scaffolding unfolding

For whom does the India Stack bell toll?

Inside the project to turn 1.2 billion Indians into a platform. And its consequences


Editor’s note:  On 17 January, India’s Supreme Court commenced the final hearing on petitions challenging the constitutional validity of Aadhaar, the unique identity programme. On the same day, The Economic Times reported that a group of private companies have filed a petition to the court, extending support to and seeking continuity for Aadhaar. The petitioners argue that Aadhaar is used by private companies ‘in a big way’ and ‘innovative solutions’ are being created in the digital economy using Aadhaar. To recap, some of the people in these private companies were part of the Unique Identification Authority of India team that conceptualised and built Aadhaar. The conflicts of interest are sometimes subtle and sometimes glaring. It is in this context that we are republishing our September 2017 two-part investigative series on iSpirt and India Stack, the two entities around which the private Aadhaar ecosystem has been built.

“Can you name one entrepreneur in India who has built a successful platform?” asks Sharad Sharma, the passionate but combative co-founder of iSpirt. He’s attempting to address why iSpirt is putting an enormous effort into creating its own platform today.

That platform is India Stack.

The pithily-named India Stack refers to a collection of APIs—software algorithms and frameworks—that are built on top of a common foundation: Aadhaar. With over 1.17 billion Indians enrolled, Aadhaar is the world’s largest unique identity project today. As things stand today, India Stack is the only mainstream channel through which solutions can access and interact with any facet of this identity platform.

Want to create an app that makes sending money between people as easy as sending email? Build it using UPI.

Want to enable secure and authenticated storage of digital records like driving licenses, college certificates, and land records? Build it using DigiLocker.

Want to authenticate a customer who wants to sign up with you in real-time? Do it using eKYC.

Want to enable people to digitally sign contracts in a secure manner? Do it using eSign.

Now, some questions.

Is India Stack owned and controlled by the government?


Is it operating under the supervision of a government-nominated organisation or public sector unit?


Then who owns this supposed public good?


Originally set up to help India’s fledgeling software product startups share their best practices on growth, iSpirt, which is a private non-profit organisation (Section 8 company) has now “pivoted” to building and evangelising India Stack.

It coined the term India Stack to represent access to five services: Aadhaar, eKYC, DigiLocker, eSign and UPI (Unified Payments Interface). According to iSpirt, India Stack would enable governments, businesses, startups, and developers to create, provision or consume “presence-less, paperless and cashless” service delivery.

Represented as an ambitious collection of APIs, India Stack offers readymade solutions for businesses and governments to address the Indian market. Its USP is to enable newer products and businesses to be created without the need to ostensibly reinvent the wheel each time.

While all of this might sound kosher, the original question remains. How did a private organisation like iSpirt end up as the sole gatekeeper with the master key to Aadhaar and associated public goods?

“Unfortunately, most of our technology entrepreneurs are not (yet) savvy about using platforms either. Compared to their Silicon Valley brethren, they are novices in strategising for the platform economy and struggle to find platform engineers who can build the new class of systems,” says Sharma (this time, in a follow-up email response).

Thus, as Sharma and iSpirt saw it, they needed to shift focus towards creating an Indian software platform on top of which Indian companies could easily build products.

iSpirt was able to convince the Indian government of this logic, which in turn led to all key government departments and ministries tying their operations to the use of India Stack solutions. Various India Stack APIs slowly seeped back into the government’s “Digital India” objectives as officially-sanctioned ways to work with Indian consumers and citizens.

For instance, the Indian government has been funding discounts, cashbacks and prizes for citizens who adopt and use UPI for digital payments.

Buoyed by the support from the government, India Stack very soon became a mandatory gateway for all businesses – big or small – to target Indian consumers. And the people running that gateway, its gatekeepers.

Gates and gatekeepers

On 18 September, Google launched “Tez”, a new mobile payments app in India. Tez was based on UPI—the India Stack promoted real-time payments protocol. (Read our related story)

While Google’s wasn’t the first UPI app in the Indian market, it was the one most thoroughly integrated with the underlying banking system. Google had gotten special approval from India’s Reserve Bank, the RBI, to integrate Tez with four different banking partners to handle UPI transactions. Almost all other UPI apps work with just one.

Tez was launched by Arun Jaitley, India’s minister for Finance and possibly the second most powerful person in its ruling cabinet after Prime Minister Narendra Modi.

Facebook too is learnt to be working closely with India’s largest public sector bank, State Bank of India, to integrate digital payments into its messaging service, WhatsApp. (Read our related story).

“SBI has given Whatsapp’s engineering team an unprecedented level of access to UPI,” says the founder of a large payments processor.

Considering that one avowed goal of India Stack was to help Indian startups build meaningful businesses around Aadhaar, it is ironical that the ones who seem to be leveraging it the most are foreign multinationals.

“As product companies, we were the underdogs. Then how did we end up building a platform that would be used by the very entities we said we wouldn’t touch?” asks a product founder.

On the other end of the UPI spectrum lie Flipkart-owned PhonePe and BHIM, two apps that currently control over 85% of the market for UPI payments.

Entrepreneur after entrepreneur in Bengaluru’s innovative fintech sector talk with awe and resentment about how PhonePe in 2016 managed to get the red carpet treatment from iSpirt, NPCI and banking partner Yes Bank to build and launch its UPI app. While numerous other fintech and payments startups have been playing “pass the baton” with iSpirt, NPCI and banks, trying to get access to UPI (regulations mandate that banks have to license UPI usage to others), PhonePe is understood to have gotten unprecedented quality of access to UPI’s protocols, via partner Yes Bank.

“PhonePe runs on completely different infrastructure than Yes Bank’s standard SDK,” says a founder of payments provider. SDKs, or Software Development Kits, can loosely be thought of as the bank-branded “wrappers” on top of UPI, which startups or companies must use. Thus, banks can create their own SDKs that limit parts of UPI’s features for partners.

Another app in this cluster that has priority-level access to UPI is BHIM, the app owned by NPCI itself.

“BHIM is a special case because it’s a NPCI app,” says Sanjay Jain, iSpirt’s spokesperson and the person second-in-command to Sharad Sharma, even though there are no formal titles that give this away.

Between PhonePe and BHIM on one end of the UPI spectrum, and Google and Facebook on the other lies the chasm of frustration. Without either iSpirt or the government opening doors and making phone calls and enabling access, it can be hard for anyone else to rapidly adopt India Stack to build better products.

Given the size of the India Stack platform, early or preferential access can allow a company to grab market share and mindshare quickly, leaving everyone else to play catch up. And the worst part is, there is absolutely no evidence of this to external observers.

And India Stack is just getting started.

BBPS, or Bharat Bill Payments System, will enable all sorts of bill payments to be made seamlessly without having to go through intermediaries like Billdesk—the largest bill payment processor.

eKYC enabled Reliance Jio to get to 100 million subscribers in less than a year, upending Indian telecom.

UPI itself will add support for recurring payments, credit cards and refunds, even while wallet companies like Paytm and MobiKwik continue to be restricted from interoperability with it.

“UPI has made payments a commodity. Making payments from your phone today is like having a data connection on your phone. There is no need for a PSP in the middle, which means being in the core payments business is unviable as a result. You have to mine the data underneath the payments layer or build strong use cases above it to create value. Ideally both,” says Satyen Kothari, founder of Citrus Pay and Cube.

How many other players will India Stack turn into commodities? Who will emerge as winners from that disruption?

The Architects of Aadhaar

Aadhaar, or the Unique Identification Authority of India (UIDAI) as it is formally known, was originally set up by the UPA government in 2009. The actual task of building Aadhaar was handled by a group of elite technology professionals who were engaged as volunteers to contribute their expertise.

Post the development of the system, these volunteers moved on to other organisations. Many of these volunteers joined iSpirt, which at that point of time was primarily focused on building a “Product Nation” in India.

Given their prior experience and knowledge of Aadhaar, India Stack was conceptualised under the auspices of iSpirt. Beyond the fact that these volunteers had proprietary knowledge on Aadhaar, what was the motivation to build India Stack?

“Despite having a billion consumers, India failed to create a network equipment or mobile handset industry over the last ten years. Similarly, despite having the second largest Internet user base, our consumer Internet industry seems to be capitulating. Without resorting to protectionism, we need to break this jinx for our product entrepreneurs,” iSpirit says in its annual letter.

But in its zeal to convert India into a platform and prevent multinationals from becoming gatekeepers to innovation, iSpirt might just have become what it sought to prevent. And India Stack has become the starkest and newest example of regulatory capture India has seen.

Churning the ocean comes with side effects.

With Great Power Comes…

India Stack’s gradual takeover of iSpirt also turned what was the latter’s biggest strength—being a volunteer-driven organisation—into its biggest liability.

iSpirt is like Wikipedia or Linux. It’s owned by volunteers

Sharad Sharma, co-founder iSpirt

As the initial set of product founders and volunteers grew into dozens first, and then hundreds, their titles started getting a life of their own.

There were fellows. Saarthis. Donors. Mavens. Policy Sherpas. Evangelists. Curators. Well-wishers.

Initially, this was good.

“We had a poly-centric governance model. No one person was too important. Hence, we had no CEO or president,” says one of the people involved with iSpirt right from the beginning. He too declined to be quoted by name.

“iSpirt is like Wikipedia or Linux. It’s owned by volunteers,” says Sharad Sharma.

While volunteerism was a great model when iSpirt’s primary function was to collate and disseminate knowledge about building great software products, it started failing once iSpirt started transitioning into India Stack.

Because now volunteers were making policies, crafting technology stacks and writing code. All of which had the potential to affect hundreds of millions of Indians, and by extension, the fortunes of companies and startups involved.

For instance, the UPI standard for digital payments transfer was partly built by India Stack volunteers lent to NPCI by iSpirt. It’s a chain that doesn’t have much transparency or rules governing it.

“There is a complete lack of accountability in the system. If something goes wrong, iSpirt or volunteers are not responsible,” says an industry observer who declined to be named.

As India Stack grows to envelop more aspects of citizens’ and businesses’ lives—authentication, payments, document storage, consent—the set of volunteers with privileged access to these systems continues to grow.

From banks to NPCI to NITI Aayog to the government itself, there’s a lot of trust and dependence that’s been built up in India Stack volunteers.

When asked how many volunteers worked for iSpirt, Sharma replied he did not know. “We don’t keep a count of how many volunteers there are because it’s of no use to us. We say, it’s tough to become an iSpirt volunteer but easy to stop being one,” he says.

Later on, in an email response, he adds, “Most of our volunteers are part-time. Only a few go full-time as volunteers-in-residence and they typically do so for a period of 18-24 months. We pay them a modest Living Wage that is capped at their previous salary or Rs 36 lakh whichever is lower.”

Having an amorphous volunteer-led model also, conversely, lets iSpirt get away with claiming credit for things it may not have played a big role in. As there is no way for anyone outside to accurately verify the claims.

In a highly circulated internal email thread in May this year, Rushabh Mehta, founder of ERPNext and a well-respected iSpirt volunteer, lambasted many of iSpirt’s claims.

“It is claimed that a lot of architecting work on IndiaStack platforms has been done by iSpirt but there is absolutely no public documentation to back that claim. Some of the claims are false like UPI draft was proposed in 2012, while iSprit was formed in 2013. There is very little accountability on how IndiaStack team works in terms of public documentation, or services delivered by iSpirt towards IndiaStack. Other than PR and evangelism, there is no direct evidence of work done.”

Mehta requested that the India Stack and Product Nation teams within iSpirt be separated, as both had little in common with each other.

“…there is very little evidence that IndiaStack is of any use to product startups. On the other hand, ProductNation is doing exceptional grassroots work in many cities, completely oblivious of IndiaStack. My personal recommendation is to separate ProductNation and IndiaStack into two separate entities.”

Naturally, entrepreneurs and people, especially those outside of iSpirt’s favourites list, are wary of the volunteer model.

“There’s a clear conflict of interest in iSpirt volunteers running UPI while four banks are funding iSpirt. Volunteers have no accountability for what businesses they build on the side,” says a startup founder.

When asked if iSpirt had a publicly available ethics policy regarding how it disclosed and mitigated conflicts of interests of its volunteers, Sharma was unable to provide a link.

Sharma later replied via email, “Our Curators must disclose their interests during the shortlisting exercise. Our Mavens can’t take any advisory equity in startups they help. Our policy sherpas can not invest in startups that benefit from the specific policy advocacy efforts that they champion.”

A “McKinsey for Banks”

Considering that iSpirt does not accept any money from the government, and donations from small product startups are not likely to be substantial, how does it keep the home fires burning?

iSpirt’s standard funding model for the first two years were voluntary donations from product startup founders. In the first year, each of its original 30 “Founder’s Circle” members had paid between Rs 3-6 lakhs each to create a corpus of Rs 1 crore with which to run itself. “Think of iSpirt as a temple to spread the religion of software products, and with your donation, we’ll name a brick in it after you,” the initial founders were told.

iSpirt would end up spending between Rs 80-90 lakhs of that in the first year, according to a former member.

In year two, the donations would grow to Rs 2 crore, and expenses to around Rs 1.75 crore.

But by year three, that is 2015-16, it was clear iSpirt’s ambitions were now much bigger than its member’s wallets.

India Stack was poised to be adopted by dozens of government and private sector companies alike. Under Sharad Sharma, it seemed like India Stack was the beginning of a 30-year project to convert 1.2 billion Indians into users of a “platform”, even if many of the original iSpirt members didn’t share that vision.

But imagine a platform that would enable a lender to sanction a loan in seconds, based on real-time data about borrowers. A platform that would allow every citizen to store documents ranging from college certificates, driving licenses and land records in a centralised Dropbox-like cloud. A platform that could instantly authenticate every person no matter the location, based on her fingerprint or iris. A platform that would allow digital money to move seamlessly from people to businesses to governments, with near-zero charges.

No. Product startups would never understand the scale of his ambition. They were all busy trying to maximise their own chances of success. But what needed to be done was at the level of the nation.

So a few calls were placed. “Invitations” were made. And for the first time, large banks were now funding iSpirt. Axis Bank, Bank of Baroda, IDFC Bank and State Bank of India each gave amounts ranging from Rs 1.25-1.5 crore to iSpirt, according to multiple former members.

In return, iSpirt would become “the McKinsey for banks”. The genesis of this idea lay in a senior member’s example of the mobile media trade association—Mobile Marketing Association. “Go to the companies that are losing out and for whom technology would play a critical role, and then tell them what to do,” he would say.

Given their very real fear of getting disrupted by fintech startups, banks were a great category to target. And a few crore rupees every year would be chump change for big Indian banks, each with balance sheets in tens of billions of dollars.

You need to be in iSpirt’s good books to move forward. As an entrepreneur, I’d prefer not to lick them, but I have no choice but to

Founder of a leading payments startup

In return the banks were given the red-carpet treatment—preferential access and introductions to the most promising startups; full-day workshops each quarter to apprise them of how technology was evolving; early behind-the-scenes information about various India Stack initiatives that would affect them.

“Banks were asking (iSpirt) how do we work with startups? And they were trying to be consultants to the banks,” recalls the founder of a leading payments startup. He declined to be identified fearing retaliation for speaking out against iSpirt.

“You have to pitch to iSpirt so they will put you in front of banks. They’ve done sessions on alternate lending, UPI, payments etc., but all closed-door events. You need to be in their good books to move forward. As an entrepreneur, I’d prefer not to lick them, but I have no choice but to,” he says.

Externally, few people were aware that four banks were now funding almost all of iSpirt’s operation. No disclosures were made.

It was only in January 2017 that iSpirt admitted to being funded by banks publicly.

But by then, banks and iSpirt were too far along in their symbiotic relationship. Both felt they needed each other to survive.

Taken together with India Stack’s deep dependence on technologies like UPI on NPCI, another body representing banks, it was clear that iSpirt’s new core constituency were large banks.

“From a think tank, are we becoming a govt. body? Are we just India Stack? Why are we in bed with PSU (public sector) banks? Lots of product entrepreneurs like me felt this (India Stack) doesn’t belong here. The Indian IT industry was built because the government didn’t understand things and stayed away,” says a former senior volunteer who’s been with iSpirt since the beginning.

Conflicts of Interest

One of the earliest organisations to get access to India Stack’s Aadhaar authentication APIs was Khosla Labs. Khosla Labs, in turn, used that access to build Aadhaar Bridge, a commercial service that connects to the government-maintained Aadhaar service to authenticate various requests.

“Khosla Labs were the first guys to get access to (Aadhaar) APIs. Others would’ve jumped at that opportunity,” says the founder of the payments company quoted earlier.

Khosla Labs is headed by Srikanth Nadamuni, the former head of technology for Aadhaar. Its website still mentions Sanjay Jain as “entrepreneur in residence”. Jain was also the co-founder of Novopay—a digital payments and lending startup incubated by Khosla Labs.

Sanjay Jain was Aadhaar’s chief product officer and is currently an iSpirt Fellow and its official spokesperson.

When asked how this potential conflict of interest was disclosed or addressed, Sharma replied via email:

“There is no ongoing relationship between Sanjay Jain and Aadhaar Bridge.

  1. Sanjay Jain and Khosla Labs have no current relationship.
  2. The previous relationship ended in July 2015. His LinkedIn page clearly discloses
  3. Employment history
  4. Founder status (Novopay)
  5. There is no conflict.”

One company that India Stack has a love-hate relationship with is Paytm*. On the one hand, many India Stack volunteers view Paytm as a threat to UPI because they see the Alibaba Group-funded company as a proprietary e-wallet. On the other, they also want to co-opt Paytm to their side, rather than having to engage in open war.

As Paytm was developing its technology roadmap as a fledgeling payments bank (Paytm was one of the companies approved by India’s Reserve Bank to open “Payments Banks”), iSpirt is learnt to have organised a full-day workshop for the company. The objective was to convince Paytm to avoid banking software from the likes of Oracle and FIS, and instead opt for building new banking software on top of Aadhaar and India Stack.

“Why would iSpirt do that? All fintech companies hate iSpirt because they never discuss things with us, but whatever they do affects us. So, it’s ‘be in our good books or else…’,” says the founder quoted earlier.

Follow the money: The India Stack Fund

As far as contentions that India Stack is open and free go, two of the key self-proclaimed tenets of the organisation is that it facilitates a level playing field and it does not pick winners. A democratic egalitarian interface to public goods like Aadhaar and UPI.

While it is moot if the intent behind these claims is genuine or not, there is at least one instance where the claims could severely be compromised.

Earlier this year, iSpirt proposed the setting up of an investment vehicle called the India Stack Fund—a $30 m fund that would focus primarily on backing startups that leverage the India Stack platform. This fund was proposed to be headed by Sanjay Jain.

In addition to promising great returns to LPs, the fund promised two other things:

First, privileged access to the teams that built India Stack, especially Sanjay Jain. And second, access to lessons learnt by iSpirt bringing solutions to Bharat.

Equally important, the pitch to entrepreneurs included the following:

Yet again, “privileged access to the change makers” is touted as a competitive advantage. “Proactively calibrated regulatory innovation” is a roundabout way of saying that the entrepreneurs would have a priori access to information about regulatory risks.

Clearly, none of this makes for a level playing field. Not only would startups in this portfolio have a competitive edge in terms of access and information, it would also be tantamount to iSpirt essentially picking winners by backing only a select few.

While the idea of the India Stack fund did not translate to an actual operational fund, it left no doubt that contrary to its avowed objectives of being a neutral platform providing a public good, iSpirt was not averse to favouritism and bias.

The idea was not completely abandoned though. Rather than set up a new dedicated fund, iSpirt decided to graft its objectives onto a fund that was previously planned by the government under the auspices of CIIE (Centre for Innovation, Incubation and Entrepreneurship), the technology business incubator of IIM-Ahmedabad. How so? By virtue of iSpirt’s involvement, this fund, called the Bharat Innovation Fund, would add a new focus on the India Stack infrastructure.

Sanjay Jain, a key member and chief product manager of the Unique Identification Authority of India (UIDAI), was co-opted into the Bharat Innovation Fund to head this segment extending the touted value proposition of India Stack.

Another iSpirt volunteer, Tanuj Bhojwani, was added to the fund as an “Investment Professional”. Curiously, Bhojwani’s resume on AngelList mentions that he has four years of experience in “sales, tech and operational roles”—nothing related to finance or anything that qualifies him to be an investment professional.

If nothing else, this appointment illustrates the power and influence that iSpirt exercises over the fund. While iSpirt is taken over and controlled by the folks behind India Stack, the Bharat Innovation Fund seems to be next in line.


*Vijay Shekhar Sharma, the founder of Paytm, is an investor in The Ken.

*Sumanth Raghavendra, one of The Ken’s co-founders, is an iSpirt volunteer.

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