DPI- enabling opportunities for all

Gagan Saksena    Vivek Khare    Amit Srivastava    Shanti Mohan
{gagan,vivek,amit,shanti}@samved.vc
Feb 2025
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India’s Digital Public Infrastructure (DPI) is emerging as a powerful mechanism to bridge the digital divide and empower the country’s vast tier 2 and tier 3 populations. The framework that includes services like Aadhaar (digital SSN equivalent), UPI (universal payment network), ONDC (universal commerce network), etc. is democratizing access to essential services and fostering innovation and is built on open, interoperable digital systems. It offers a unique opportunity for startups to innovate and quickly bring great ideas to fruition. It is easy to see why this then attracts significant investor interest. Here’s our take at why this is crucial to India’s transformation ahead.

DPI’s role in India’s transformation

DPI comprises interoperable platforms that allow governments, private entities, and citizens to seamlessly interact and transact. This infrastructure removes barriers to entry for underserved communities, providing a foundation for equitable access to essential services like banking, healthcare, education, and commerce. DPI’s universal access enables bringing services to all tiers and in particular opens some unique opportunities-

1. Financial Inclusion: UPI has brought millions of unbanked individuals into the financial ecosystem. As of 2024, UPI processes over 9 billion transactions monthly, with a significant proportion coming from non-metro areas. This financial inclusion enables small businesses and individuals in smaller cities to participate in the digital economy.

2. Health and Education Access: Platforms like CoWIN and DIKSHA are transforming healthcare and education by making these services accessible to populations in remote areas. The digital-first approach reduces the dependency on physical infrastructure, a constraint in smaller towns.

3. E-Governance Accessibility: Aadhaar and DigiLocker have streamlined access to government schemes and services. Citizens in smaller towns can now access subsidies, certificates, and benefits without navigating the bureaucratic hurdles traditionally associated with such processes.

DPI Empowers India’s underserved cities and fuels digital growth

Historically, India's Tier 2 and Tier 3 populations have been underserved by both public and private sectors due to challenges such as inadequate infrastructure, limited financial services, and a lack of localized solutions. This neglect has perpetuated socio-economic disparities, leaving these regions behind in the nation's growth narrative. DPI is now leveling the playing field by providing interoperable platforms that facilitate seamless access to essential services, thereby bridging the urban-rural divide.

The significance of Tier 2 and Tier 3 cities in India's digital revolution cannot be overstated. As of 2024, rural areas accounted for 55% of the country's 886 million active internet users, with 488 million users in rural regions surpassing the 397 million in urban areas. This surge is driven by increased smartphone penetration and affordable internet access, transforming these regions into pivotal contributors to a connected India.

A report by the Internet and Mobile Association of India (IAMAI) and Kantar highlights this trend, noting that rural India has been leading internet consumption growth, with rural users now exceeding their urban counterparts by 90 million. This growth is occurring at twice the pace in rural regions compared to urban areas, underscoring the critical role of Tier 2 and Tier 3 cities in India's digital expansion.

Opportunities for Startups

One of the most important go-to-market elements of any startup is the ability to connect with an existing infrastructure to build scalable solutions. DPI offers this in spades. Some sector specific opportunities include-

● FinTech: UPI and fintech frameworks offer microloans, insurance, and investment products specifically tailored to the farmers/rural demographics.

● HealthTech: Expanding telemedicine and diagnostic services by utilizing digital health records linked through Aadhaar.

● AgriTech: Using DPI to provide farmers with real-time market prices, weather updates, and subsidies directly, eliminating intermediaries.

● EdTech: Edtech startups can leverage DPI to create personalized learning experiences and bridge the educational gap in rural areas.

● E-commerce and Logistics: ONDC is unlocking opportunities for local businesses to participate in digital commerce, allowing startups to enable these businesses.

Opportunities for Investors

For investors, DPI reduces friction for startups and ensures that scaling is both efficient and inclusive. The key advantages for investors are:

● De-risked Innovation: DPI offers a proven infrastructure for startups, reducing the time and cost associated with building proprietary solutions. For example, startups can use UPI for seamless payment integration or Aadhaar for KYC verification without significant upfront investment.

● Massive Addressable Market: By unlocking Tier 2 and Tier 3 populations, DPI significantly expands the addressable market. Startups serving these regions can achieve scale without relying solely on saturated urban markets. In other words, scale is built in from day one.

● Policy Support: India’s proactive regulatory framework around DPI encourages innovation while protecting consumer interests, creating a favorable environment for investments.

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Case Study: How Digital Public Infrastructure Has Simplified Business for Independent Financial Advisors

Independent Financial Advisors (IFAs) have long been the backbone of India’s mutual fund industry, guiding investors toward informed decisions and wealth creation. However, before the advent of Digital Public Infrastructure (DPI), IFAs faced significant challenges in onboarding clients, managing transactions, and ensuring seamless recurring investments. DPI, encompassing tools like Aadhaar for digital identity, bank validation through penny drop, Unified Payments Interface (UPI), and the National Automated Clearing House (NACH) mandate, has revolutionized how IFAs conduct business. These advancements have simplified operations, increased efficiency, and enabled IFAs to focus on their core role: building client relationships and providing tailored financial advice.

Challenges Faced by IFAs Before DPI

1. Lengthy and Manual Onboarding Processes
IFAs had to manage cumbersome Know Your Customer (KYC) procedures that involved physical documentation and in-person verification (IPV). The need to collect and submit identity proofs, address proofs, and signatures often led to delays, errors, and multiple follow-ups with clients.

2. Manual Bank Validation
Verifying clients' bank accounts was time-consuming, requiring cheques or account statements to confirm details. Errors in manual processes occasionally resulted in failed transactions, frustrating clients and causing delays.

3. Inefficient Payment and SIP Mandates
Setting up Systematic Investment Plans (SIPs) required physical mandate forms to be filled, signed, and submitted. Processing these forms often took days, delaying the start of investments and creating additional work for IFAs to track and manage clients' SIP activations.

4. Limited Access to Tier 2/3 Markets
The absence of digital infrastructure made it difficult for IFAs to expand their reach to semi-urban and rural markets. Investors in these areas were often hesitant to deal with the paperwork and lacked access to advisors who could provide them with easy, transparent solutions.

5. Administrative Overhead
The manual nature of operations, from managing KYC to ensuring recurring payments, left IFAs burdened with administrative tasks. This took away valuable time they could have spent on client acquisition and financial planning.

How DPI Has Simplified Business for IFAs

1. Faster Onboarding with Aadhaar-Based e-KYC
The introduction of Aadhaar-based e-KYC has been a game-changer for IFAs. Clients can now complete their KYC process online in minutes using OTP-based Aadhaar authentication. This has significantly reduced onboarding time, eliminated the need for physical documents, and enabled IFAs to onboard clients remotely. For IFAs catering to a geographically dispersed clientele, this has been particularly impactful.

2. Seamless Bank Validation through Penny Drop
The penny drop mechanism has removed the hassles of verifying clients’ bank accounts. By transferring a nominal amount to the client’s account, IFAs can instantly validate account details without requiring physical cheques or bank statements. This has minimized errors and ensured a smoother transaction process, enhancing client confidence and trust.

3. NACH Mandate for Hassle-Free SIPs
Setting up SIPs is now quicker and entirely digital, thanks to the National Automated Clearing House (NACH) mandate. With e-NACH, IFAs can help clients authorize SIPs online, enabling automatic debits from their accounts. This has removed delays associated with physical mandates and improved the timeliness of investments, ensuring clients don’t miss their financial goals.

4. Instant Payments via UPI
Unified Payments Interface (UPI) has made mutual fund transactions faster and more convenient. Clients can now make lump sum investments or SIP contributions instantly using their mobile phones. For IFAs, UPI eliminates the need for cheque collections and manual tracking of payments, making the entire process seamless. This also allows IFAs to serve tech-savvy millennial clients who prefer quick, digital solutions.

5. Reaching New Markets with Digital Tools
DPI has enabled IFAs to expand their reach into Tier 2 and Tier 3 cities. With Aadhaar-based e-KYC and mobile payments like UPI, IFAs can now onboard clients remotely, breaking geographical barriers. This has opened new growth opportunities and helped advisors tap into underpenetrated markets.

6. Efficient Data Management and Personalization
DPI-enabled frameworks like Account Aggregators (AAs) provide secure, consent-based access to clients’ financial data. This has allowed IFAs to better understand clients’ financial profiles and needs, enabling them to offer more personalized and data-driven advice. By reducing the need for manual data collection, IFAs can focus on strategy and client engagement.

Benefits for IFAs in the DPI Era

1. Reduced Administrative Burden
Automation of processes such as KYC, bank validation, and payment mandates has significantly reduced the time IFAs spend on administrative tasks. This allows them to dedicate more time to client acquisition, financial planning, and portfolio reviews.

2. Enhanced Client Experience
Faster onboarding, seamless payments, and timely SIP activations contribute to a superior client experience. By leveraging DPI, IFAs can establish themselves as trusted advisors offering hassle-free and efficient services.

3. Cost and Time Efficiency
Digital processes have reduced operational costs for IFAs by minimizing paperwork and the need for physical client interactions. This scalability allows IFAs to serve a larger number of clients without proportionate increases in effort or expenses.

4. Building Trust Through Transparency
Tools like penny drop validation and UPI provide transparency and reliability in transactions. Clients are more likely to trust advisors who offer digital-first, errorfree processes.

5. Expanding Client Base
By leveraging digital infrastructure, IFAs can cater to clients from diverse regions and demographics. This not only grows their business but also helps them contribute to India’s financial inclusion mission.

Conclusion

Digital Public Infrastructure has transformed the way Independent Financial Advisors operate, making their business processes more efficient, scalable, and client-centric. By simplifying onboarding, streamlining payments, and enabling seamless recurring investments, DPI has freed IFAs from the burden of manual processes and allowed them to focus on what truly matters: building relationships and helping clients achieve their financial goals. For IFAs, the DPI revolution is not just about operational efficiency; it’s about unlocking new opportunities for growth, expanding their reach, and cementing their role as trusted financial partners in a rapidly digitizing world.