step-by-step approach. With the help of endorsement from the Government, particularly by the Commerce Minister and DPIIT, leading banks and financial institutions chipped in the necessary capital to establish a not-for-profit company with the necessary flexibility and agility to respond to the fast-changing  requirements of digital commerce; that with a global-first solution architecture. FIDE Foundation with Nandan Nilekani, Pramod Varma and Sujith Nair as founders gave the foundational protocols and continued guidance. A powerful Advisory Council and a Board with appropriate participation of government, investors and independent members provide strategic direction and ensured unblemished governance.

Being a network, there is no central platform to be established by ONDC. The network would succeed only if we can create a vibrant ecosystem. It is a classical chicken-and-egg dilemma. Unless there is wide participation of merchants and service providers, it is not exciting for the customers; and unless there is a wide customer base on the network, there is no incentive for the sellers to come aboard 

More importantly, this is an idea that has never been attempted anywhere in the world. To encourage adoption, we needed to demonstrate that such cascaded flows, stitching services provided by multiple entities, will in reality  work seamlessly with end-to-end security of data.

ONDC being a network there was no central system to be built and tested by ONDC for the potential users to check out. We had to have some entities coming forward to develop seller apps and onboard merchants, buyer apps and consumers to try out orders, and Gateway and Registry to link these.

With a few entities like Protean, PayTM, Loadshare, Gofrugal, DIGIIT, Growthfalcon and Sellerapp, who were willing to bet on this idea and develop a minimum viable product and convince a few sellers to onboard, ONDC team went about demonstrating that this is a Network that can deliver its promise. This was our alpha testing phase that was kicked off in five cities across the county within five months of the company's incorporation. While the ultimate goal of the network is to cover the entire gamut of catalogable products and services, ONDC commenced alpha testing with the challenging domains of Food and Grocery. 

Six months later, ONDC launched beta testing in Bangalore with Grocery, Food and Mobility and after streamlining the processes among the participants and merchants in the first couple of months, we started reaching out to the consumers in Bangalore to try out the network. lowly and steadily, we managed to have more merchants and service providers, and a few customers testing out the network with around 40 to 50 transactions a day.

While this proved that we can have transactions in an unbundled network, we have a long journey ahead to have a critical mass of merchants and consumers in the network to make it sustain, and grow and to achieve the original objective of democratisation of digital commerce.

Unite and Conquer

One of the key elements of our early strategy was to have a few anchor partners in the domains we launched, then gradually scale transactions and publicize on a regular basis our principles, our aspiration, our roadmap and our progress. We had support from the Minister, the ministry, government, industry, startup ecosystem, philanthropic agencies and developmental institutions endorsing us, and the press giving us visibility and encouragement for the baby steps forward. This challenged us and is helping to convert fence-sitters one by one.

15 months on, we have grown from 800 merchants and 1200 orders in a month to 400,000 merchants, 8 million orders in a month across 800 cities, with  month on months steady improvement in penetration, usage and all key performance parameters with respect to order fulfilment and delivery. Though we had started with grocery, food and mobility, we have gradually added many more domains such as electronics, fashion and apparel, health and wellness, beauty and personal care, home and kitchen, credit, insurance, agriculture input and output etc and many more like B2B procurement, home and urban services, entertainment ticketing, multi-modal transportation and the list goes on.

ONDC’s ultimate vision is that every catalogable product/ service will be on the network, with innovative buyer interfaces helping diverse user segments access and choose what is relevant for them.

The industry in general, except for a handful, understands and welcomes this idea of open network. But we need to crack the cold start problem. Therefore, we are approaching this with a dual strategy. We are working with the digitally mature entities familiar with e-commerce to get them onboard and reach across ecommerce-friendly consumers to get the pumps primed. But it is a long journey.

The well-established businesses that are currently operating in a platform-centric world are yet to fully appreciate the dramatic change possible in the distribution channels and supply chains with the freedom an open network offers to the brands and merchants. The corporate bureaucracy, busy with business as usual are slowly realizing the opportunities, and many are seriously evaluating the possibilities, including this in the top management agenda and making it a priority and not just a nice-to-have tick-in-a-box. It is heartening to see established players from the public sector and private sector like SIDBI, NABARD, SFAC, HUL, ITC, Google, Meta, Dominos, Tata, OLA, PayTM, MagicPin, Juspay,Reliance etc. taking definite steps by launching their presence, albeit in pilot scale in comparison with their potential.

In the meantime, we have multiple initiatives to support the mini & small enterprises and to help the unserved and underserved sections of enterprises, entrepreneurs, artisans, weavers etc, who are normally ignored or provided lip-service for PR purposes to become truly ready to embrace, adopt and benefit from the world of digital commerce.

This involves innovation, capacity-building and handholding in areas ranging from selecting and signing-up with a service provider of their choice, developing attractive catalogues, uploading these catalogues with inventories to the network, responding in time to orders, order fulfilment, packaging for delivery, obtaining logistics, responding to queries and so on, so that they are accepted by the extended consumer base the network can offer. 

Many government agencies are excited about the possibilities with the ONDC Network. Ministries like MSME, Agriculture, Textiles, Fisheries and Animal Husbandry from Central  and State Government are doing/developing/ considering projects that can scale nationally. They are also in the process of developing/ launching schemes for their ecosystem, to leverage the network through digitalisation.

Philanthropic agencies like BMGF, TERI. etc have also jumped into the fray to extend processes, technology, and toolsets, and more importantly help them to promote their products/services.

The addition of financial products and services like credit, insurance and investments can be a real gamechanger when it comes to the small business as it can be an avenue for accessing flow-based working capital credits, sachetized insurance and investment driving digital inclusion across the length and breadth of the country.

We are expecting to have participation of of BFSI sector starting with Financial  Products and then expanding their scope to help small and medium scale industry to leverage open network with a robust foundation enhancing digital financial inclusion.

Now that we are getting a decent pipeline of suppliers of diverse products and services, we need a big push to bring the consumer base. Not just existing users; but we need to expand the participation of both merchants and consumers in this world of opportunities digital India offers

Road Less Travelled

While we go through these steps for network and enabling ecosystem development, there are quite a lot of activities that the ONDC team with the active collaboration from the network participants are engaged in, to strengthen the network and to build trust on the network.

These include, but are not limited to:

(i)           continuous evolution of network polices to cover ever-expanding functionalities and domains;

(ii)          continuous evolution of protocol capturing the evolving network policies to help enforcement of processes;

(iii)       network-wide services such as scoring of merchants/service providers, which then becomes a digital asset they can benefit from, as well as acting as a deterrent to unscrupulous merchants, and a protection to the consumers;

(iv)     data lake of non-competitive,    non-business sensitive non-PII data, anonymised   and  aggregated as open data for all participants, to benefit without being an exploitative tool

(v)             SDKs, training and capacity-building material as common assets;

(vi)            developing an ecosystem of enablers and service providers to support small enterprises;

(vii)       enabling big-tech engineering skills on AI and language models to be available as standard offers that can be leveraged by small enterprises to complement their strengths in operation and customer care.

(viii)      enhancing systems and processes for smoother and faster grievance and dispute resolution

Tailpiece

Such roles help ONDC to help the network to continuously evolve as a truly democratic digital marketplace. This is a journey no person has ever made before; where India is playing a leadership role. Come and join hands in this global first quest

 " IF you want to be a pioneer you have to blaze your own trail"

Drivers of Customer Service in ONDC

 Introduction

In the prevailing model of eCommerce, the same entity provides end-to-end solution as a market place which manages both customer experience and seller interface.  Such an end-to-end solution offer significant influence and control to the platform providers compared to the end points like the seller / buyer. This enables the platform providers to give priority to customer demands which is their natural strategic choice to build and retain an exclusive customer base as their lever for market control. With this prioritisation logic, they may follow a no-questions asked return and refund policy. Sometimes they take this to the logical extreme even if the return request is not on account of the fault of the seller which is possible with the control of the funds and contractual hold they have on their on the sellers which the economists explain as ‘near monopsony’ power of these platforms.  Any loss on account of this is usually borne by the seller. Such selective service also enable significantly big margin for the platforms.

In the end, if there is any dispute with the seller, the existing legal framework forms the basis for the dispute resolution between the buyer and merchant as the merchant is the seller on record and not the platform providing the market place.

ONDC Network

In case of ONDC, with unbundling of the building blocks of the transaction (like seller interface, buyer service, logistics etc) there is possibility for different models to evolve which will suit different segments of buyers and sellers.

A.     Different Business Models with divergent service level offers

 

1.      Some Buyer application would like to offer a select service and may offer no-question asked return / refund with then insisting on payment to be routed through them so that the full payment to seller is made only after the necessary lock-in period for customer return.

In this case, the search request and order placement will include these conditions and only offers meeting these conditions will be accepted by the Buyer App and shared with the customer which means the seller has the option to respond to such conditions without being dictated by the intermediary.

2.      In some cases the Seller App  (may be a discount store) may offer products with a no or limited return  which will be part of if its offer when it returns response to a search by a buyer app and only customers accepting these conditions explicitly will be serviced .

The important point to note is that the ONDC network offers opportunity for sellers offering different price/ service combination and buyers with different price/service preference to come together and transact in a transparent fashion thus creating a healthy and diverse market place which is what we are familiar in any physical market.

B.      ONDC checks and balances encouraging and incentivising fair and responsible business practices

As in the case of the prevailing eCommerce market place, the legal framework still remains the same and there is no different legal framework for ONDC. However, as a community manager ONDC will develop an enhanced set of checks and balances to offer better experience both to the buyer and seller thus reducing the need of legal recourse.

1.      ONDC will onboard buyer and seller apps only after establishing their identity

2.      ONDC has stringent polices on expected behaviour of each NP.

3.      Most of these policies are programmatically enforced

4.      All NPs are onboarded only after their apps / software is tested for their compliance to ONDC protocol

5.      All NPs sign an agreement confirming their commitment to the policies

6.      All seller market places are expected to undertake due diligence on the sellers onboarded by them and expected to watch for their responsible behaviour

7.      ONDC will compute and publish network level reputation and credibility score of platforms and sellers which will act as a strong check on them.

8.      ONDC will monitor and publish record of grievance redressal and dispute resolution performance of each app and seller

9.      ONDC is establishing a framework and platform for Online Dispute Resolution (ODR) following the guidance issued by NITI Ayog for exception handling.,

10.  ONDC will suspend/ expel from the network entities with continuous aberrant behaviour

11.  The onboarded platforms are required to undertake periodic system and process audits with respect to compliance with network policies and share reports with ONDC

12.  ONDC may undertake periodic mystery shopping exercise to monitor performance of participants and share feedback with the entities

 

C.      Inherent nature of ONDC network encouraging healthy and fair market practices.

 

1.      ONDC network being unbundled, very often the Buyer app will only have buyer as clients and Seller app will have only sellers as clients (in some cases same entity may have both apps)

2.       With no platform able to have captive buyers and sellers and the buyers and sellers being available as a cohesive pool in the network discoverable and accessible to all buyers and sellers, there will be many buyer and seller apps giving multiple options to the consumers limiting the possibility of the platforms for user-unfriendly measures.

3.      The Buyer app will be forced to have loyalty to the buyers and would have to take extra effort in terms of functionalities and services to retail loyalty and continued support from the buyers. Their services thus will include active follow-up with sellers for grievance redressal and escalating aberrant behaviour by the sellers if any

4.      Seller Apps on the other hand with no captive buyers but with a responsibility to ensure good customer service to attract the buyers, will have to put in checks and balances to ensure that their sellers treat the end customers in a fair and transparent fashion failing which their network wide reputation will suffer and may be rejected by buyers

5.      With multiple platforms offering competing services, there will be possibility for continuous social audits on the practices by the platforms and ONDC will enable publishing of such social audits. This becomes all the more relevant with multiple buyer and seller apps in the market giving strong competition

6.      Even cases where the platforms are providing both buyer and seller apps, each side will attempt to focus on their consumer (buyer for buyer app and seller for seller app) as their own platform offer of sellers for buyers and buyers for sellers will only be a small part of the total available options in the network.

All the above point out to the possibility for a total transformation of the way markets operate impacting big and small players. This transformation will not happen overnight, but over a period of three to five years. The entities readying themselves for this new reality will  reap the benefit and the others will pay the price.

"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.” Niccolo Machiavell

COVID-19 and Foundations of Social Security Delivery

 

The COVID-19 has turned out to be a pandemic in a very short time causing significant disruption of normal life and economic activities around the world. This has led to increased stress to financially marginalised and has also pushed many who are not otherwise included in the financially challenged segment down the precipice at least in the short term. Therefore, financial assistance by the government to a larger cross section of society has become a necessity.

One of the foundational elements to target benefits to deserving citizens is the ability to uniquely identify every person. Many developing countries don’t even have reliable functional IDs that generally cover the majority of population. Hence, the relevance of national ID becomes even more important. In this world with increasing mobile penetration if this ID database also includes a mobile number and/ or email ID seeded the whole targeting process can become more efficient. ‘Aadhaar’, in a country as large as India, has demonstrated the benefit of having a platform that issues a unique ID to every resident and enables easy authentication. Many experts have observed significant variations in targeting benefits between countries that have well-established infrastructure, institutions & processes to uniquely identify/ authenticate its residents and countries that don’t have such facilities.

The other two important foundational elements for targeted delivery are digital social registries and digital financial inclusion.

A well-established social registry consolidates the list of residents along with their key attributes essential for determining the nature and extent of assistance needed. This registry could be built by linking multiple databases against unique ID of the resident subject to good practice personal data sharing rules. Such a registry maintained digitally and updated dynamically will go a long way in correctly identifying and targeting the deserving persons and avoid leakage through fraud, double-dipping or because of any processing error. A social registry built on a unique national ID is more efficient and less error prone.

An efficient and low-cost payment system that is inter-operable among all segments of institutions that hold a customer account storing value is another critical element that encourages and enables financial inclusion. The digitalisation of holding and transaction is key to reducing the cost of account maintenance and transaction. The success of Unified Payment Interface (UPI) that has been introduced in India enabling interoperability across all banking transaction networks at practically nil cost has revolutionised the payment ecosystem. The high volume, low value transactions which were hitherto not encouraged in the conventional card driven ecosystem have found exponential growth in this regime. In January 2020, the UPI transactions crossed 1.3 billion, amounting to close 30 Billion USD, which is about 3.5 times the number of transactions in the VISA/ MASTER network. In addition to the interoperability offered by UPI, it removes the need for plastic cards and relatively expensive to maintain POS network, with conventional smartphones for both the account holder and merchant. It also enables feature phones based USSD transactions that widen the serviceable segment of the population thus giving boost to financial inclusion. This has been endorsed both by large multinational private sector players like Google and by the banker to the Central Banks, BIS. The National Payment Corporation of India (NPCI) established by the Reserve Bank of India, which introduced UPI is expected to establish and promote an entity to introduce UPI to countries around the world to help them launch this in their countries.

The COVID-19 pandemic now brings to the forefront the importance of mature systems for ‘national ID’, ‘social registry’ and ‘interoperable payment systems’ as discussed above. As a response to the immediate need, many countries are quickly establishing beneficiary registries. Considering the urgency of the short term need, this is being built with lesser safeguards against ghosts, double dipping and such possible avenues for leakage. In the short term, this may be acceptable. However, instead of seeing this as a one-time exercise, it is advisable to consider this as a big step towards building a comprehensive social registry and establish mechanisms to refine this in the next few months so that this becomes the foundation for all social service delivery programs in the future. For example, Philippines is in the process of undertaking a door-to-door enumeration of 18 million households (out of 21 million total households) to create a list of beneficiaries. There could be concerns as to whether this is the best possible means to build the registry in this period. However, if this plan is already rolled out, the way forward could be as follows. Philippines is also expected to roll out their national ID project by the end of this year. It may be a good idea to use the digitised database built on the current enumeration as a starting point for enrolment for national ID by providing it as a pre-populated form that could be refined during enrolment. Thus, soon Philippines will have a biometric national ID seeded social registry. In this fashion, every country needs to evolve appropriate strategies to enrol deserving residents in the short term using the existing infrastructure and use this, in medium to long term to build a robust social registry.

Large number of residents are being provided cash transfer to tide over the crisis. While each country would rollout this cash distribution using the existing infrastructure this is the opportune time to encourage, enable and nudge the unbanked in this group to open at least a limited purpose account operated online with capping on the amount held in the account. This can be allowed with limited KYC processes. Eventually, the customers can opt to upgrade to a regular account after necessary due diligence. In this process, it is important to ensure that infrastructure and policies are in place at the earliest to enable seamless transactions across accounts at a cost that make sense for the small value transactions of customers and merchants, irrespective of which entity holds the account for storing value. Governments may have to consider regulatory nudge for interoperability and to contain the cost for low value transactions. Also, it is essential that all the entities holding account (including mobile wallets) are also regulated uniformly with respect to the safety and security of these accounts. Mobile platforms can also speed up the proliferation of low-cost micro ATM making cash in cash out (CICO) centres widely available using the mobile industry distributor network.

While each government will have their own approaches on the most pressing and emergent issues of today, a robust national ID integrated with a social registry and combined with digital financial inclusion are the building blocks that will enable governments to deliver benefits in good times as well as crises.

It is hoped that the governments and developmental agencies take these lessons in their design of policy interventions in the social sector.

“Those who cannot remember the past are condemned to repeat it”, George Santayana.

Aadhaar or Not?

The total number of Aadhaar enrollment has reached a level of around 600 million. There are serious debates in the public domain about use of Aadhaar as mechanism to establish and verify identify for various subsidies and benefits extended to the residents of this country. Let us take a deep look at the merits and demerits of this idea.

Every entity that provides any benefit or service to a person has a need to establish the identity of the recipient at the time of enrollment into the scheme. It would also want to verify if the same person is receiving the benefit/ service every time the service is availed. For this purpose different entities use different methods and different supporting documents.  Aadhaar comes out as the best identity proof on account of the following.

·         Most of the identity documents that are commonly used like PAN card, Voter Id, passport, electricity bill and so on are only enrollment proof for a specific service. Therefore this limits the cross section of residents who can have each of these documents. This makes it essential for every service provider to allow a variety of identity document resulting in higher cost and risk. Aadhaar is issued by UIDAI which has been set up only for the purpose of issuing an identity documents to every resident. This makes it possible for every resident to receive an identity documents.

·         Aadhaar has established a centralised system and a standard process that is accessible throughout the country to verify the identity document submitted by the recipient of the service. This makes it easy for every service provider to establish uniform but strong verification mechanisms instead of establishing multiple verifications for various identity documents.  No other identity document has such a seamless verification process in place (many of them don’t give a facility to verify from the source if the identify document has been truly issued by the issuing entity) which makes it possible for the unscrupulous to get away with forged identity documents.

·         The above process also significantly reduces the cost and risk of identity verification.

Every service/ benefit provider could want to ensure that same person does not access the service under multiple identities. Aadhaar issues a unique number to a person supported by extremely strong biometric technology to ensure that one person cannot have multiple identities. The current practice of establishing uniqueness with demographic data like name, father’s name, age etc  is quite weak in comparison with this. No other identity document has such strong de-duplication mechanism in place to ensure that same person has multiple identities

.

The issuing authorities for the various documents used as proof of identity have established their channel for enrolment to meet their requirement and they do not cater to the need and right of every resident to receive an identity document. For example voter id is issued to eligible voters. PAN is a tax id and tax department has no incentive to extent this as a service to all residents. Since UIDAI is established as an entity to issue identify document, it has established extensive channel for issuance and verification and is in the process of further extending this channel.

This helps any entity which has to uniquely identify a person to save significant cost and effort in the identity verification process.  Building on this Axis bank now has introduced scheme wherein an individual can walk into any Axis Bank Branch, give his / her UID and after verification of the same, the banks issues an account without any further document.  Many service providers are figuring our innovative application of this idea. With more than 600 million cards already established we can soon witness wider adoption.

But let us be clear; only thing Aadhaar can guarantee is a unique identity, nothing else. Not citizenship, not right for any entitlement. For any of these you will need other mechanism. So we should judge and decide based on what Aadhaar can do and its relevance, and not what it cannot!

“No one  can stop an idea whose time has come” Victor Hugo

Even Elephants Can Dance

My friend Zakir Thomas is a revenue service officer; but he is more comfortable in developmental work than being an enforcement officer. At present he is the project director for Open Source Drug Discovery (OSDD) a unique initiative by Centre for Scientific and Industrial Research (CSIR) and is personally mentored by its DG, Dr. Samir Brahmachari.

Though concept of Opens Source development has been in practice for a long time (though not in this name), it has become quite popular with the advent of internet, more so with the availability of collaboration tools (now referred to as web 2.0) which has enabled communities across the globe to work on solutions to complex problems.

Internet itself is product of such collaboration and Linux, the Operating System, is one of the most known open sources software. There are hundreds and thousands of such initiatives out there today in a variety of fields. Sequencing of human genome can be seen outcome of such a participative effort. However, in fields like Pharma where the cost of research, testing and regulatory approval can be phenomenal, collaboration is considered suicidal. On account of such high cost Pharma companies have least interest in working on development of drugs for ailments which particularly affect the poor (TB, Malaria etc) or which affect few people are very limited. They are keener on development of drugs for lifestyle ailments like Blood Pressure and Coronary Diseases

It is in this area the model of open source development is attempting to play a role. Today there are only few such initiatives in the world like Tropical Drug Initiative (Participants from University of California Berkeley, Dukes University, University of Sydney), Institute of One World Health, TB Alliance etc.

OSDD initiated by CSIR is an initiative attempting to provide affordable health care to the developing world, presently focusing on development of drug for TB which today kills two people every three minutes in India. OSDD has taken of well with participation from about 4500 scientists/ students from 130 countries. It has completed mapping of TB bacteria genome a record time. It already has two molecules for TB in the pipeline. CSIR hopes that they will be able to bring out at least one drug for TB in the near future.

I asked Zac what has made this possible. “A few People with commitment and Tools that made collaboration possible” he replied. He introduced me to two fellow scientists who were with him then who is working from Institute of Genomics & Integrative Biology(IGIB). Sridher Sivasubbu is a PhD in fish genetics and Vinod Scaria a medical doctor who is equally comfortable with computers. Both of them are young and highly qualified to have picked up high paying jobs in private sector in India or abroad. But they have decided to dedicate at least few years of their life to this initiative. Their energy level, enthusiasm and commitment for bringing multidisciplinary skills through collaboration to develop better drug for TB is awe-inspiring.

There are more of such dedicated scientists across the labs who share this passion. Zac suggested that I read the book “Geek Nation” by Angela Saini in which she has dedicated an entire chapter (titled The impossible drug) on this collaborative effort of a number of committed professionals from multiple labs across India to find a cure for TB. (This book is worth reading as it gives an interesting perspective on the dream, hope and possibility of India becoming a scientific super power).

What OSDD has done is to make the platform available to for these professionals to collaborate among each other and with the best around the world who are willing to join. I hope that OSDD is able to build on this momentum and don’t get ossified to a white elephant when the pioneers move on.

It is a commendable achievement for a government institution to work on such revolutionary models. We see such islands of excellence in many parts of the government. What is unfortunate is that often there is no mechanism to sustain this momentum. When the pioneers move on there is no planned succession. Successors are not selected keeping in mind the requirement of such exceptional institutions; but following a process which is meant to manage routine operations. And that is the tragedy of governance we face often.

Elephants can dance; so long as we play the right music…

"It is the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed." - Charles Darwin

Related Readings

Competitive Advantage - A case for blogs and wikis

If wishes were horses

Dare to Differ

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Some Inconvenient Questions

[I am a concerned citizen of the world. I worry about the doom that is projected for this mother earth on account of the irresponsibility of “we the people.” Recently I came across some contrarian thoughts in few books that I read (referred below) which raises some questions on the current popular thinking. I have attempted to draw attention to some highlights. Those interested can read up more.This may be a bit heretical but I believe it is worth being alive to these issues]

In 1798, an Austrian Monk Robert Thomas Malthus, who was also a political economist,  predicted a gloomy future for the mankind because he believed that population would increase at geometric progression and the food supply would grow at arithmetic progression resulting in collapse of the mankind. In 1898 another eminent British scientist, Sir William Crookes, argued that unless nitrogen could be chemically fixed from air by some scientific process, the human race would not be able to feed itself from the land available. They were not being paranoid. Their predications were based on facts, based on scientific estimation of arable land, based on the prevailing productivity of land, based on availability of fertilizer and based on their estimation of population growth. [1]

In the same year (1898) delegates from across the globe gathered in New York for the first international urban planning conference. Their main cause of concern was management of horse manure which had exploded to un-manageable problem in all major cities of the world. In 1894 Times London had predicted that by 1950 every street in the city would be buried nine feet deep in horse manure. Somebody in New York predicted about the same time that by 1930 horse shit would rise to Manhattan’s third-storey windows. All policy efforts to mitigate the problem offered no solutions. Urban planning conference broke up in three days instead of the planned 10 day schedule. [2]

Within 15 years after Sir Crookes made his predication a German Scientist Bosch invented a technology for large scale production of inorganic nitrogen fertilizer. Today almost half of the nitrogen in our body would have passed through such a factory. The invention of internal combustion engine was the environmental savior. It managed within two decades to address the problem that was driving nations around the world nuts. They also released significant land for farming which was hitherto being used to feed the horse and other draught animals.[3]

These solutions to the society’s vexing problems were not found by means of depopulation of society or by policy directions that reduced travel and commerce. It came about from human ingenuity and innovation. The internal combustion engines improved mobility, revolutionized travel and agriculture and helped the mother earth to sustain seven billion people without falling into the Malthusian trap.

With the exploding usage of these IC engines, today we are faced with the negative externalities of greenhouse gases (incidentally the methane gas produced by the ruminating animals produce 50% more greenhouse impact than the transport sector!) from this technological magic and we are worried about future of our energy options and global warming. In the same way the urban planning conference on horse manure failed to produce results, the Copenhagen Summit on climatic control was unproductive. The reason was not lack of intention. But because the marginal cost of discipline is much more than the benefit; not just for individuals, but also for countries. Garett Halden has nicely explained this “tragedy of commons”; the problem of free riding.[4]

We have to have innovations to address this. Not just knee-jerk relations based of fads and fashions. The renewable energy sources today have not reached the level of scalability to solve the global energy problem. Many of them, on a total input-output ratio of energy spent and energy output is quite inefficient and often a net consumer of energy. Matt Ridley has pointed out this conundrum with an interesting analysis. “Today about 125 kwh per day is the average energy consumption of a British national. Let us assume that we managed to brig it downto100 kwh which is to be supported with 25% each from nuclear, wind and solar, 5% each from bio-fuel, wood, wave tide and hydro. Then there would be sixty nuclear power stations, wind farms would cover 10% of entire land, solar panels covering an area the size of Lincolnshire, eighteen Greater Londons growing bio-fuels, forty seven new forests growing fast rotation harvested timber, hundreds of miles of wave machines off the coast, huge tidal barrages in the Seven estuary and Strangford Lough and 25 times as many hydro dams in the rivers as there are today’ Still with frequent power cuts.” [5]

We need to incentivize and encourage game-changing innovations and not hope for altruistic actions by individuals and countries represented by their political masters or jump at everything that sound green or organic without analyzing its true cost and benefit. We cannot be carried away by such dreams and take retrograde steps of arresting economic growth that would do injustice to billions of global citizens who hope to share some part of the benefit of human progress, massive drives to bio-fuels that will reduce land under cultivation leading to food shortage or hijack more rain forests. If we take this path the cure we are attempting will end up being a bigger disaster.

“Our dilemma is that we hate change and love it at the same time; what we really want is for things to remain the same but get better.” Sydney J. Harris
Related Reading: Question of Existence
References
[1], [3],[5] The Rational Optimist, Matt Ridley
[2] From Horse Power to Horsepower, Eric Morris
[4] The Corruption Conundrum, V Raghunathan
Super Freakonomics, Steven D levitt & Stephen J Dubner
The Price of Everything, Eduardo Porter

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Competitive Advantage - A case for blogs and wikis

Mat Ridley in his seminal article “Humans: Why They Triumphed” has put forward an interesting argument that the dramatic progress of Homo sapiens in the recent past is not primarily on account of the increasing size of brain or dramatic increase in human intelligence. But, it has been achieved by the collective intelligence of the society arising out of continuous exchange of ideas. We have managed to build on what others have built. Sir Isaac Newton also expressed this view when he said “If I have seen further, it is only by standing on the shoulders of giants”

The progress in commutation and in communication has enlarged opportunities for people of different culture and experience to contact each other and to exchange their ideas. This has further accelerated the rate of progress. As Mr Ridley expressed brilliantly “The process of cumulative innovation that has doubled life span, cut child mortality by three-quarters and multiplied per capita income nine fold - world-wide - in little more than a century, is driven by ideas having sex”

Books, Radio, TV and even internet (web 1.0) while helping to distribute thoughts and ideas across very long distance, enabled mostly one way interaction; sort of broadcast. Email brought about fast and cheap two way communication and it exploded opportunities for human collaboration.

The recent innovation in Information technology (web 2.0 also supported by progress in mobile technologies) has brought about dramatic changes in communication by making it “two-way” enabling seamless collaboration.

Very often these tools for two-way collaboration like face book, twitter, wiki and blogs are seen by many as either as geeky or as non-serious pastime, juvenile indulgence or even waste of time. Therefore many companies and organisations prohibit access to such tools as they see these as risky distractions.

As these tools are seen as such distractions, the senior management is not giving due attention to how these concepts can alter the way we work and alter the way we collaborate. With so little interest (or so high ignorance), we are unable to harness the power of these tools.

The study by American Sociologist Mark S. Granovetter on the Strength of weak ties is quite relevant in this context. According to this study, for most people their network friends with whom they enjoy strong relationship is quite small, limited and almost culturally and intellectually incestuous in nature. Therefore it is the weak ties between groups enable us to collaborate with a more divergent set of people.

It is in this area that collaboration tools like blogs, wikis and social networks offer powerful, intuitive and convenient means. It can help us to build larger network of strong ties and build and maintain a larger network of weak ties. Wikis help in collaborative developments, Face book kind of tools helps to keep the links with a large number of friends.

Many organisations have woken up to these challenges and have established innovative ways of harnessing the power of this collaboration. The book published by Andrew McAfee, Principle Research Scientist at MIT’s Center for digital business titled Enterprise 2.0, the new collaborative tools for your organisations provides excellent insights to why and how on these tools and it is worth reading. I have drawn on the insights from this book to write this post.

At present this is relatively a new concept and not widely adopted. Therefore, those who can exploit this early will be able to build significant competitive advantage. Once this idea gets commoditized and becomes the norm for most of the players, the extent of competitive differentiation possible with this may come down.

‘If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.’ — George Bernard Shaw