Edited Transcripts of Nandan Nilekani’s  

https://www.youtube.com/watch?v=E3veTcqRzN0

Dr. Urjit Patel (Governor, Reserve Bank of India), Dr Mohapatra (Dr Biswamohan Mahapatra, Non- Executive Chairman, NPCI),  Rajnish Kumar, (Chairman, State Bank of India) and friends,

 It's really great to be here and a very exciting time. You know just of what four five years ago when UPI was just an idea and we were all looking to see how we can transform payments and develop something which was a native digital internet mobile platform and not take an existing technology and bring it to the internet world and that's how the idea of UPI was born when NPCI had already done a phenomenal job with IMPS immediate payment system and today as you know it's one of the great success of NPCI which does about 100,000 crore worth of transactions every month and in fact Mr. Hota is also here when to happen in his  time and that platform was basically a credit platform it was you know you could send money to a bank account or to somebody's account but it didn't really have debit facilities and you know we felt that to really have something which was completely comprehensive required both debit and credit and that's how  UPI was born but I think what's important is also the importance of this because all the key players came together the Reserve Bank of India was very very progressive for the last five years in supporting UPI in a very calibrated way to make sure there was a balance between innovation and risk and today we have  come to appear 2.0 as a step by step evolution and I think the Reserve Bank has played a phenomenal role and I'm grateful to Dr. Patel and his colleagues for that and I think the fact that India has a company like NPCI is also very very critical we without NPCI we could not have done all these things and the fact is that NPCI is a non-profit company section 25 a section 8 company owned by the banks collectively and therefore having that company which enables these payment rails to be built in a cooperative fashion in a collaborative fashion and as an open rail which can be used by everybody is very very important in most countries when you migrate from physical cash to digital cash you don't get the migration right because physical cash has always been a sovereign function right you have central bank's your means your people who print cash you know it's all run by  the sovereign sovereign but digital cash inevitably leads to a privatization of money and then if that architecture of that privatization happens does happen properly you end up creating new monopolies which is what is happening in some of the countries and then you become dependent on a few players and then you have all the consequences of you know duopoly the monopolies in India we have done something very very strategic which is that kept the payment trail as an open rail and owned and managed by a non profit company which is owned by the banks and regulated by the central bank I think this is really very very strategic because now we have the ability in NPCI to create high-volume low-cost payment systems which can be used by everybody so I think that's one serious strategic policy and regulatory thing that India has done which every country is now looking at and saying maybe we need to do something similar the second important thing I think is how do you combine reliability and robustness of the banking system with innovation on the edge and I think the UPI architecture allows you to do that the fundamental players in the upî architecture are banks under the payment and settlement Act so they have all the obligations of reliability security and so on counterparty risk and all that but at the edge of this payment system we can bring in all innovators with it's a Google or a Whatsapp or whatever so the ability to combine a core sound payment system regulated by the banking system and having all the security and reliability that you want and have many distribution innovation at the edge that combination is a very unique thing which only India is able to do and I think that is going to be a very very important thing and this very very important thing and this innovation is very important the third thing is which is a technological innovation is that upî platform that has been built by NPCI is built completely of an open source stack and I think it's one of the most advanced open source stacks so it does not it uses off the shelf open source like Linux, Postgres and so on so the cost of building this technology of course they may not like me telling this to you guys because you'll say well lower the prices even further but the cost of building this technology is probably a tenth of what it would have cost us using commercial products and that is and the architecture of it is designed for scale so the combination of open-source scalable architecture means that the UPI infrastructure is capable of going to billions of transactions at a very low cost and that is the heart if you really want to move India from cashless to digital you need to have high volume low cost highly scalable infrastructure because if you make your  infrastructure because if you make your digital infrastructure expensive from a transaction pricing point of view then there's no incentive for the person dealing with cash to move to digital and therefore it's very important that we enable people to go and I think the use of the internal architecture of UPI using open source has been a critical factor in success and we have seen the volumes grow the month before demonetization as the chairman NPCI said UPI transactions was 100 thousand a month in October of 2016 one month before demonetization today it's 250 million transactions a month so from 100,000 transactions we have gone to 25 CRO transactions in less than two years and with the launch of UPI 2.0 and other innovations coming I believe that this can reach a billion transactions a month within the next 12 months a billion transactions a month is 100 fro transactions a month which means that or the next couple of years.

UPI will become the dominant digital payment system it will do off all of the transaction types because the growth that will happen and it'll actually start moving the needle on cashless transactions because once your payments become simple person-to-person payments are simple and effectively free once your merchant payments are simple then you will use this more and more using the cash you know using a cashless option we also should recognize that a lot of the UPI and its other infrastructure happened under the pressure of Demonetization those 60 days from November 8th to March 8th or February 8th when I think more changes were made in the regulations and in a technology then in the last you know 20 years because everybody was focused on what do we need to do to make this work at scale so for example before demonetization UPI was available only on smartphones not on feature phones but after after in that time of those 60 days the complete feature phone and ussd app was built for feature phones so that now people who have smartphones can use UPI on their app whether it's you know or or any other app and people have feature phones can use the USSD so 600 million people with phones today whether there are smartphones or feature phones can now use UPI and this was a direct result of the Demonetization sort of window of policy opportunity similarly the Aadhaar pay which allows people who don't have phones to use Aadhaar for drawing money or making a merchant payment also happen at that time so essentially what happened was a lot of the policy and regulatory bottlenecks to digital got swept away in those 60 days and now is the time to leverage all that to really release create scale and I'm confident that you know will create massive scale you know across the whole across the whole whole thing so I think this is something which is very important that we have done this is something which the world is looking at the whole India's digital infrastructure for financial transactions the India stack other eky see in 2 minutes UPI instant payment is unprecedented anywhere in the world and we I can say we have at least 20 countries which have visited India to see what we are doing and seeing how they can replicate this in that country so clearly what we have is a global phenomenon which which has been done thanks to all the people in this room and it is being seen as something that India is done and Morocco is implementing it and Philippines so on season every day there is a new country coming who wants to do something about it so I think we really created something exceptional in this country and I think the next phase of this is really going to be the data revolution because historically when we think of big data we think of big data as useful to companies to make money or governments to do surveillance or whatever but India has an operation where data can be used by users to get get better services so users can use their own data using the infrastructure we have of authentication online identity verification and so on users can use their own data whether it's to get better healthcare better education and in your case to get a loan and I think the big big thing which will happen with all the digital infrastructure we have built is a massive increase in credit not driven by you know random decision making but driven by huge amounts of data and payment data will be one of those data because as transactions move from cash to digital then there's a payment history and the payment history can be the basis of taking a loan decision and then as Mr. Rajesh Kumar mentioned using big data analytics machine learning an ability to figure out who is a credit risk is improved dramatically and therefore ability to give high volume small value loans including flow based lending loans using payment details is going to increase dramatically and I think we now are sitting on a partially where technology and data will be the key to credit deepening and in fact the creative credit revival because you now have a way to give loans in high volumes to millions of Indians at the same time making it secure and reliable and and risk-free by using data to make sure that the loans are used properly so I think we are on the verge of that and I think here again the central bank Reserve Bank of India has done remarkable job for example they are spearheading the account aggregator standards. The account aggregator standards we will create an in structure it's very important because if you are really going to get a billion people to use the data you need some intermediaries who will act on your behalf manage the data connections for you and make sure that your data is used properly and the account aggregator standard with the RBI actually allows that will happen so I think the next part of this digital revolution in India's financial system is the account aggregator which the Reserve bank is spearheading on behalf of all the regulators so once that comes in place all the four or five financial regulators will use the same infrastructure and that will then lay the foundation for credit expansion using data so I think India has really done an amazing job and that's thanks to the Reserve Bank NPCI and all of you and UPI 2.0 which they will talk about I think has very very significant features and we still have a few more things to do and since I have the stage I'll request the Central Reserve Bank to think about it we still have to look at recurring mandates so I think it's not yet there but I'm sure it will happen one of these days I'm I'm lobbying for you guys and of course the EMI and all that so I think couple of things missus the way is nodding her head so clearly she has heard me so I think but I think what we have today is very significant I think the three or four things being launched today are very significant and it's important to realize that the way we are doing payments is the opposite of what happened earlier earlier payment per person to merchant payments do happen in the offline world and then we brought online here we have a system which began in the online world and will now go offline and I think as the big thing will be as millions of merchants are enrolled by all of you with QR codes and so on and small small merchants will start taking payments then we're going to take payments from online merchants to offline which is the opposite of the way the you know the card word operated so I think we are on the verge of some very big things and I think the credit goes to the Reserve Bank and NPCI and all of you for this ecosystem thank you very much