Kunal Kapoor, President of Morningstar, recently chatted with Nandan Nilekani. Nilekani is the co-founder and chairman of EkStep, co-founder of Infosys, author of Imagining India, philanthropist and chairman of UIDAI.
There's so much buzz around the government: Startup India, Digital India, Make in India, you know the top to bottom. Give me a perspective of what’s going on in finance and technology?
India is at a very seminal point in the use of fintech in financial services because many things are coming together. JAM - the Jan Dhan, Aadhaar, Mobile platform, which a billion people will have the Aadhaar-based India's tag. The National Payment Corporation of India (NPCI) launched a Unified Payment Interface for payments. So, all these things are fundamentally transformational to financial services.
I think, we are in a very exciting time, for incumbents to include technology in the business strategy, as well as for newcomers to come up with new business models.
Talking about newcomers, tell us a little bit about the startup culture in India, particularly in this space.
I find that there's enormous energy and innovation happening in the startup space. I see literally hundreds of new companies coming up. Young people with great backgrounds and digital natives who understand this world very well are building all kinds of very exciting apps which are very consumer-centric on the mobile with lot of automation, machine learning, artificial intelligence, all that good stuff.
But they will work with the incumbents because I think many of these technologies have to be done in conjunction with large incumbents with large customer bases. So, I see a lot of synergy between the two.
Clearly, mobile is a place where one could be the most disruptive.
India, in some sense, is the mobile-first country. We don't have that many desktop or internet connections, but we have a few hundred million internet connections on mobiles. For many, the first internet is mobile internet. This changes the whole way of thinking. So, everybody develops apps today which are mobile first.
What are some of the ones that excite you the most on the mobile front?
A lot of apps now are related to payments because of this Unified Payment Interface which has been launched. People are developing all kinds of payment inboxes. I even see people building robo advisers kind of thing and providing mobile-based wealth management products.
Payment banks can't take deposits. They have a limit of Rs 1 lakh per account at night. So, now they are linking the payment bank account to a mutual fund account and sweeping money from the payment bank account into the mutual fund and so on. Lots of interesting combinations are coming, thanks to the digital world.
Is there one app in particular that you would think of as the WhatsApp app for finance in India?
There are a lot of interesting apps.
There is an app by a company, which Flipkart is a part of, called PhonePe, which has a payment inbox.
All the banks have good apps. ICICI Bank has a good app. HDFC has launched their app.
Snapdeal, FreeCharge have an app.
Then there are a lot of youngsters which are building SDKs. A very interesting company called JUSPAY in Bangalore has SDK which is going into all the merchant apps. So, when you have a merchant with an ecommerce site, then he needs to have the UPI he embeds that in his app.
Finomena offers consumer finance for millennials.
You said earlier that there's an opportunity for the incumbents to partner with some of the startups. What are some strategies that people should be thinking about so that they can work better with startups?
It's difficult for an incumbent to guess who is going to be the winner or loser. So I think it's better to have an approach where you create a platform where startups can come and deliver different kinds of applications and then the market will decide which of those apps are better than others. But because you are the common platform for all of them you still win in the end.
A bank like RBL, which recently went public, does that. They offer their platform to many startups. So, the startup delivers the app, but uses RBL as the backend and then whichever wins, RBL wins.
What inspired you to move from the private sector to serve in the government?
I had been at Infosys for 30 years and the company was already a multi-billion company. So, I was also looking at what new things I could do. The then Prime Minister, Dr. Manmohan Singh, invited me to join the government and lead the Aadhaar project. I and my colleagues at Infosys felt this was a great opportunity to give back. This is a very common tradition in the U.S. where people after a successful private sector career join the government.
So I took that up for five years and saw it as a high leverage project because by giving every Indian a digital biometric ID it could be a platform for a whole host of things, direct cash transfers, financial sector reforms, healthcare reforms. So, when you have one thing which is like a horizontal that can affect so many sectors, it's good bang for the buck.
That's what led me to take up this project.
Tell us how you conceptualized EkStep.
After I stepped down from Aadhaar I was looking for something to do.
My wife, who has been working in education, has been seeing that millions of Indian children are coming to school but not learning.
We both were visiting Boston and we were at edX, which is the MOOC which Harvard and MIT have set up together, and they were building a MOOC for higher education, so online university. She said why can't you do that for kids? And I said how many kids does it affect? She said 200 million.
I like this big number kind of problems. Because there's a same amount of effort whether you solve big problems or small ones.
How do you define success for something like that?
This is highly scalable. So, we are building this app on a smartphone which enhances learning outcomes for children and we hope to deliver it to millions of children in the next few months.
Success will be at least 100 million children use the app and it makes a material difference to the learning outcomes.