India was long a financially excluded nation — only 17 per cent of Indians had a bank account in 2011. The World Bank suggests it would have taken 50 more years for 80 per cent of Indians to get a bank account at the pre-2011 speed. Yet, we reached that milestone in 2018. A magical combination of political will (Jan Dhana Yojana and Aadhaar embedding), a proactive central bank (creating a non-profit market participant entity and leveling the playing field between non-banks and banks), and a technology stack with three layers (identity, payments, and data).

UPI five policy lessons:
• How the India stack: The independent platforms or open APIs — are a public good that lowers costs, spurs innovation, and blunts the natural digital winner-takes-all. Replicating this in education, healthcare, and government services are likely to be a harbinger of large scale multi-domain collaborative innovation.
• Collaboration can create ecosystems: That overcome the birth defects of its constituents — the execution deficit of government, the trust deficit of private companies, and the scale deficit of nonprofits.
• Complementary policy interventions are important: Demonetisation and GST are changing the stories that firms and individuals tell themselves around cash and informality.
• Human capital and diversity matter: This revolution needed career bureaucrats to partner with academics, tech entrepreneurs, venture capitalists, global giants and private firms.
• India doesn’t need to be Western or Chinese to be modern: If our policymakers had copied Alipay or US banks, we wouldn’t have leapfrogged their birth defects.

Challenges ahead:
• The central government must deadline digitising all its payments.
• The RBI must implement the 100-plus action items arising from its own Vision 2021 document and the Nandan Nilekani Committee for Deepening Digital Payments.
• It must also make UPI and RuPay fit for use in our $70 billion inward remittances that currently come through exploitative financial institutions which don’t have clients but hostages.
• The RBI must replicate the core design of UPI — fierce but sustainable private and public competition — in bank credit because our 50 per cent credit-to -GDP ratio is one of the reasons India is poor.
• China’s 300 per cent is the wrong number, but reaching the OECD average of 100 per cent needs the RBI to do many things.
• To raising its human capital and technology game in regulation and supervision
• Catalysing an ecosystem for lending against the rapidly expanding digital exhaust of small firms and individuals,
• To issuing more private bank licences, facilitating management changes in old private banks with market caps that signal questions about book value, and
• Shepherding a governance and human capital revolution at PSU banks (their risk-weighted assets being lower than two years ago despite a capital injection of Rs 2.5 lakh crore should be unacceptable).

Way ahead:
• Converting the collective independence our citizens got in 1947 to individual freedom surely involved universal financial inclusion.
• The gap between this aspiration and reality was not a lie but a disappointment because our capital got handicapped without labour and our labour got handicapped without capital.
• Change has begun – the RBI, the finance ministry, and many individuals deserve our gratitude and duas for a billion digital payments a month.
• We now ask you for a billion digital payments a day.