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Briefing Document: India’s Digital Public Infrastructure (DPI)

Date: June 26, 2025
Source: Excerpts from Trust over IP Ecosystems and Governance Working Group Meeting
Presenter: Aakash Guglani from the Digital India Foundation.
Topic: Enhancing Trust using Digital Public Infrastructure (DPI)
Excerpt: India’s Digital Public Infrastructure (DPI) and Unified Payment Interface (UPI) revolutionize financial inclusion, bringing over 500 million people into the digital economy. This open-source, mobile-first system builds trust and breaks traditional payment monopolies.

Executive Summary

This briefing document provides an overview of India’s Digital Public Infrastructure (DPI), focusing on its development, impact, and future direction as presented by Aakash Guglani from the Digital India Foundation. The DPI, particularly the Unified Payments Interface (UPI) and Aadhaar, has been instrumental in formalizing India’s economy, empowering its vast and diverse population, and challenging traditional payment monopolies. It represents a unique, policy-driven approach that blends public and private sector participation, aiming for broad inclusivity rather than just serving the affluent.

I. Core Philosophy and Context

• Addressing India’s Unique Challenges: India’s DPI was developed to address the needs of its “100 million plus” households, representing “500 million people” who were largely deprived and excluded from the burgeoning digital economy. Traditional private platforms primarily targeted the “top 1%,” while public approaches lacked state capacity and risked centralization. (00:07:39, 00:10:50)
• A “Digital Public Infrastructure” Approach: India adopted a “distro public infrastructure” model, which emphasizes diversity, choice, openness, and sovereignty. It’s a collaborative effort involving both public and private sectors. (00:11:08)
• Contrast with Other Models: Unlike purely private platforms or a “totally state-led model” like China’s, India’s DPI is designed to be a democratic solution. “We could not go with private platforms, and we never had the state capacity like China to go for a totally state-led model.” (00:09:30, 00:16:40)

II. Key Components and Their Impact

A. Aadhaar: Unique Digital Identity

• Foundation of DPI: Over the last 10 to 15 years, India has established “more than 1.3 billion Aadhaar,” a unique digital identity based on 10 biometrics (fingerprints and iris scan) for “99% of Indians.” (00:11:37, 00:11:50)
• Enabled EKYC: Aadhaar facilitated “EKYC (Know Your Customer),” drastically reducing the cost of customer acquisition for banks. The cost of KYC dropped from “$25 to $1.” (00:12:02, 00:21:16, 00:21:21) This cost reduction made it economically viable for banks, previously reluctant due to high offline verification costs, to open “zero-cost accounts” for the rural and unbanked population. (00:21:21, 00:21:29)
• Broad Financial Inclusion: This initiative, known as “JanDhan Yojna,” led to “more than 500 million people [having] bank accounts, which is totally zero cost.” (00:19:53, 00:21:10)

B. Unified Payments Interface (UPI)

• Solution to Payment Friction: UPI addressed significant problems in India’s financial landscape, including limited digital transactions, high costs for credit card usage, reliance on paper receipts, and lack of “information collateral” for poor individuals seeking credit. (00:15:08, 00:16:56)
• Massive Adoption and Interoperability: As of March 2025, UPI recorded “more than 18 billion transactions.” (00:18:30)
• Over 200 banks are integrated, and it’s “totally interoperable.” A payment between a customer from Bank A and a merchant from Bank B takes “less than 10 seconds” via a QR code scan. (00:18:37, 00:18:42, 00:18:54)
• There is “no MDR (Merchant Discount Rate)” for most transactions, which incentivizes small vendors like vegetable sellers to adopt digital payments. (00:19:04, 00:19:15)
• “Every part of the country is using UPI,” demonstrating “deeper usage” even in poorer regions. (00:31:47, 00:31:52)
• Economic Empowerment: For retailers, UPI reduces the “cost of business” by allowing them to “service 3-4 people at a time” without handling cash and change. (00:29:21)
• It empowered women by ensuring that earnings from their stores went directly to their bank accounts, preventing misuse of physical cash. (00:30:13, 00:30:24)
• Challenging Global Monopolies: UPI has fundamentally reshaped the global payment landscape. It involves a diverse range of participants including “Visa, Mastercard, Google Pay, Phone Pay, American Express.” (00:33:45, 00:33:50)
• “It is not dominant by two major players,” effectively “break[ing] monopoly of private players.” (00:33:50, 00:33:58)
• UPI has “crossed the transaction volumes of Visa and Mastercard combined.” (00:34:14)
• “46% of real-time payments across the world happen out of India.” (00:34:21)
• Beyond the “Bottom of the Pyramid”: DPI, including UPI and EKYC, has also benefited the middle and upper-middle classes. The reduced KYC cost facilitated the opening of “more than 190 million DMAT accounts” (online stockbroking accounts) between 2016 and 2024, many for “first-time users.” (00:34:43, 00:35:08, 00:35:14, 00:35:52) This formalizes the economy and encourages savings.

III. Enablers and Policy Framework

• Government Subsidies: An ongoing annual government subsidy of “$0.2 billion for MDR” (Merchant Discount Rate) for UPI usage is in place. This is viewed as an investment in “public railroad” or “public highway” infrastructure due to its immense “inclusion value.” (00:40:41, 00:40:54, 00:41:09)
• Agile Policy: The success of DPI is underpinned by “agile policies.” Examples include:
• The central bank’s allowance for EKYC (2012-2013). (00:45:04)
• An IT Act making “digital documents equivalent to offline documents” for digital locker services. (00:45:21)
• The RBI’s Digital Payments Committee recommending UPI. (00:45:49)
• Government procurement shifting to “totally digitally” platforms using UPI. (00:46:39)
• Leadership and Trust: The Prime Minister’s public use of UPI and foreign leaders using it in India “enhances trust in people,” creating a “virtuous cycle.” (00:47:01)
• Mobile-First, Low-Tech, Multilingual: The platforms are designed to be mobile-first, multilingual, and low-tech, supporting feature phones and even “offline availability.” (00:39:31, 00:39:38)
• Internet Penetration: Government efforts to provide “free internet” increased coverage from 25% to 48%, a “major contributor for UPI.” (00:33:11)
• Indigenous Development: All platforms are “indigenously made,” addressing specific Indian problems. (00:39:38)

IV. Future Directions and Challenges

• Next Stage: Credit Enablement: With 500 million bank accounts and 1.2 billion digital identities, the focus shifts to empowering users by providing credit. (00:36:00, 00:36:26)
• Account Aggregator: A framework allowing individuals to consent to share their financial data between banks, mutual funds, insurance providers, etc., using the EKYC framework, to facilitate consumer and business loans. (00:36:41, 00:36:53)
• Open Credit Enablement Network (OCEN): This leverages the transaction data from informal vendors (e.g., vegetable sellers) who now have “information collateral” on their transaction frequency and average ticket size, making it “easier for banks to also financialize them.” (00:37:29, 00:37:35, 00:37:49) This moves DPI beyond just a base to “formalize the economy.” (00:37:49)
• Global Export of DPI: India aims to share its open-source DPI frameworks, including UPI APIs on GitHub, “freely to anyone around the world.” This includes cross-border payment solutions and sharing its vaccination system. (00:38:16, 00:38:34, 00:38:42)
• Future Open Data Platforms: The “India Stack was the beginning,” with future initiatives including digital commerce, online financial information sharing, online credit availability, digitization of health records, AI-based voice, and digital skills. (00:38:54, 00:39:04)
• Tech Sovereignty: India advocates for “tech sovereignty” to avoid reliance on foreign private entities that could “cut off my access” due to geopolitical tensions, as seen in the Russia-Ukraine war. The aim is to prevent private companies from engaging in “geopolitical positioning.” (00:48:14, 00:49:06, 00:49:32, 00:49:45)
• Fraud and Cybersecurity: With massive scale, the system faces “more than a million cyberattacks” annually, including those from state and non-state actors. (00:51:38, 00:51:49, 00:51:53)
• Common frauds include “digital arrest” scams using AI-based voice to demand UPI transfers. (00:53:00, 00:53:07)
• RBI is implementing measures like mandating brokers to use “authenticated UPI IDs,” displaying the recipient’s name before transfer, and nudging users not to pay while on a call. (00:55:54, 00:56:03, 00:56:10)
• The direct debit nature of UPI makes reversing fraudulent transactions difficult once money is transferred. (00:54:47)
• Ongoing efforts include public advisories and potential future escrow services. (00:53:23, 00:57:00)

V. Conclusion

India’s DPI journey, marked by the success of Aadhaar and UPI, demonstrates a powerful model for digital inclusion and economic formalization in a democratic context. By leveraging agile policy-making, strategic government investment, and open-source technology, India has built a robust digital public good that empowers its citizens and offers significant lessons for the Global South. The ongoing challenge lies in mitigating fraud and expanding the system to foster greater financial empowerment through credit, while maintaining technological sovereignty.

For more details, including the meeting transcript, please see our wiki 2025-06-26 Aakash Guglani & Enhancing Trust using Digital public Infrastructure (DPI) – Home – Confluence