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Wednesday, March 27, 2024

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"

Thursday, June 16, 2022

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

Friday, July 3, 2020

Enabling a Paradigm Shift in Social Protection through BECKN

Delivery of social protection measures is a big challenge to any government; especially in a developing country.  Social protection program has three key components.

The first component is how we can uniquely identify the beneficiary and enrol them into the program. Digital Id revolutionised this part. The pandemic demonstrated that the countries which have established a foundation of digital id can manage the outreach much better than a country that is lacking in this area. Countries which have gone one step forward and have established a somewhat comprehensive registry of uniquely identified deserving beneficiaries did even better.

The second component is the payment system. Building on the foundation of Digital ID, in India we have introduced Unified Payment Interface (UPI) which is a completely open and interoperable protocol that has transformed the payment system.  As of now, UPI handles more than 1.25 billion transactions per month which is more than four times the volume of transactions handled by the Credit / Debit card network every month. We are now in the process of building a next layer on top of it to provide a digital voucher using completely open protocol. This could be a straightforward money voucher, or it could be a voucher that is meant for a specific product if the government wants to ensure that the benefits are provided in kind with respect to certain goods and services.

The third element is the market including the supply chain, and it is still a challenge. That is why the governments are forced to run the whole physical operation of procurement, supply chain management and retail shops. Often very very inefficiently.

BECKN foundation established by Nanden Nilekani has come out with a brilliant solution to this problem. It has published and open protocol specification which can completely revolutionize the marketplace.

What is the challenge it is attempting to solve?  Digital marketplace is a big boon; but the market is still heavily siloed.  It is increasingly becoming walled gardens of few players. Take for example retail. There are  a few large aggregators like amazon/ big basket/ Alibaba They are doing a great job; but, they are walled gardens. Same is the case with delivery or mobility or health service. It is a pain for the consumer who must look at multiple apps to make an ideal choice. This limits the choice and makes markets inefficient.

The service providers are also constrained. Unless you are a part of the aggregator platform you are at a big disadvantage in terms of discoverability.

BECKN protocol addresses this issue for both the service provider and the consumer. It is a paradigm shift; we are making internet, small business friendly and not small business internet friendly.

A simple adapter to the payment system or inventory management system based on BECKN protocol can provide any service provider equal access to the market whether he is big or small. Any frontend app which is comfortable to the consumer; could help him or her to access all the options seamlessly if it has a BECKN based connector to the network. It may be WhatsApp may be telegraph may be Google map or a special app provided by the government.

These mean simplification of service delivery [e.g. one stop payment, personalized workflows combining multiple services, granular view of events as and when they occur], freedom of choice for consumers, stitching of suppliers to fulfil a comprehensive service, much better (network driven) view of consumer demand and ability of suppliers to fulfil that demand

Such a marketplace has also the potential for bringing dramatic innovations in terms of option to the beneficiary. Once such an Open Benefit Delivery Network is in place, governments can focus on scheme design and enrolling the beneficiaries and reaching him the subsidy / financial assistance . Then leave the markets to make the best offer.

The beauty of this solution is that we are not talking about huge investment in a new platform or software solution. The service providers at a very low cost can be enabled to plug into the market. We are democratising the market just like HTTP democratised the internet. This is not a wishful thinking. We are helping the first solution built around BECKN to go live in India next month and few more are on the way.

It is time to give this a serious try and be an innovator to solve fundamental problems so that we can manage emergencies like the pandemic much better.

“He who is best prepared can best serve his moment of inspiration and desperation.” ― Samuel Taylor Coleridge


Saturday, April 11, 2020

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.

Friday, June 8, 2018

To be or not to be Part 9- Aadhaar: Proving my Identity


Our everyday life is full of interaction with other people or organisations. Depending on the nature of these interactions there could be exchange of credentials. If I walk into a shop to buy a burger, normally the shop keeper does not care who I am. He only needs the price to be paid with acceptable instruments. He may ask for my phone number or address with an intention to be in touch with me with his offers. But I have the choice to give this or not. (Unless of course he is a monopoly supplier at that point of time and I need the service desperately) But if I am trying to access a service or a product which is meant to be provided only to specifically identified persons, the service provider will require evidence to prove my identity.
                         
Based on the criticality of service, the extent of credentials and  / or endorsements that the service provider will ask will be different for different transactions. For example, the passport authority has extensive procedure to establish my identity; often they ask for multiple documents to establish my credentials before they issue a passport. The bankers may have a different way of establishing my identity; especially to meet the compliance requirement relating to KYC. The service providers with whom I have recurrent interactions may often provide me a special token to prove my identity during future interactions with them, thus avoiding extensive identity verification every time I have an interaction with them. These documents/ tokens are generally referred to as functional id. Some service providers may save on the effort required for establishing the id by making use of a functional ID issued by another entity (often government) as an evidence to establish my identity/ credibility.  For example tax id or driving license is often accepted as a proof of identity by many service providers. For evidence purpose and for future investigation they may retain copy of the credentials provided to them.

There are some practical problems associated with the above. (i) As most of the identity creds used are issued by service providers for their clients many people; especially from poor of marginalised segment of the society may not have any such credentials with them as they may not be availing any services in their name from these service providers (ii) most of the entities who provide such documents/ tokens do not publish the process they use to issue the cred making it difficult for the users to judge how good the cred issued by them is (iii) none of the entities that issue the cred (which are often meant to be only for their clients) does provide a mechanism to third parties to verify the authenticity the id token provided; resulting in use of fake id documents by some.(iv) Most of the entities who are issuing the functional ids have effective tools to avoid duplicate id generation. This makes it possible for one person to manage to have multiple identities  (iv) many functional ids are not accepted as proof of identity by all service providers (v)when the service provided is very sensitive or very valuable, the service provider will ask for multiple proofs (sometimes including biometrics) as they are limited faith in many of the functional ids.

UIDAI was established to address these concerns. (i) It is an entity established with a single focus; to issue and authenticate id for all residents of the country, unlike most of the other ids which are issued to limited set of individuals who are often beneficiaries of the service provider (ii) It has established checks and balances of the highest quality to ensure security and privacy of data and has institutional mechanisms in place to keep it updated (iii)it has a very standard and published means of establishing the identity of the person who is being enrolled. These are quite simple and straightforward with clearly defined exception handling mechanism so that practically nobody will be denied an opportunity to enrol (ii) it gives a quick, easy and straight forward means to authenticate the id by third parties and that too only with the consent of the id holder(iii) the biometric characteristics collected makes it almost impossible for a person to obtain multiple ids (iv) it is recognised as a proof of id by almost all service providers (v) it collects bare minimum attributes of a person compared to all other accepted functional ids. UID does not collect or store any attributes other than name, dob, address , sex, father’s name and biometrics in their database.(vi) UIDA does not share the biometrics collected with any other entities which is guaranteed by an act of parliament. Further it does not also collect or save the purpose for which the id was authenticated (vii) it gives an facility for the holders to be enquire online which entities have authenticated their id. This is also enshrined in Aadhaar Act

In this context, many service providers insisting that their clients should provide their Aadhaar as proof of identity is not in anyways overreaching their right and need to establish the identity of their clients. Rather, this is only making their process stronger and makes their services accessible to a larger cross section of the society who otherwise would have been denied of the service. The latter is a major boon for a large cross section of the society who thanks to Aadhaar are able to access a wide verity of services. In a similar fashion the requirement of authentication of id behind each tax id also is helping the Income Tax Department to weed out many instances of multiple tax ids by same person to avoid tax.
 
The database of Aadhaar has quite limited data relating to a person. Aadhaar based authentication is allowed only through registered entities through registered devices. As a part of authentication they do not store the purpose for which the authentication was undertaken by service providers. In this way, UIDAI does not and is not able to profile any of the UID holders or track their activities.  Compared to this all entities who collect information about their clients to issue functional ids and provide services hold significantly more information about their clients. Most of them in electronic form which are often connected to internet without strong security measures in place. Many of them even sell this data to third parties to other agencies. The number of un-solicited mails and sms we get is a proof of this.
 
The big difference in case of Aadhaar is that it provides a means to authenticate the Aadhaar even without sharing the data relating to aadhaar. (UIDAI only provides a yes/ no response to an authentication request. Only in limited and specified cases it also allows certain specified entities to collect the demographic information available with them against consent by the user). Thus the worry that UID database is a violation of privacy is unfounded. Further, compared to most other databases which compile and maintain their client information the security processes are much stronger.  Therefore, in cases where ID is required to be established for service delivery, it is safer for both service provider and recipient to use Aadhaar as proof of id; especially considering the wide coverage of Aadhaar and easy and fast enrolment possible. The service providers may also introduce exception handling mechanism to handle rare cases of not being able to have an Aadhaar or being authenticated with Aadhaar.

Another concern is that if the Aadhaar number of a person is used as proof of id by various service providers, it will give the government a mechanism to track a person extensively. This again is a myth. All services provided will take some kind of functional id as a proof of id. Most beneficiary databases have been converted or in the process of being converted to electronic form. With the modern computing and analytics tools, if the government decides to profile any person they will be able to do so by linking these multiple databases even without Aadhaar being linked.

To protect privacy what we need is a clear legal framework on who can collect what data, what is the disclosure they have to provide to their clients and what should be the data retention and data sharing policy with respect to all entities who collect third party data. Going after Aadhaar is nothing but a folly or just plain ignorance of the landscape of id establishment today.

"In the social jungle human existence there is no feeling of being alive without a sense of identity."

Erik Erikson

Wednesday, April 19, 2017

Guarding Democracy


It is widely accepted that in most cases monopolies are not very good for the economy and society. It is inefficient and lead to increase in price paid by the consumer. In olden days many industrialists used muscle power and/ or political patronage to muster monopoly power. Over the years the policy frameworks have evolved and matured, reducing opportunity for monopoly leading to a more competitive industry structure that encourages innovation and foster efficiency. Disruptive technologies also played a role in unseating established monopolies.

But we are now seeing a new trend in market monopolies. Technology innovations with the support of money power fuelled by PE funds are manipulating the market to build and enable monopolies. For some time it will appear that the consumer is benefitting. But once these new breed service providers decimate their competition and establish difficult to break monopoly on top of the network effect might give no option to the consumer from their monopoly pricing or lack-lustre service. Dr Ajay Shah has published a blog on this topic building on a paper published by him along with  Smriti Parsheera, Avirup Bose  This paper discusses some of the regulatory innovations that is required to address this concern.

This is not just a matter of concern with respect to industry. It is also a matter of concern in politics and in governance. The strength of democracy is that the common man through the majority vote can make a selection of who should govern his country. Though individually nobody would be knowledgeable on all matters, the “wisdom of the crowd” enables collective decisions that is more right in most of the times than even the expert opinion. But democracy may not be very efficient always. Fragmentation of political parties and / or absence of decisive leadership may lead to periods of wild uncertainties. Different countries in the world have experienced this in different periods of time. When a country pass through such uncertainty for a long time hampering growth a large cross section of the society would yearn for a benevolent dictator (a monopoly). In short term this appears like a panacea. . At this point of time if a leader rises and come up with an appealing theme, he will be able to win the heart of the majority.

If he is good leader he be able to make a big difference and could stimulate economic growth and wider acceptance. But if such super-popularity built on emotional themes it could also eventually slip to autocracy. Especially if his team has a large contingent who have no vision or capability they, instead of providing a balanced support structure to the leader, will focus on deification of the leader. Then like the PE funds finance monopolies, a powerful few start selling specious dreams and unfounded fears towards meeting their hidden agendas. When they manage to buy or suppress media the story is complete.. Then the “wisdom of the crowd” becomes mob frenzy which fails to see reason and start dancing to the catchy slogans and clever public relations campaign almost like sheep.

This is what happened in Germany after the First World War. The degeneration of German economy made worse by Versailles’ Treaty made Hitler and his Nazi Party the hope of the German Society. In the first few years of his rule the German Economy turned around and helped recover the “lost Honour” from with the reparations forced by the allied forces. He and his cronies were able to build on this and eventually he became a cult figure. When people lifted their phone instead of a “Hello”, “Hail Hitler became the norm. Those who did not qualify as per the ‘majority norm’ were marginalised and eventually eliminated.

One of the key elements of success of any democracy is how we prevent degeneration to autocracy. India managed when Indira Gandhi through her emergency rule attempted this. Only with the sacrifices of many thinking members of the society we were able to manage to curtail her. That is why we need to nurture a strong opposition who has the capability and popularity to provide strong check and balance and avoid media surrendering it independence. We should not just get carried away by the “Uber Pricing” fuelled by PE funding and should we willing and confident to raise questions where it us warranted if our democracy is to sustain.
It would be folly to argue that the people cannot make political mistakes. They can and do make grave mistakes. They know it, they pay the penalty, but compared with the mistakes which have been made by every kind of autocracy they are unimportant. Calvin Coolidge

Sunday, June 14, 2015

A Requiem for Mother



It was around 1 o' clock in the afternoon on Sunday 31st May 2015. Mom was lying on her bed. My sister Mary, niece Reni, Ambily and I were sitting around. Mom’s eyes were closed and her breathing was strained. Although we had seen similar condition few months ago when she was in the hospital, it still did not feel right and a cloud of foreboding enveloped me.  I wanted her to open her eyes, look at me and smile. I called out “Mother” (in the recent past I had started calling her mother and she used to laugh at this) hoping she would respond as she always did. I did not know what to do. I felt helpless in not knowing how I could help my mom. The only thing I could do was to pray.

I took the hymn book.  The song that came to my mind was “Nearer my God to Thee.” I had my hand on her shoulders gently caressing as I started to sing. I finished the first stanza and was at the refrain “Nearer my God to thee, Nearer to Thee”. Suddenly mom opened her eyes wide and took a deep breath. And that was her last breath.

The song stopped in my throat. Ambily and Reni gave out a gasp. The only thing to be done now was to close those eyelids and kiss her still warm body that would fast turn cold.

As Mary, Reni and Ambily were cleaning the lifeless body and clearing it of all the tubes and wires that were supporting her life, I sat stupefied on the chair.  I couldn’t help thinking about that iron lady who though short in stature, stood tall in her spirits, conviction and confidence.

She was born in 1917, two years short of a century ago. In a time when girls were not allowed to step out of the house, she was lucky to have had a father who sent her to a reputed residential school in Kerala called “Nicholson”. After her higher secondary she went for further studies to a far way land (in those days) Madras at Women’s Christian College (WCC).

After completing her studies she joined the Indian Postal Department as a Post Mistress and later she left this position to take up teaching. A few years later she resigned her job to give more attention to her children although the family income was meagre with the focus her husband had on spreading the word of God.

She took the complete load of running the household allowing her children to focus on their studies. Those were the days when there was no cooking gas, no refrigerator, no washing machine or no mixers. This meant that food had to be freshly cooked, loads of clothes hand washed, all the grinding needed for cooking to be on the grinding stones every day; not to forget the cows in the stable and the hens who also needed attention. It is this sacrifice that has helped all of us children to where we are.

She was a strong personality with exceptional administrative skills. She was a support and guide not just for her children but to many in the local community and church in which she was very active till very late into her life.

She enjoyed a healthy repartee laced with humour, especially those rhymed, with no malice intended. She could beat any smart alecs in a verbal rally with her quick-wittedness. Once one of her students in the Sunday School she taught wanted to prove his smartness.

“Teacher, whom did Cain marry?”

As most of you would know Cain  was the son of Adam as per the Bible and there is no reference about any woman in the story of Adam and Eve other than Eve.

Pat came the reply

“Son don’t worry about somebody else’s wife. Read the scripture and learn about life”

Even in her fading years when her memory started to fail her logical mind was still intact.  Once when somebody came to visit her she could not recollect who it was. When he kept on asking her whether she knew who he was he replied with a smile

“If you don’t know who you are, high time you consult a doctor”

In the last few months she was getting to be younger in her mind. She wanted to dress up and even have some make-up. As the days went by she was turning to  be a little baby who wanted to be hugged and even preferred to be allowed sit on lap. She was so lucky to have Ambily looking after her 24 X 7. For my mother, she was a great companion, a well-qualified nurse, a daughter, a mother and a sister all rolled into one. The luckiest thing that happened for mom in the last one year was having Ambily around.

She was also lucky that all her five children who are scattered around the world could spent time with her in the last one year with the eldest and the youngest spending lots of time. This is the only thing that any parent would want and any child could give in the twilight years. Unfortunately this unfettered togetherness is turning to be a luxury in the new world of abundance.

In the last one year when she was failing in her health I was lucky that my work brought me to Delhi, where she stayed with my sister, every week. Every day when I left for office I would go to look her up and to give her a kiss. I learned to cherish the moment; but there was a nagging thought deep in my heart, “how long”. 

Now the death has come and taken her away. What is left; some memories. As the days go by we try to internalise this vacuum, this feeling of emptiness, ruminating on the old and not so old memories; sometimes happy about those wonderful moments and sometimes with regret about those wasted moments and stupid fights.

We need to look ahead. There are many more loved ones still here with us. Make our time relevant to them, to us and the society around us.  As Oliver Wendell Holmes said “Death tugs at my ear and says “Live, I am coming”” 


No man is an Iland, intire of it selfe; every man is a peece of the Continent, a part of the maine; if a Clod bee washed away by the Sea, Europe is the lesse, as well as if a Promontorie were, as well as if a Mannor of thy friends or of thine owne were; any mans death diminishes me, because I am involved in Mankinde; And therefore never send to know for whom the bell tolls; It tolls for thee: John Donne. (this was the original spelling he used in 1624)