2020 was a year of contrasts. While many businesses were struggling and even vanished, new startups were booming. It’s a transformational time for all of us.
Three themes were covered in this conversation between Haresh Chawla and Nandan Nilekani:
- How is the pandemic resetting the world—it’s now “go digital or die”. Related to this is the subtheme of digital within India.
- How do companies and leaders manage this time of transition
- Technology is overwhelming our lives. There’s a tension between government, tech, and society.
1. Digital is no longer an “option”; digital gives you “optionality”
This is a dramatic acceleration of trends that were already happening.
Companies in the proximity business (airlines, hospitality) were deeply impacted. But those in remote businesses (where you can work from anywhere) are booming. That divergence became dramatic in the pandemic.
- The lesson is that every company needs a digital strategy. You need optionality in strategy—digital is no longer an “option”; digital gives you “optionality”.
- Those that had built multiple ways to reach the customer, did well. (In retail for example, some big names went into bankruptcy. But others like Walmart, Target, and Home Depot did well. They had figured out various forms of reaching the customer—ecommerce, delivery at home, kerbside pickup, in store pickup, etc. McDonald’s has a very good drive-through experience.) Similarly, companies that had work-from-home policies adopted much faster to virtual working.
2. There are four models of the internet competing for attention
- the American (laissez-faire) internet
- the Chinese internet (which, behind a firewall, created domestic champions like Alibaba, Tencent, etc)
- the European internet, which is much more regulation-oriented. They’ve been the leaders in GDPR, digital services act, digital taxation, etc.
- the Indian internet—represented by India Stack—which is more inclusive.
China is going through its own challenges because of regulations (Ant’s IPO got stopped, more regulation is coming in.)
3. This is a decisive moment in the digitisation of India. And it is time to relook at the India opportunity post-Covid
All the investments in technology, infrastructure and policy are now poised for take-off.
- India for the world: Where India could be a great place for future SaaS companies. And where India can be an agent for digital transformation for the world
- The India opportunity in the next decade, where India will go from a “prepaid” economy to a “postpaid” economy. This will drive a huge cycle of consumption and growth, because credit will boost the system. (The prepaid model was built by the mobile companies in pre-Aadhaar times, when they couldn’t identify the user. It enabled them to reach every corner of the country. As people get to digital payments, build credit histories, they will now be ready for credit.)
India Stack’s real fruition happened in the pandemic. It has become the bedrock from which companies and startups have risen.
- Aadhaar-enabled payments was a key foundation in the pandemic, which allowed the government to transfer money to millions of people.
- There were 2.2 billion UPI transactions in December 2020. And it is building towards 1 billion transactions a day.
- 10 years ago, in payments, Nandan Nilekani had suggested an RFID-based toll system. That led to Fastag, which does Rs 24,000 crore per annum in toll collections. This will make roads easier to finance.
In the coming 10 years,
- “Embedded lending” will be transformational: Where people can use their own data through RBI’s account aggregation infrastructure to access credit—a small business could use its GST data to get a loan. Lending companies will be able to give small businesses loans because they have their transaction data—that data can connect lenders and borrowers.
- We are starting to see the penetration of AI and other technologies across fields. For example, today, the Supreme Court is using AI and neural machine translation to convert legal documents from one language to another. In GST they are using analytics to identify fake invoices.
- All the rails we’ve put in the last decade are clear: That the government will build the fundamental digital rails—the backbone—and let companies use APIs to hook into that. For example, Fastag can be a platform to also reduce congestion parking.
- Western countries built their digital infrastructure on advertising revenue. India does not have an advertising model (our advertising spend is very small). Instead, our future will be led by the transaction-led boom (low-cost, high-volume, small ticket size transactions using auto debit and embedded lending). Credit, which will be flow-based and not asset-based, will flow to millions of consumers and small businesses.
4. The vaccine roll-out supported by the India Stack infrastructure can speed up economic recover
- India is the vaccine capital of the world.
- With the CoWin app, you will get a QR-coded digital certificate that you’ve been vaccinated. This will make it easier to get the economy back on track. You can show the certificate on the app—at the airport, at the station, at a restaurant, to your office.
5. Companies will need to re-organise themselves
- Greater digitisation is obvious. They’ll have to think “digital-first”.
- Traditional companies typically don’t know much about their consumer. They need to have a digital channel for direct-to-consumer (sales + in the data sense), but do this without creating conflicts with their existing channels. For example, while e-commerce companies have access to rich data around consumer behaviour, the large FMCG companies have traditionally reached consumers through wholesalers, distributors and retailers. They need to figure out a way to not just reach the customer but also leverage data to understand consumer behaviour better in real-time.
- Cybersecurity will have to go hand-in-hand with going digital.
6. Big Tech and the role of government
- There are many complex issues here: Antitrust; fake news and polarisation; free speech vs. censorship
- Governments are now far more aware of the issues, and their ability to understand them is high.
- In India, they (government and regulators) have found the right balance between regulation and innovation. India is very unusual in that regulators have figured out how to use tech for India’s future.
7. India can be the world’s biggest consumer transaction-led economy, but it needs to continue with universal access to technology
We have an “English” internet, where most of the traffic goes through Western internet firms—which is also a source of conflict. How will this pull and push play out?
- Let’s take it market by market. In messaging, it’s dominated by Facebook; in Search it is dominated by Google. But all these are advertising-led markets, which in India does not have much traction.
- But India can be the world’s biggest consumer transaction-led economy. And that advantage lies with India, not with anybody from outside.
- To be fair, Amazon, Walmart and Flipkart are doing lots of things on the ground, but it will not be a case of winner-take-all.
- We need to get population-scale, universal access to technology. We need to figure out how people with smartphones, with feature phones, and with no phones can have access. (In payments we did that through UPI and Aadhaar Enabled Payment System.) That's one way to make it inclusive, make it ubiquitous.
- You cannot progress if India 2 and India 3 are dragging—and now those segments have access to the same technology. A lot of the money spent in the last decade was on behaviour change. That phase is now over.
- Last year was a big setback, but this is also India’s moment. India is a young country in an ageing world, perhaps one of its kind in the world.
- Young startups and founders are moving at an amazing pace and with confidence—that will transform India. (But they need to learn how to make money.)
Still curious? Read Haresh's column Trendspotting 2021: Inside India’s Great Digital Reset
Curated Comments from the Live Audience
(Lightly edited)
Soundari Mukherjea: Great conversation - thanks. Any suggestions for leaders to bring digital to the fore but stay human at the core, given the impact on equality, diversity etc?
Raji Bonala: Frugal use of tech in personal lives! Nice one. Very enlightening point about frictionless credit
Ajay Kelkar: Digitalization of our society would bring Customer privacy as a serious issue to solve. How do leaders look at this issue? Would customers ever have power over their data?
Ramki Sreenivasan: Nandan is answering faster than Qs are being asked
Jayant Shah: Advanced countries are still struck with card payments but India has fast adopted digital payment model with apps. That's revolutionizing the payment process from as low as Rs. 10 to say 10k to 50k
Gautam Lakshmiratan: We don't have anything in place when we ask for our data back. Seriously worried, as many are not even ready to handle this request and hide behind company policies for not giving back what is yours.
Anirudha Dutta: Will India become “flat” or more uneven? Over 50% of children haven’t logged into any form of classroom during the pandemic, programs like measles vaccination have got suspended.
Balaji Gopalan: Very insightful and energising, would have liked for it to go on for another hour
Sherry Rawla: Insightful comparison between Indian and western digital economies
Mayank Agarwal: My concern is digital illiteracy present in India. People don’t know importance of MAC address and IMEI. Cybersecurity is going to be challenge
