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Digital India, building an e-nation

A slew of government initiatives and a rapidly growing mobile subscriber base are making India a key market for digital innovation
[Article coming from The Review, winter 2012 issue, author Swati Prasad]

A decade back, Baburam Kumar came to Gurgaon, a suburb of Delhi, from a village in Bihar with a few hundred rupees in his pocket. Today, he owns four shops, each fitted with electronic weighing and billing machines, mobile and landline phones and credit card machines. A great believer in technology, this almost illiterate vegetable vendor sends money to his village using internet and phone banking services.

You will find the likes of Baburam Kumar in every corner of the country. India is a land of possibility, and Kumar and his fellow citizens have big dreams. Technology – from eIDs to mobile healthcare – is helping them realize these dreams.

It is a promising market, to say the least. This demographically young nation (half of its 1.2 billion people are under 25) is undergoing several regulatory and eGovernment initiatives that aim to increase convenience and security for its citizens. Meanwhile, India turns out millions of skilled technology graduates every year, many of whom gather in its tech megacities, such as Bangalore. You’ll also find many more contributing to the success of tech giants around the world. In fact, Ajay Bhatt, the inventor of the USB and current Chief Client Platform Architect at Intel, is Indian.
Indians are also enthusiastic tech adopters. For example, the number of mobile phone subscribers increased from 98.78 million in March 2006 to 913.49 million in July 2012 – a penetration rate of 76% and growing. This makes it ripe for all manner of innovation.

Here, we look at some of the areas in which technology is transforming the lives of Indian citizens.

An ID for all

eGovernment initiatives have a key role to play in India. It, along with the other BRIC countries, has a rapidly expanding middle class: according to analyst Frost and Sullivan, it is expected to number 864 million by 2020.

However, more than two-thirds of the population still lives in villages with inadequate banking, education and healthcare services. The new eGovernment initiatives aim to address these challenges by making the system more transparent while reducing corruption, fraud and the role of intermediaries – problems common to many nations.

The most high-profile initiative is Aadhaar, an identity program that will cost INR 180 billion (US$3.4 billion), according to official estimates. Run by the Unique Identification Authority of India (UIDAI), Aadhaar is a unique 12-digit number that will be issued to residents who opt in – so far, more than 200 million have enrolled. In addition, the government plans to enroll all Indian residents who are over five years old to create an identity database known as the National Population Register (NPR).

The Aadhaar numbers will be stored in a secure central database and linked to the basic demographic and biometric information – such as facial and fingerprint records – of each individual. These records are easily verifiable online, allowing government departments from all corners of this vast nation to ensure they have the correct information on individual citizens.

This ambitious project is not without its challenges. It relies heavily on internet access, but internet penetration in India is growing – from 2.9% in January 2008 to 10.07% in August 2012.

While the country works to bolster internet access further, Resident Identity Cards (RICs) are filling the gap. First launched in 2007 and extended after the 2008 terror attacks in Mumbai, the RIC smart card uses a microprocessor chip that carries data, photographs and fingerprints. It incorporates security features such as hot-stamped holograms and micro text, and can also be used offline when internet access isn’t available.

The RICs work hand in hand with Aadhaar, because they contain each person’s 12-digit Aadhaar number for identity verification. RICs can also be  used to facilitate government programs, the public distribution system, and electoral and other financial services.

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Safer, smarter cards

India is one of the fastest-growing countries in the card payment segment – the market has been recording an annual growth rate of 30% for the past five years. There are already 130 million cards in circulation, and this number is increasing quickly due to the enthusiastic consumption of India’s burgeoning middle class.

One way the card market is developing is in the security features included on payment cards. India’s cards, like those in the US, still use magnetic stripes, which most experts believe leaves the cards open to fraud. And with lost, stolen and counterfeit card fraud costing INR 130 million (US$2.37 million) a year, a solution is needed.
It is coming in the form of the EMV (Europay, MasterCard, Visa) standard, which uses a secure chip and PIN system to deter fraudsters.

The good news for consumers (and banks) is that the Reserve Bank of India (RBI) has thrown its weight behind EMV, directing banks to migrate to EMV chip cards and other PIN-based cards by 30 June 2013.

Another solution could be the biometric information that powers Aadhaar: the RBI has suggested that Aadhaar-based biometric identification could be used instead of PINs for all card transactions, including at ATMs and point-of-sale terminals.

 

Empowerment through phones

With the rapid growth in wireless telephony, mobile phones are fast emerging as an important point of internet access in rural India. Teledensity in rural areas is a respectable 39.54% and, even in India’s poor states, one in three rural households has a mobile phone.

The Indian government wants to improve this rate further and has plans to provide every family living below the poverty line with a mobile phone to encourage financial inclusion.

India's consumers are also embracing smartphones. While India will account for only 2.5% of global smartphone shipments in 2012, IDC Asia Pacific says that this figure is poised to increase to 8.5% in 2016. And, once that happens, near-field communication (NFC) will be the technology to watch.

Some players are already ahead of the field. The Delhi Metro Railway Corporation has thrown its weight behind NFC, experimenting with NFC ticketing for its passengers. Late in 2011, a company announced it was running pilot projects for NFC-based micro-banking and social welfare facilities in a number of areas of Mizoram, Andhra Pradesh and Uttarakhand. And for those without NFC-enabled smartphones, a Chennai-based company launched an NFC sticker that can be used for mobile payments. Users can simply tap the sticker on participating retailers’ Android NFC handsets to pay.

So, while the interest is there, NFC is still at a nascent stage in India. Banks are yet to be equipped with the technology that would augment eCommerce using NFC – and infrastructure needs to be improved further to help large-scale adoption.

Mobile healthcare, on the other hand, is well developed in India. According to a global study by PwC, India ranks second among developing economies in the adoption of mobile healthcare, or mHealth, which supplements India’s primary health centers (PHCs), particularly in semi-urban and rural areas. According to PwC, the mHealth market in India will be worth INR 31.8 billion (US$0.6 billion) by 2017.

mHealth has already begun to improve the PHC system in the country. Sehat Saathi, for instance, is a rural telemedicine system that is used to bring medical care to those who may be many miles from a PHC. A trained non-medical operator collects data – from electrocardiograms to lung function – from the patient that is then analyzed and diagnosed by trained physicians back at the PHC. In the pilot program in Kanpur, Uttar Pradesh, 700 patients received eye treatment in a period of six months.

If India continues on its present path, Baburam Kumar and his family could benefit from not only mHealth facilities, but also streamlined government services, quick and easy mobile payments and remittances, and all manner of other digital developments. A bright future indeed.

Bringing banking to the unbanked

In India, nearly 40% of people lack access to formal financial services and remain largely “unbanked” – partly due to the fact that only 38% of bank branches are in rural areas. To increase financial inclusion, the Indian government has launched a campaign called Swabhimaan.

The program will use various models and technologies to ensure there are banking facilities in areas with a population of more than 2,000. It’s all done using business correspondents (BCs), where banks engage NGOs and micro-finance institutions to act as intermediaries between their customers and them.

Mobile technology is playing a key role in this campaign. The BCs use handheld mobile devices that store customers’ information, from fingerprints to account details. Customers are given an account number, while the BCs handle deposits and dispense cash. The government hopes in time that the BCs will be able to offer micro insurance and access to pensions.

Download

Micro Finance

Micro Finance

Accelerating micro banking for the under banked people to benefit from simplified access to financial services

Micro Finance [PDF - 1.4mb]

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How rural India is boosting consumption

Consumption in rural India is growing faster than in urban areas, according to a survey by ratings and research firm CRISIL. In 2011/12, people in rural parts of the country spent INR 3,750 billion (US$69 billion) more than the previous year, significantly higher than the urbanites’ figure of INR 2,994 billion (US$55 billion).

Underpinning this growth in rural consumption is a strong increase in incomes due to rising non-farm employment opportunities and the government’s job schemes. National Sample Survey Organization data shows that, from 2004/05 to 2009/10, the number of rural construction jobs rose by 88%, while the number of people employed in agriculture fell from 249 million to 229 million.

Download

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Micro Finance [PDF - 1.4mb]