Digital public infrastructure, or “DPI,” has the potential to transform how businesses acquire new customers and deliver services at population scale.
While efforts are underway to develop a principle-based definition of DPIs, the term generally refers to technology-enabled systems deployed for public benefit with active participation from the private sector. Given this, there is good reason to believe that DPIs have a valuable business proposition.
At their core, DPIs are built on the principles of openness, interoperability, and decentralization. These design principles are usually embedded into the technical architecture of the DPI. As I will demonstrate, DPIs help businesses scale rapidly, verify user identities, improve the discoverability of their products, monetize transactions, and accelerate innovation.
Accelerating growth
When it comes to scale, the network effects of DPIs are unmatched. The Unified Payments Interface (UPI), which includes more than 380 banks and 50 million merchants as part of its network, accounted for more than half of all digital transactions in India through FY 2021–22. Since UPI is a multi-sided network, companies have the opportunity to focus on specific user segments and make exponential returns. A great example is Paytm’s decision to focus on the merchant side of the UPI network, which has set it up on a path to profitability.
Elsewhere, India’s healthcare sector is widely criticized for running on outdated legacy systems, making it difficult for hospitals, labs, insurance firms, and others to collaborate. The Unified Health Interface (UHI), another example of a DPI, is a potential solution to that problem. With more than 380 million user accounts, 200,000 healthcare facilities, and over 100,000 healthcare professionals on board, it provides significant incentives for platforms to integrate into India’s fragmented health network. If the UHI is implemented well, it will allow businesses to reach underserved populations with useful services such as telemedicine and e-pharmacies at scale.
In addition to these examples, one of the most popular applications of DPIs is digital identity systems. With Aadhaar’s coverage currently at 93 percent of the total Indian population and identity verification becoming a legal requirement in sectors such as social media, gaming, and education, businesses can eliminate the need to build an identity system from scratch to meet regulatory requirements.
Market expansion
For businesses, DPIs are a gateway to globally interconnected markets. As more and more countries begin to adopt DPIs, businesses that have already built DPI applications stand to benefit. For example, PhonePe now supports international payments, through which Indian users can pay foreign merchants in several countries via UPI, including Singapore, the UAE, and Nepal.
More than fifty countries are in various stages of adopting DPIs, including some SAARC countries and SCO member states. In addition to their rapid adoption in the Global South, even developed countries such as France are embracing this trend. In fact, India and the EU agreed to enhance the interoperability of their DPIs at the first meeting of the Trade and Technology Council
Reducing costs
DPIs also help businesses reduce their operational costs. For example, Jio onboarded 100 million users in six months using eKYC systems at a fraction of what physical verification would have cost. Since then, platforms such as LinkedIn and Koo have also enabled identity verification through Aadhaar.
Additionally, the Open Network for Digital Commerce (ONDC), an open and interoperable network designed to help level the playing field in India’s e-commerce sector, is also expected to reduce customer acquisition costs for small businesses. For example, a retailer on ONDC can increase the discoverability of its products by uploading its catalogue in one place and broadcasting it to the entire buyer network. Moreover, the government has indicated that sales commissions on ONDC will be 75 percent less than what merchants are currently charged on e-commerce platforms. While it is still early days, the network has already been clocking in 35,000 daily transactions this year.
Advancing innovation
The most remarkable contribution of DPIs is to innovation, enabling businesses to participate in socioeconomic development by promoting inclusion, accessibility, and empowerment.
For example, the UPI ecosystem has spawned a host of creative products, including lending, peer-to-peer transactions, subscriptions, vouchers, and even IPOs, which have made these financial services more accessible to previously unbanked individuals.
Many of these innovations are deeply rooted in the personal stories of local communities, addressing specific needs and requirements. For example, when Paytm’s founder noticed that small merchants were finding it difficult to verify UPI transactions because of SMS caps, the company launched Paytm Soundbox, a small device that provides instant audio alerts to the merchant in their preferred language. More than 6 million devices have been installed already.
Another example of community-driven innovation can be seen in Namma Yatri, a ride-hailing app for auto-rickshaws built using open mobility protocols. The app uses a closed-bid auction process so that drivers can evaluate different bids and select the most suitable offer. This innovative approach to the issue of price transparency empowers both riders and drivers.
Some reservations
Despite these benefits, not all businesses are eager to fully participate in the DPI revolution. Most prominent companies are involved in at least one DPI project, but there is some reluctance to go all in.
Some believe that current business models are unsustainable once network-backed subsidies are phased out. For others, the privacy-first approach to DPIs makes it harder to build new revenue pipelines involving data analytics. Another big concern is around governance—there is far too much reliance placed on technology-led compliance rather than traditional forms of regulation. For example, technical code cannot substitute for legal provisions on specific issues, such as specifying who is liable to pay compensation in the case of a data breach.
It is easy to dismiss these concerns as the unfounded fears of entrenched businesses trying to protect their moats and models. But resolving these concerns should be a priority for policymakers, especially if the success of DPIs depends on private sector participation.
Deepening the dialogue
There are a few ways in which the private sector’s concerns can be abated:
- The technical development of DPIs should be transparent and collaborative. Behind closed doors, some firms have expressed concerns that many of India’s DPIs are being built by private actors without transparency and due process. To make DPIs truly open and inclusive, all potential participants should be consulted on the design of the protocols.
- Policymakers should play a more active role in resolving differences between ecosystem players, for example, between banks and wallet providers. Many of these tensions arise from policy changes that have a direct commercial impact. Regulators should conduct impact assessment to ensure that revenue effects are distributed across the network.
- Successful deployments of DPI will require good governance and enforcement mechanisms built on the foundations of trust, accountability, and transparency. New regulations for the digital economy should be studied through the lens of DPIs.
Conclusion
Any business that wants to deliver impact at scale should pay close attention to the DPI story. By embracing DPI’s foundational principles of openness, decentralization, and interoperability, businesses are more likely to innovate and grow while advancing important policy goals like financial inclusion. In fact, these design principles are permeating the digital economy through new technologies such as blockchains, the internet of things, and large language models.
As the ecosystem develops, issues around transparency, monetization, and governance will have to be resolved through effective collaboration guided by policymakers. For now, all businesses—big or small, Indian or foreign—should be developing a strategy to leverage the power of DPIs. Whatever the final destination might be, it is time to ride the DPI train.
