## wpiea2021052-print-pdf

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---

### Introduction and purpose
- India implemented the “India Stack” over the past ten years to:
  - promote financial inclusion through increased access to financial services;
  - improve delivery of public services and benefits; and
  - increase competition in the Indian financial sector.
- Early outcomes:
  - large increases in the number of individuals with bank accounts and expansion of digital payment services;
  - more gradual progression in active use of new bank accounts.
- Emphasis on synergies across three public goods:
  - digital ID with a low entry cost;
  - inter-operable payments APIs in a regulated space; and
  - mechanism to operationalize individuals’ control over personal data via regulated intermediaries (account aggregators).

### India Stack architecture and regulatory design
- Four layers of infrastructure and standards:
  - (i) digital identity;
  - (ii) an inter-operable payments interface;
  - (iii) digitalization of documentation and verification; and
  - (iv) a consent layer for management of individual data through regulated intermediaries.
- Data fiduciaries (account aggregators) aim to reduce privacy and identity-theft risks by operationalizing user-authorized data portability and interoperability.
- Notable design choices:
  - extensive public infrastructures and standards to enable user-authorized data portability and interoperability across the economy;
  - centralized digital ID (Aadhaar) with APIs for biometric/demographic authentication.

### Aadhaar digital ID: rollout, features, governance
- Timeline and technical features:
  - Universal ID system announced and institutions created in 2009.
  - Name Aadhaar announced in March 2010.
  - First Aadhaar number issued in September 2010.
  - Aadhaar number length: twelve-digit number.
  - Aadhaar biometric enrollment captures: photograph, ten fingerprints, and two iris scans.
  - Mandatory demographic variables in Aadhaar: name, address, gender, and date of birth.
- Enrollment and coverage:
  - Registration does not require previous physical identification.
  - Aadhaar database contains basic personal data on almost all Indian residents.
  - Cumulative unique Aadhaar numbers registered since launch in 2010 reached about 600 million within three years (roughly half the Indian population).
  - Over 90 percent of the Indian population covered by 2017.
  - Half of identity holders had linked their bank accounts to their Aadhaar number by 2017.
- Governance and institutional features:
  - Unique Identification Authority of India (UIDAI) facilitates collection, verifies uniqueness, and stores information in a central identity repository.
  - UIDAI may charge a fee for providing identification services deposited into a government account.
  - UIDAI is subject to extensive regulation requiring protection of individuals’ privacy and security of core biometric data.
  - Aadhaar ID does not itself confer citizenship, rights, or entitlements.
- Core technologies and enabling actions:
  - APIs enabling biometric and demographic authentication and links to individual phones for One Time Password (OTP) authentication.
  - 2013 RBI action: enabled Aadhaar ID holders to authorize banks to obtain electronic verification from UIDAI, creating e-KYC that shares only relevant demographic data and photograph after consent.

### Payments, UPI, and fintech evolution
- Pre-reform landscape (numeric baselines preserved in next section).
- Key payment system developments:
  - RTGS established in 2004; Payment and Settlement Systems Act, 2007 provided legal basis for netting and settlement finality.
  - NPCI launched Aadhaar Payments Bridge (APB) and Aadhaar Enabled Payments System (AEPS) by 2011.
  - UPI introduced in 2016 to expand interoperability beyond IMPS and simplify transfers between stored-value accounts at banks or non-banks; supported Peer to Peer (P2P) transactions.
  - UPI architecture enabled any application to send or receive money directly from bank accounts, increasing competition for user acquisition and innovation.
  - NPCI processed 48 percent (by value) of all electronic payment transactions in India by 2018.
- Impacts of UPI and mobile payments:
  - UPI accelerated volume growth of low-value retail transactions and brought in segments of the unbanked whose transactions formerly fell outside the formal financial system.
  - Mobile money accounts now serve over half the population (GSMA, 2018).
  - Paytm serves over 400 million users and over 14 million businesses as of 2019 (Business World, 2019).
  - Mobile payments estimated to account for 0.3 to 0.6 percent of GDP in India (BIS 2019, FAS 2019).
  - Prior to expansion, India had approximately 20 million credit cards and only two million digital payment acceptance points.
- Regulatory responses:
  - RBI created differentiated banking regime including payments banks and small finance banks.
  - Payments banks: can provide payment and domestic remittance services and demand deposit products but are not permitted to lend (RBI, 2014).
  - Non-bank participation through non-bank PPIs allowed since October 2018.
  - Full participation requires entrants to accept regulation as financial entities or link services through regulated banks.

### Financial inclusion: accounts, usage, and limits
- Pradhan Mantri Jan Dhan Yojana (JDY):
  - Launched: August 2014.
  - Objectives: provide banking access for unbanked households with no-frills, zero balance account, debit card, mobile banking, overdraft facilities, and basic life insurance (~US$440) to all account holders.
  - Account uptake:
    - 166 million accounts within one year of inception.
    - almost 384 million accounts in operation in 2019.
    - 80 percent of accounts reside in public sector banks.
    - Half of these accounts opened in rural areas (RBI, 2018).
  - JDY accounts could be opened using Aadhaar and linked for government benefit transfers.
  - Agarwal et al. (2019): number of accounts increased at a rate of 14 percent per month since the start of the program.
  - Account balances: 77 percent of accounts maintained a positive but low balance (approximately US$7 in 2017, about 60 percent of the rural poverty line in India).
- Usage and inactivity:
  - Agarwal et al. (2019): 81 percent of new consumers do not deposit any money into their new accounts; 87 percent do not withdraw any cash after opening the account.
  - Nearly half (48.5 percent) of accounts remain inactive (no deposit or withdrawal within a year), the highest inactivity rate in the world.
  - Inactivity rate was 23 percent in 2014.
  - Demirgüç-Kunt et al. (2018) data (2011 to 2017): share of adults saving with a financial institution increased from 12 to 20 percent; percent of adults who borrow decreased from 8 to 7 percent; in 2017, about 39 percent reported sending or receiving domestic remittances using a financial institution.
  - Observed barriers to usage include low financial and digital literacy; transaction costs; need for tailored financial products to overcome frictions.
  - Note: a 2018 reform allowed UPI payments without requiring a bank account link (pre-paid wallets funding possible), complicating attribution of UPI to increased active bank-account use.

### Credit intermediation, credit information, and financial market development
- Affordability and intermediation costs:
  - India scores low on affordability of financial services and ease of access to loans (WEF, 2019).
  - Unit cost of financial intermediation proxied by banks’ net interest margin: hovered about 3 percentage points in India during the past decade.
  - State-owned banks account for nearly 70 percent of assets in the banking sector.
- Credit information systems:
  - CIBIL established in 2000; three other CICs after CICRA in 2005.
  - As of 2014, CICs coverage was 19.8 percent of adult population and lacked many data types (RBI, 2014).
  - From 2015, RBI required all credit institutions to submit data on individuals and firms in the formal sector.
  - Currently CICs cover approximately 56 percent of the population (World Bank Doing Business, 2019).
  - Large portion of informal sector businesses and lower-income households remain excluded from credit registries.

### Data sharing, consent layer, and fiduciary model
- India’s consent layer uses a fiduciary model (account aggregators) responsible for managing subjects’ data and consent; fiduciaries may not access or store the data being shared but may charge fees.
- Fiduciary functions:
  - Authenticate subjects using digital ID.
  - Link digital ID to verified digital documents (paperless layer) to attest to provenance of identity, data, and documents.
  - Serve as a trust engine reducing information asymmetries for third-party service providers.
- Data classes and expansion:
  - Data sharing in India spans more classes of data than many jurisdictions and includes consumers and small businesses; intended later expansion to insurance and health data.
  - Concerns that bigtechs can obtain financial data from incumbents while not reciprocating non-financial data (social media, web browsing, location), which lie outside the open-banking perimeter but can inform credit assessments.

### Comparative design choices and regulatory trade-offs
- Distinguishing features of India Stack:
  - comprehensiveness across layers;
  - centralized digital ID;
  - public-sector standards and open APIs facilitating (but not mandating) interoperability;
  - operationalization of consent via data fiduciaries.
- Policy trade-offs:
  - Interoperability fosters competition and contestability.
  - Compliance costs of financial regulation for participants may raise barriers to entry for smaller providers.
  - Network scale advantages of bigtech providers could lead to market dominance despite interoperability.
  - Consumers were not charged for UPI use in the first few years (Google Payments, 2019).

### Risks, operational challenges, and research needs
- Cyber-security risks from open-API architectures require policies ensuring adequate investments in data security and individual privacy by regulated entities.
- Public trust in aggregators’ data management practices will be crucial for take-up; attitudes to data sharing vary cross-country.
- Open research questions:
  - implications for competition, market structure, financial stability, efficiency trade-offs;
  - whether regulatory compliance costs deter smaller entrants;
  - effects of interoperability versus network scale advantages in determining market concentration.
- Practical limits and monitoring needs as data classes expand to non-financial sectors, including health.

### Policy implications and conclusions
- India Stack operationalized open banking principles through interoperability and data sharing, facilitating financial inclusion as reflected in increased high volume-low value payment transactions.
- Publicly provided digital infrastructures can support a broad range of financial services and deepen financial inclusion and development.
- The data fiduciary model could operationalize individual control over personal data while facilitating privacy-preserving data sharing; monitoring approved account aggregator fiduciaries is important as data classes expand.
- Policymakers should balance stability and contestability by calibrating regulatory requirements and supporting competition while investing in privacy and cyber-security frameworks.

### Key numeric facts and milestones (preserved exactly)
- Bank accounts: increased from 35 percent of adult population in 2011 to 80 percent in 2017.
- Banking sector: 61 percent of banking assets held by public sector banks.
- Currency in circulation: approximately 12 percent of GDP.
- ATMs: 21 per 100,000 adults.
- Aadhaar biometric enrollment captures: photograph, ten fingerprints, and two iris scans.
- Aadhaar number length: twelve-digit number.
- Mandatory demographic variables in Aadhaar: name, address, gender, and date of birth.
- Timeline notes:
  - Universal ID system announced and institutions created in 2009.
  - Name Aadhaar announced in March 2010.
  - First Aadhaar number issued in September 2010.
- Cumulative Aadhaar coverage:
  - about 600 million within three years (roughly half the Indian population).
  - over 90 percent of the Indian population by 2017.
  - half of identity holders had linked their bank accounts to their Aadhaar number by 2017.
- JDY account statistics:
  - 166 million accounts within one year of inception (August 2014 launch).
  - almost 384 million accounts in operation in 2019.
  - 80 percent of accounts reside in public sector banks.
  - Half of these accounts opened in rural areas (RBI, 2018).
  - Agarwal et al. (2019): number of accounts increased at a rate of 14 percent per month since program start.
  - 77 percent of accounts maintained a positive but low balance (approximately US$7 in 2017, about 60 percent of the rural poverty line in India).
- Usage/inactivity statistics:
  - Agarwal et al. (2019): 81 percent of new consumers do not deposit any money into their new accounts; 87 percent do not withdraw any cash after opening the account.
  - Nearly half (48.5 percent) of accounts remain inactive (no deposit or withdrawal within a year).
  - Inactivity rate was 23 percent in 2014.
- Credit information coverage:
  - As of 2014, CICs coverage was 19.8 percent of adult population.
  - Currently CICs cover approximately 56 percent of the population (World Bank Doing Business, 2019).
- Payments and fintech statistics:
  - NPCI processed 48 percent (by value) of all electronic payment transactions in India by 2018.
  - Mobile money accounts now serve over half the population (GSMA, 2018).
  - Paytm serves over 400 million users and over 14 million businesses as of 2019 (Business World, 2019).
  - Mobile payments estimated to account for 0.3 to 0.6 percent of GDP in India (BIS 2019, FAS 2019).
- Banking intermediation cost:
  - Unit cost proxied by banks’ net interest margin: hovered about 3 percentage points in India during the past decade.
- Market structure:
  - State-owned banks account for nearly 70 percent of assets in the banking sector.

*Italic: Source — Excerpt from wpiea2021052-print-pdf (IMF).*

### References ___________________________________________________________ 24

### wpiea2021052-print-pdf - References ___________________________________________________________ 24

### Introduction and purpose
- Over the past ten years, India implemented the “India Stack,” a set of application programming interfaces (APIs), open standards, and infrastructure components designed to:
  - promote financial inclusion through increased access to financial services;
  - improve delivery of public services and benefits; and
  - increase competition in the Indian financial sector.
- The India Stack’s early successes include large increases in the number of individuals with bank accounts and expansion of digital payment services, with more gradual progression in active use of new bank accounts.
- The paper emphasizes synergies across three public goods: (i) digital ID with a low entry cost; (ii) inter-operable payments APIs in a regulated space; and (iii) a mechanism to operationalize individuals’ control over their personal data via regulated intermediaries (account aggregators).

### India Stack architecture and regulatory design
- The India Stack comprises four layers of infrastructure and standards:
  - (i) digital identity;
  - (ii) an inter-operable payments interface;
  - (iii) digitalization of documentation and verification; and
  - (iv) a consent layer for management of individual data through regulated intermediaries.
- The introduction and regulation of data fiduciaries (referred to and regulated as “account aggregators” in India) aim to reduce privacy and identity-theft risks associated with wider data sharing.
- India’s approach is notable for providing extensive public infrastructures and standards to operationalize user-authorized data portability and interoperability across the economy.

### Indian financial landscape prior to reforms
- In 2011:
  - 35 percent of adults in India possessed a bank account.
  - 12 percent of adults saved with a financial institution.
  - 8 percent of adults borrowed with a financial institution.
- The banking sector was dominated by public sector banks holding 61 percent of banking assets.
- Currency in circulation amounted to approximately 12 percent of GDP.
- The availability of ATMs was 21 per 100,000 adults.
- Prior modernization steps included:
  - establishment of the Real Time Gross Settlement (RTGS) system in 2004;
  - Payment and Settlement Systems Act, 2007, empowering the Reserve Bank of India (RBI) to regulate payment and settlement systems and provide settlement finality and a legal basis for netting.

### Launch and features of Aadhaar digital ID
- Aadhaar identification system:
  - Launched in 2010; the name Aadhaar announced in March 2010; first number issued in September 2010.
  - A twelve-digit number randomly assigned at enrollment, ensuring no personal information is encoded in the number.
  - Enrollment captures biometric identifiers: photograph, ten fingerprints, and two iris scans.
  - Registration does not require previous physical identification.
  - The Aadhaar database contains basic personal data on almost all Indian residents.
- Mandatory demographic variables collected at enrollment: name, address, gender, and date of birth.
- Aadhaar objectives and capabilities:
  - Improve delivery of government services and reduce leakages in targeting.
  - Digitally authenticate individuals for public and private services, enabling biometric checks to reliably verify identity, including online authentication.
  - Interoperability was built into Aadhaar by design, unlike several legacy ID systems in India (tax cards, voting cards, drivers licenses).
- Governance and institutional features:
  - The Unique Identification Authority of India (UIDAI) is a public agency that facilitates collection, verifies uniqueness, and stores information in a central identity repository.
  - UIDAI may charge a fee for providing identification services deposited into a government account.
  - UIDAI is subject to extensive regulation requiring protection of individuals’ privacy and security of core biometric data.
  - The Aadhaar ID does not itself confer citizenship, rights, or entitlements.

### Payments, data, and financial inclusion dynamics
- Reliance on cash prior to reforms meant many transactions were unrecorded, producing no data for use as signals of company cashflow or consumer spending.
- The India Stack and related reforms created a technological foundation that enabled subsequent expansion of financial access and intermediation.
- The paper notes that, based on other countries’ experiences, expansion of digital payments can support broader financial services provision by enabling products that leverage data harvested from payments activity.

### Key numeric facts and milestones (preserved exactly)
- Bank accounts: increased from 35 percent of adult population in 2011 to 80 percent in 2017.
- Banking sector: 61 percent of banking assets held by public sector banks.
- Currency in circulation: approximately 12 percent of GDP.
- ATMs: 21 per 100,000 adults.
- Aadhaar biometric enrollment captures: photograph, ten fingerprints, and two iris scans.
- Aadhaar number length: twelve-digit number.
- Mandatory demographic variables in Aadhaar: name, address, gender, and date of birth.
- Timeline notes:
  - Universal ID system announced and institutions created in 2009.
  - Name Aadhaar announced in March 2010.
  - First Aadhaar number issued in September 2010.

*Source: wpiea2021052-print-pdf - References ___________________________________________________________ 24*

### 1.2 Bn

### 1.2 Bn

### Aadhaar rollout and enabling technology
- Cumulative unique Aadhaar numbers registered since launch in 2010 reached:
  - about 600 million within three years (roughly half the Indian population).
  - over 90 percent of the Indian population by 2017.
  - half of identity holders had linked their bank accounts to their Aadhaar number by 2017.
- India’s digital ID is not unique globally; similar schemes exist in Estonia and Uruguay.
- World Bank statistic: 83 countries collect fingerprints or biometrics for issuing a digitized ID (World Bank ID4D Global Dataset, 2017).
- Distinguishing features of Aadhaar: large scale, low unit costs, and creation of a digital ecosystem around the identity.
- Core technologies: APIs enabling biometric and demographic authentication and links to individual phones for One Time Password (OTP) authentication.
- RBI action in 2013: enabled Aadhaar ID holders to authorize banks to obtain electronic verification from UIDAI, creating e-KYC.
  - eKYC shares only relevant demographic data and photograph after consent (principle of data minimization).
  - Industry claim: drastically reduced costs of complying with regulatory KYC requirements during onboarding.

### Evidence on linking unique ID to financial services
- Muralidharan et al. (2016): biometrically authenticated payments infrastructure delivered faster, more predictable payments and reduced leakage for employment and pension programs.
- Banerjee et al. (2020): digital financial platforms reduced leakages of government funds and improved targeting to intended beneficiaries.

### Expansion of banking access: Pradhan Mantri Jan Dhan Yojana (JDY)
- Launched: August 2014; objective: provide banking access for unbanked households with no-frills, zero balance account, debit card, mobile banking, overdraft facilities, and basic life insurance (~US$440) to all account holders.
- Account uptake:
  - 166 million accounts within one year of inception.
  - almost 384 million accounts in operation in 2019.
  - 80 percent of accounts reside in public sector banks.
  - Half of these accounts opened in rural areas (RBI, 2018).
- JDY accounts could be opened using Aadhaar and linked for government benefit transfers.
- Agarwal et al. (2019) administrative microdata: number of accounts increased at a rate of 14 percent per month since the start of the program.
- Account balances: 77 percent of accounts maintained a positive but low balance (approximately US$7 in 2017, about 60 percent of the rural poverty line in India).

### Usage, inactivity, and limited effective financial inclusion
- Agarwal et al. (2019): 81 percent of new consumers do not deposit any money into their new accounts; 87 percent do not withdraw any cash after opening the account.
- Demirgüç-Kunt et al. (2018) data (2011 to 2017):
  - Share of adults saving with a financial institution increased from 12 to 20 percent.
  - Percent of adults who borrow decreased from 8 to 7 percent.
  - In 2017, about 39 percent reported sending or receiving domestic remittances using a financial institution.
- Account inactivity:
  - Nearly half (48.5 percent) of accounts remain inactive (no deposit or withdrawal within a year), the highest inactivity rate in the world.
  - Inactivity rate was 23 percent in 2014.
- Observed barriers to usage: low financial and digital literacy; transaction costs; need for tailored financial products to overcome frictions.
- Note on UPI: extent to which UPI expansion increased active use of bank accounts is uncertain because a 2018 reform allowed UPI payments without requiring a bank account link (pre-paid wallets funding possible).

### Credit information, intermediation, and financial market development
- India scores low on affordability of financial services and ease of access to loans (WEF, 2019).
- Unit cost of financial intermediation proxied by banks’ net interest margin: hovered about 3 percentage points in India during the past decade.
- State-owned banks account for nearly 70 percent of assets in the banking sector.
- Credit information systems:
  - CIBIL established in 2000; three other CICs after CICRA in 2005.
  - As of 2014, CICs coverage was 19.8 percent of adult population and lacked many data types (RBI, 2014).
  - From 2015, RBI required all credit institutions to submit data on individuals and firms in the formal sector.
  - Currently CICs cover approximately 56 percent of the population (World Bank Doing Business, 2019).
  - Large portion of informal sector businesses and lower-income households remain excluded from credit registries.

### Fintech, mobile money, and evolving payments landscape
- Mobile money accounts in India have grown rapidly and now serve over half the population (GSMA, 2018).
- Paytm (example): serves over 400 million users and over 14 million businesses as of 2019 (Business World, 2019).
- Mobile payments estimated to account for 0.3 to 0.6 percent of GDP in India (BIS 2019, FAS 2019).
- Expansion of mobile money associated with favorable outcomes: increased household resilience to shocks and improved sales for informal-sector firms (Patnam and Yao, 2020).
- Rapid increase in fintech and bigtech lending; growth far exceeded growth of domestic credit by traditional financial sector (Cornelli et al., 2020).
- Despite rapid growth, fintech/bigtech lending remains a very small share (text truncated in source).

*Source: wpiea2021052-print-pdf - 1.2 Bn*

### 0.1 percent) of overall lending.

### wpiea2021052-print-pdf - 0.1 percent) of overall lending.

### Fintech diffusion and payments evolution
- Mobile-banking and private-sector led mobile credit experienced rapid growth and contributed to financial inclusion; RBI responded by creating a differentiated banking regime including payments and small finance banks.
- Payments banks: can provide payment and domestic remittance services and demand deposit products but are not permitted to lend (RBI, 2014).
- NPCI processed 48 percent (by value) of all electronic payment transactions in India by 2018 (RBI, 2018).
- Prior to expansion, India had approximately 20 million credit cards and only two million digital payment acceptance points.
- NPCI launched Aadhaar Payments Bridge (APB) and Aadhaar Enabled Payments System (AEPS) by 2011 to channel government benefits and enable point-of-sale Aadhaar biometric authentication.

### Unified Payments Interface (UPI) design and impacts
- UPI introduced in 2016 to expand interoperability beyond bank-only IMPS and to simplify transfers between stored-value accounts at banks or non-banks; supported Peer to Peer (P2P) transactions.
- UPI architecture enabled use of any application to send or receive money directly from bank accounts, increasing competition for user acquisition and innovation among banking service apps.
- IMPS remained mainly interoperable within banking sector; IMPS grew rapidly in gross values transacted while volume growth remained low relative to UPI.
- UPI accelerated volume growth of low-value retail transactions and brought in segments of the unbanked whose transactions formerly fell outside the formal financial system.

### India Stack: four-layer architecture
- Layers defined:
  - Presenceless layer: Aadhaar digital ID for identity verification and dataset mapping.
  - Cashless layer: UPI’s interoperable payments system.
  - Paperless layer: verification of digital documents replacing paper analogs.
  - Consent layer: data fiduciaries (account aggregators) to facilitate aggregation and sharing of individuals’ financial data subject to consent.
- First two layers have operated together since 2016 and form the core interoperable payments system; the consent layer will enable regulated data sharing.
- India Stack’s distinguishing features include: comprehensiveness across layers; centralized digital ID; public-sector standards and open APIs facilitating (but not mandating) interoperability; and operationalization of consent via data fiduciaries.

### Regulatory perimeter and licensing
- Full participation in the stack requires entrants to accept regulation as financial entities or link payments services through regulated banks.
- India introduced new bank license types including payments banks with restricted activities (acceptance of demand deposits, payments and remittance services) and lower regulatory thresholds.
- Non-bank participation through non-bank PPIs has been allowed since October 2018.
- Payments banks and other participants operating within the regulatory perimeter enabled RBI to promote financial inclusion while pursuing system stability and resilience.

### Open APIs, interoperability, and competition
- NPCI developed open API standards and a payments markup language; entrants were invited—but not mandated—to use public infrastructure standards.
- Interoperability allows instantaneous transfer of funds across providers (e.g., from one wallet issuer to another).
- Policy trade-offs noted:
  - Interoperability fosters competition and contestability.
  - Compliance costs of financial regulation for participants may raise barriers to entry for smaller providers.
  - Network scale advantages of bigtech providers could lead to market dominance despite interoperability.
- RBI supported UPI adoption by facilitating payment aliases, common authentication, and technical support to merchants and third-party tech players.
- Consumers were not charged for UPI use in the first few years (Google Payments, 2019).

### Data sharing, fiduciaries, and privacy
- India’s consent layer uses a fiduciary model (financial data aggregators / account aggregators) responsible for managing subjects’ data and consent; fiduciaries may not access or store the data being shared but may charge fees.
- Fiduciary functions:
  - Authenticate subjects using digital ID.
  - Link digital ID to verified digital documents (paperless layer) to attest to provenance of identity, data, and documents.
  - Serve as a trust engine reducing information asymmetries for third-party service providers.
- Data sharing in India spans more classes of data than many jurisdictions and includes consumers and small businesses; intended later expansion to insurance and health data.
- Concerns remain that bigtechs can obtain financial data from incumbents while not reciprocating non-financial data (social media, web browsing, location), which lie outside the open-banking perimeter but can inform credit assessments.

### Comparative design choices (summary)
- India: UPI launched 2016; national Digital ID present; perimeter includes licensed banks (UPI) and mix of market-driven and regulated participants; interoperable payment initiation included; data classes initially digital payments with later expansion; data sharing reciprocal.
- Other jurisdictions vary in launch dates, presence of national digital ID, perimeter of participants, whether interoperable payment initiation is mandated, and data classes covered (e.g., Australia 2020 with ADRs and planned expansion to energy/telecom; EU PSD2 & GDPR with mandate for payment account data and asymmetric sharing).

### Risks, operational challenges, and research needs
- Cyber-security risks from open-API architectures require policies ensuring adequate investments in data security and individual privacy by regulated entities.
- Practical limits: public trust in aggregators’ data management practices will be crucial for take-up; attitudes to data sharing vary cross-country.
- Open questions for future research: implications for competition, market structure, financial stability, efficiency trade-offs; whether regulatory compliance costs deter smaller entrants; effects of interoperability versus network scale advantages in determining market concentration.

### Conclusion and policy implications
- India Stack implemented open banking principles through interoperability and data sharing, facilitating financial inclusion as reflected in increased high volume-low value payment transactions.
- Publicly provided digital infrastructures can support a broad range of financial services and deepen financial inclusion and development.
- The data fiduciary model could operationalize individual control over personal data while facilitating privacy-preserving data sharing; monitoring the operations of approved account aggregator fiduciaries is important as data classes expand to non-financial sectors, including health.
- Policymakers should balance stability and contestability by calibrating regulatory requirements and supporting competition while investing in privacy and cyber-security frameworks.

*Italic: Source — Excerpt from wpiea2021052-print-pdf (IMF).*

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_Source: https://www.imf.org/-/media/files/publications/wp/2021/english/wpiea2021052-print-pdf.pdf_