Data-based lending will be taking off in a big way making lending solutions available for many businesses and individuals with a push from the Reserve Bank of India's (RBI) Account Aggregator (AA) framework, said Infosys chairman and Aadhaar architect Nandan Nilekani.
"Data-based lending will take off in a big way. Businesses that so far could not get access to many lending options will be getting access to credit. This is going to drive lending to millions of individuals and businesses," Nilekani said while addressing a session at the Bharat Inclusion Summit hosted by CIIE.
The next big thing will be credit in India and getting a loan will be as easy as making a payment in the next 3-4 years, Nilekani added.
Touted as the UPI moment for lending, the AA framework ensures quick data sharing with the consent of the user and eliminates the need for physical documents.
AAs are licensed by the RBI to enable the flow of data between Financial Information Providers (FIPs) and Financial Information Users (FIUs). The user has to give consent on what data can be shared.
The RBI, Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), and Securities and Exchange Board of India (SEBI) collaborated to allow regulated entities under their control to share data with account aggregators after obtaining user consent.
Nilekani added that while insurance and pension plans may take time to pick up, except for products like embedded insurance products, credit will be the next big thing in India.
"Insurance and pension are push products and will take time to pick up maybe the different models will evolve...But credit and lending will grow massively," Nilekani said.
"If 20 million small businesses are able to get access to credit then 40 million jobs will be created... India will move to a postpaid economy from a pre-paid economy in the next 10 years," he added.
Talking about Digital Public Infrastructure (DPI), Nilekani said that while DPI must be built for the population scale, more private partnerships for innovation will help in creating quality products.
"One is you need digital public investment… You need to make sure this infrastructure is accessible to everybody with open-source API. And then you need private innovation and that will address the quality issues," he added.
Nilekani said that the RBI's central bank digital currency (CBDC) will solve for wholesale cross-border transactions and settlements, similar to how UPI solves for retail use cases.
"In the last few months and the fall of FTX has shown that the private cryptocurrencies may not be the future... However, CBDC has a lot of wholesale cross-border use cases," he said.
On UPI going global, Nilekani said that many countries will be using India's UPI as a standard to build products on top.
"I think UPI going global to many countries is great, it is not clear the exact endgame how it will look like...But I think if standardized software from India becomes the de facto standard, then obviously, you're building on top of that," he said.
Predicting the next big thing for India, Nilekani said that the Open Network for Digital Commerce (ONDC) will allow every small shopkeeper to be part of the Indian economy.
"I think language-based AI will pick up and ONDC will allow every small shopkeeper to be a part of India's commerce and economy...so many innovation are happening in the logistics side and all this will pick up fast in the next 10 years," Nilekani said.
