Activating different layers of the India Stack, the project tested whether borrowers, lenders and low-income customers could use a loan access process that was paperless, presence-less, cashless and included informed consent. It aimed to validate if cost of lending could be reduced and better and more flexible loan products designed


Period: March 2016 – August 2017
Partners: Eko & Suvidha (data provider), Capital Float (marketplace/lender) and Aditya Birla Finance & Axis Bank (lender)

Objective: To test if digital remittance data provided by user-level transaction trails are a viable source for credit appraisal and loan provision to the financially underserved. A larger objective is to activate different layers of the India Stack to ensure that the loan access process is paperless, presence-less, cashless and includes informed consent, thereby bringing down the cost of lending and enabling the design of better and more flexible loan products.

Project overview: Eko merchants access the Capital Float mobile app to express their credit need. These merchants carry out remittances and Capital Float accesses these remittance data via inbuilt consent architecture to appraise them for the loan. The process involves authentication via Aadhaar. After credit appraisal, the loan is underwritten by either Capital Float or Aditya Birla Finance (the two lenders on the platform) and the merchant agrees to the terms of the loan after which the money is deposited in his account. By using eKYC (for verification), eSign (for the loan agreement) and Aadhaar (for authentication), Capital Float enables a presence-less, paperless and cashless loan application experience for the merchant on the India Stack platform, which includes using remittance-based transaction data consensually as a proxy for credit appraisal.


The genesis of India Stack can be traced back to the Government of India’s Open API Policy (2015) and the Digital India campaign also launched by the Prime Minister in 2015. To facilitate the process, the iSPIRT team conceptualized the India Stack project. India Stack is essentially a set of powerful open and programmable capabilities and is designed to have four distinct layers:

  • A consent layer which allows data to move freely and securely to democratize the market for data;
  • A cashless layer where a single interface to all the country’s bank accounts and wallets democratizes payments;
  • A paperless layer where digital records move with an individual’s digital identity, eliminating the need for paper collection and storage; and
  • A presence-less layer where a universal biometric digital identity allows people to participate in any service from anywhere in the country.

Each layer of the India Stack has a specific technology – Aadhaar authentication and eKYC (Know Your Customer), eSign and Digilocker, Unified Payments Interface, and consent architecture – with corresponding public APIs, as prescribed by India’s Open API policy.


Access to formal credit remains an important unmet financing need in India. There are two key issues on the borrowers’ side:

  • Their inability to meet banks’ traditional lending criteria; and
  • A mismatch of available loan products with the financing need.

On the lenders’ side, lower overall profitability of serving the low-income segment limits the value proposition for traditional financial institutions due to:

  • High cost of lending (driven by high customer acquisition/onboarding cost); and
  • Low revenues (for example, through interest payments on small ticket loans).

Broadly speaking, two levers can help unlock credit for low-income customers (and broader financial inclusion in the country):

  • Using proxies to assess credit worthiness ; and
  • Using technology to reduce costs to serve the financially excluded.

The emergence of digital payments and the creation of digital data trails (for example, transaction histories) provide a unique new source of information to unblock credit services for the underserved. In addition, replacing costly and time consuming procedures such as collection and storage of paper records (bank statements, ITR, KYC, etc.), scrutinizing “wet signatures”, and securely handling physical cash, can reduce the overall costs to acquire and serve low income customers. This is where the India Stack project comes in.


Consumers carry out digital transactions which are stored/archived by the data provider. Data providers may share this data trail with data aggregators.

  • Consumers approach the market place to request for a loan and provide informed consent to share data with lenders
  • The market place player relays this request immediately to lenders
  • Lenders request the data aggregator to share consumer’s data
  • The data aggregator shares consumer’s data for processing (processing may be done by lenders or third parties). Processed data reaches lenders who can now underwrite loans after assessing credit worthiness
  • Lenders provide consumers with loan offers through the market place
  • Consumer receives the loan (digitally)



  • India Stack, when fully active, could transform the way in which financial services such as credit are made available to scores of financially underserved consumers.
  • Fully realizing the benefit of India Stack requires overcoming a range of regulatory, technical, operational and behavioral roadblocks.

User experience

For Eko merchants covered under the project, the working capital loan provided by Capital Float was a novel, hassle-free product, which they could access without going through traditional bank processes (which they considered complicated and time consuming).

The loan access channel seemed to be work quite efficiently, but overcoming key operational and regulatory challenges would make the process even more seamless.

Operational and regulatory challenges prevented the activation of all the layers of India Stack. For instance, project participants had to collect physical documents from the merchants because it is believed that RBI explicitly recognizes only biometric based Aadhaar eKYC and has not clarified its stance on the One Time Password (OTP)-linked Aadhaar eKYC. Similarly, a successful OTP-based eKYC process requires that the Aadhaar database be updated with the Aadhaar holders’ current and operational mobile number. Therefore, merchants who did not have their Aadhaar card linked to their mobile numbers could not complete eKYC seamlessly.

Customers were willing to give consent when they were informed that their remittance transaction history was being used as an indicator to offer loans. They did not have any questions on the misuse or privacy of their data, and seemed happy to access credit with ease.

Lender experience

Lenders were able to reach out to a new segment of customers through this project. On the merchant side, this comprised a different channel of activity (online vs. offline), size (high turnover vs. low turnover), level of financing need (large ticket size vs. small ticket size), and tenure preference (long-term credit vs. short-term credit). On the individual customer side as well, the lender reached out a much lower income class customer, providing nano-loans, smaller in ticket size as compared to typical Micro Finance Institution (MFI) loans.

Lenders seemed convinced that the India Stack would bring down the cost of lending over time, thus allowing them to offer loans at better terms. They were enthusiastic that the level of effort required for onboarding customers would reduce as users develop trust and comfort with accessing loans via an end-to-end digital channel.

Lenders primarily used remittance data, which seemed to be a good proxy to make certain kind of loans; however, there could be potential to use other forms of data (online transaction history, POS machine data, etc.) for underwriting loans.

Technology Integrator Experience

There were no major issues in terms of technology integration. A certain level of technology readiness from Application Service Providers (ASPs) is recommended, going by Capital Float’s experience, from the conception stage to facilitate ease of integration. Designing an application which factors in integration at the conception stage can help speed up the integration process and subsequent deployment. Both KYC User Agencies (KUAs) recommend the use of the pre-production platform for testing before deploying an enterprise-level platform which is real time.

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