Understanding iSPIRT’s Entrepreneur Connect

There is confusion about how iSPIRT engages with entrepreneurs. This post explains to our engagement model so that the expectations are clear. iSPIRT’s mission is to make India into a Product Nation. iSPIRT believes that startups are a critical catalyst in this mission. In-line with the mission, we help entrepreneurs navigate market and mindset shifts so that some of them can become trailblazers and category leaders.

Market Shifts

Some years back global mid-market business applications, delivered as SaaS, had to deal with the ubiquity of mobile. This shift upended the SaaS industry. Now, another such market shift is underway in global SaaS – with AI/ML being one factor in this evolution.

Similar shifts are happening in the India market too. UPI is shaking up the old payments market. JIO’s cheap bandwidth is shifting the digital entertainment landscape. And, India Stack is opening up Bharat (India-2) to digital financial products.

At iSPIRT, we try to help market players navigate these shifts through Bootcamps, Teardowns, Roundtables, and Cohorts (BTRC).

We know that reading market shifts isn’t easy. Like stock market bubbles, market shifts are fully clear only in hindsight. In the middle, there is an open question whether this is a valid market shift or not (similar to whether the stock market is in a bubble or not). There are strong opinions on both sides till the singularity moment happens. The singularity moment is usually someone going bust by failing to see the shift (e.g. Chillr going bust due to UPI) or becoming a trailblazer by leveraging the shift (e.g. PhonePe’s meteoric rise).

Startups are made or unmade on their bets on market shifts. Bill Gates’ epiphany that browser was a big market shift saved Microsoft. Netflix is what it is today on account of its proactive shift from ground to cloud. Closer home, Zoho has constantly reinvented itself.

Founders have a responsibility to catch the shifts. At iSPIRT, we have a strong opinion on some market shifts and work with the founders who embrace these shifts.

Creating Trailblazers through Winning Implementations

We are now tieing our BTRC work to specific market-shifts and mindset-shifts. We will only work with those startups that have a conviction about these market/mindset-shifts (i.e., they are not on the fence), are hungry (and are willing to exploit the shift to get ahead) and can apply what they have learned from iSPIRT Mavens to make better products.

Another change is that we will work with young or old, big or small startups. In the past, we worked with only startups in the “happy-confused” stage.

We are making these changes to improve outcomes. Over the last four years, our BTRC engagements have generated very high NPS (Net Promoter Scores) but many of our startups continue to struggle with their growth ceilings, be it an ARR threshold of $1M, $5M, $10M… or whether it is a scalable yet repeatable product-market fit.

What hasn’t changed is our bias for working with a few startups instead of many. Right from the beginning, iSPIRT’s Playbooks Pillar has been about making a deep impact on a few startups rather than a shallow impact on many. For instance, our first PNGrowth had 186 startups. They had been selected from 600+ that applied. In the end, we concluded that we needed even better curation. So, our PNGrowth#2 had only 50 startups.

The other thing that hasn’t changed is we remain blind to whether the startup is VC funded or bootstrapped. All we are looking for are startups that have the conviction about the market/mindset-shift, the hunger to make a difference and the inner capacity to apply what you learn. We want them to be trailblazers in the ecosystem.

Supported Market/Mindset Shifts

Presently we support 10 market/mindset-shifts. These are:

  1. AI/ML Shift in SaaS – Adapt AI into your SaaS products and business models to create meaningful differentiation and compete on a global level playing field.

  2. Shift to Platform Products – Develop and leverage internal platforms to power a product bouquet. Building enterprise-grade products on a common base at fractional cost allows for a defensible strategy against market shifts or expanding market segments.

  3. Engaging Potential Strategic Partners (PSP) – PSPs are critical for scale and pitching to them is very different from pitching to customers and investors. Additionally, PSPs also offer an opportunity to co-create a growth path to future products & investments.

  4. Flow-based lending – Going after the untapped “largest lending opportunity in the world”.

  5. Bill payments – What credit and corporate cards were to West, bill payments will be to India due to Bharat Bill Pay System (BBPS).

  6. UPI 2.0 – Mass-market payments and new-age collections.

  7. Mutual Fund democratization – Build products and platforms that bring informal savings into the formal sector.

  8. From License Raj to Permissions Artefact for Drones – Platform approach to provisioning airspace from the government.

  9. Microinsurance for Bharat – Build products and platforms that reimagine Agri insurance on the back of India Stack and upcoming Digital Sky drone policy.

  10. Data Empowerment and Protection Architecture (DEPA) – with usage in financial, healthcare and telecom sectors.

This is a fluid list. There will be additions and deletions over time.

Keep in mind that we are trying to replicate for all these market/mindset-shifts what we managed to do for Desk Marketing and Selling (DMS). We focussed on DMS in early 2014 thanks to Mavens like Suresh Sambandam (KissFlow), Girish Mathrubootham (Freshworks), and Krish Subramaniam (Chargebee). Now DMS has gone mainstream and many sources of help are available to the founders.

Seeking Wave#2 Partners

The DMS success has been important for iSPIRT. It has given us the confidence that our BTRC work can meaningfully help startups navigate the market/mindset-shifts. We have also learned that the market/mindset-shift happens in two waves. Wave#1 touches a few early adopters. If one or more of them create winning implementations to become trailblazers, then the rest of the ecosystem jumps in. This is Wave#2. Majority of our startups embrace the market-shift in Wave#2.

iSPIRT’s model is geared to help only Wave#1 players. We falter when it comes to supporting Wave#2 folks. Our volunteer model works best with cutting-edge stuff and small cohorts.

Accelerators and commercial players are better positioned to serve the hundreds of startups embracing the market/mindset-shift in Wave#2. Together, Wave#1 and Wave#2, can produce great outcomes like the thriving AI ecosystem in Toronto.

To ensure that Wave#2 goes well, we have decided to include potential Wave#2 helpers (e.g., Accelerators, VCs, boutique advisory firms and other ecosystem builders) in our Wave#1 work (on a, needless to say, free basis). Some of these BTRC Scale Partners have been identified. If you see yourself as a Wave#2 helper who would like to get involved in our Wave#1 work, please reach out to us.

Best Adopters

As many of you know, iSPIRT isn’t an accelerator (like TLabs), a community (like Headstart), a coworking space (like THub) or a trade body. We are a think-and-do-tank that builds playbooks, societal platforms, policies, and markets. Market players like startups use these public goods to offer best solutions to the market.

If we are missing out on helping you, please let us know by filling out this form. You can also reach out to one of our volunteers here:

Chintan Mehta: AI shift in SaaS, Shift to Platform Products, Engaging PSPs

Praveen Hari: Flow-based lending

Jaishankar AL: Bill payments

Tanuj Bhojwani: Permissions Artefact for Drones

Nikhil Kumar: UPI2.0, MF democratization, Microinsurance for Bharat

Siddharth Shetty: Data Empowerment and Protection Architecture (DEPA)

Meghana Reddyreddy: Wave#2 Partners

We are always looking for high-quality volunteers. In case you’re interested in volunteering, please reach out to one of the existing volunteers or write to us at [email protected]

The History and Future of Angel Tax

“I propose a series of measures to deter the generation and use of unaccounted money. To this end, I propose:

Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value.”

When ex-Finance Minister Pranab Mukherjee introduced angel tax in 2012, it created an uproar in the fledgeling startup and angel investor community. While the purpose of this section was to reduce money laundering by imposing the hefty tax rate of 30.9 percent, it had several inadvertent consequences.

There were several cases of money laundering by Jaganmohan Reddy that were caught by the Enforcement Directorate, who revealed that people had “paid bribes to Reddy in the form of investments at exorbitant premiums in his various companies to the tune of Rs 779.50 crores apart from making payment of Rs 57 crores to him in the guise of secondary purchase of shares and donation of Rs 7 crores to the YSR Foundation”.

To prevent such abuses of the law, the government clamped down and stated that any unjustified share premium given by a private company would be taxed as income in their hands. But to catch one culprit, they threw the book at many innocents. The relevant law known as section 56(2)(viib) of the Income Tax Act came to be known as the angel tax section. Many startups which are private companies and had issued shares at a premium to angel investors ended up facing notices from the tax authorities under this section. This premium is treated as income in their hands, classified as “income from other sources” and taxed at the maximum marginal rate of tax.

The ‘Startup India’ initiative changed all that. Under the stewardship of the Honourable Prime Minister, startups became a focus area. As per the ten points in the Action Plan, if a startup was registered post- April 1, 2016, then the angel tax was not applicable to the startups. The move had helped startups operating in that area, but a problem still existed for startups that were incorporated before 2016. In fact, in December 2017, many startups received notices and orders for the Financial Year 2013-14. A few entrepreneurs who faced income tax notice hassles launched an e-petition called Change.org in January 2018 so that the government could take some concrete action in Budget 2018.

iSPIRT has taken up the matter with MoF and DIPP on the same. We had made some representations to MoF specifically before the budget. In the budget, the Finance Minister made a statement on continued assistance to the Angel Ecosystem. Due to rigorous efforts that went into sharing of information by these startups, we have recently seen MoF making the welcome announcement.

As per the latest announcement, angel tax would not be applicable on startups which are incorporated before 2016, fulfil the criteria under Startup India Policy and have been granted angel funding up to Rs10 crores. It is believed that at least 300 startups will get a breather from angel tax. The government is also likely to establish a separate committee for the recognition of startups that meet these criteria.

In a further relief to startups, the Finance Secretary Hasmukh Adhia also announced that income tax officers would not take precipitate action and will proceed only after the first set of appeals decided in appellate cases. The exact phrase they used was “no coercive action”, which helped many startups heave a collective sigh of relief. All pending appeals by March 31, 2018, will be quickly addressed.

If you are a startup and need further guidance on angel tax, you should follow the steps below:

  1. Register at DIPP for a startup even if you were incorporated before 2016 and currently are still a startup as defined by DIPP by logging onto this site and filling up the form at https://www.startupindia.gov.in/registration.php.
  2. If you are a startup as per DIPP definition, then get your DIPP certification. All startups which may have raised funding post-April 2016 and are registered with DIPP will not have angel tax applicable to them.
  3. If you are a startup which has received income tax notices for years before 2016 and is still eligible to register as a startup, then please register yourself with DIPP. You can share the registration certificate and relevant notifications with the assessing income tax officer to get an exemption from angel tax.
  4. If you are a startup which has received income tax notices for years after 2016, then please repeat step 2 mentioned above and then appeal against the order. It is important that due process is followed so that the redressal measures taken by the tax authorities can come into effect.

These startups do not have to pay 20% of the tax order at the time of appeal as this has been a one-time exception granted till 31st March 2018 to avoid hurting the sentiments of the startup ecosystem. You can share the order with iSPIRT.

Also, pursuant to our meeting with MoF, we have been assured that the income tax officers in the various jurisdictions have been directed to exercise leniency on this till the new taxation regime for angel and venture capital investors comes into place, as announced by the Finance minister in his budget speech. The officers are aware of the hardships that startups now face and are doing their best to mitigate this within the ambit of the current law.

DIPP and MoF are also in the process of allowing a waiver to the earlier startups facing the angel tax issue, provided the investment made is under Rs 10 crores and subject to an Inter-Ministry board approving the same. This should happen in the next 5-10 days.

We will encourage all startups which have received notices and orders under Section 56 to follow the above steps to chart their way across the new announcements.  

Please forward your orders to [email protected] enabling us to use these orders to take a strategic view to policy to help with this issue in the long term.

Start up India.

Stand up India.

This post is co-authored by Nakul Saxena and Siddarth Pai, Policy Expert Council Members, iSPIRT Foundation

iSPIRT’s Response to Justice SriKrishna committee’s White Paper on Data Protection Framework for India

Read more about the Data Protection Law here: https://pn.ispirt.in/india-in-a-digital-world co-authored by Shrikant Karwa and Sarika Mendu.
For any query, Feel free to write to us: [email protected]

While Well-Intentioned, Budget 2018 Falls Short of Expectations

Starting nine years ago, Aadhaar, eKYC, UPI and the rest of India Stack laid the foundation for a formalization of the Indian MSME sector. With the introduction of Aadhaar for Business and the unlocking of GST data for lenders, we are poised to see an explosion in flow-based lending to MSMEs, ultimately having a multiplier effect on jobs and economic growth. This is great news for MSME focused digital lenders and the product startups serving them. Therefore, a significant digital dividend for the Bharat economy is finally in sight.

It is heartening to see government adopt the same digital-first approach when it comes to health and education. While this is a great start, much work remains. Laying the policy foundation alongside an India Stack inspired technology spine will ensure the rise of the Bharat focused tech-entrepreneur. We need India’s entrepreneurs to lift outcomes for patients and students not adequately served by our existing system.

On the startup and investor fronts, this budget is a missed opportunity to address the important near-term issues. We had hoped to see the resolution for Angel Tax and other such Stay-in-India Checklist issues. Slapping a Long-Term Capital Gains Tax on the previously untaxed sale of listed equities will adversely affect the List-in-India initiative. Additionally, the compliance overhang of listing will no longer be tempered by the promise of tax-free gains. The promised tax regime must incentivize and protect foundational (angel and domestic investors) as opposed to fleeting capital.

While well-intentioned, this budget falls short of our expectations. India’s complexity and diversity call for a much more responsive and action-oriented policy-making approach. Only then can we harness our entrepreneurial energy to address India’s most pressing challenges.

About iSPIRT
iSPIRT is a non-profit technology think tank that builds public goods for Indian product startup to thrive and grow. Learn more: www.ispirt.in

Sanjay Jain, Nakul Saxena, Sudhir Singh and Sanjay Khan Nagra Fellows from our policy team have issued a press release on 1st February 2018, a copy of it is here. Reach out to Sanjay Jain in case you would like to know more details.

Special thanks to our volunteers Sharad Sharma, Siddarth Pai, Tanuj Bhojwani, Sarika Mendu, Anukriti Chaudhari, Karthik KS. 

The End Doesn’t Justify The Means: A Public Statement

[Given the course of events that have unfurled recently, iSPIRT created IGCC to investigate, and strengthen governance. Sharad Sharma, who has previously apologized and accepted responsibility on Twitter, has reflected further on the topic, and written this post. We are putting it out to ensure that this starts the right discussion inside iSPIRT and outside – Sanjay Jain]

There will be a time when we must choose between what is easy and what is right. It is our choices that show what we truly are, far more than our abilities.” – Albus Dumbledore

What is IndiaStack

Over the last week, iSPIRT has asked itself fundamental questions on who we are and how we conduct ourselves. As a pro-bono partner in the development of the India Stack, this team has had the privilege of designing systems that have eventually seen adoption by the state in a quest to solve said hard problems. Our work results in technology platforms that have positively impacted the lives of hundreds of millions of Indians. However, technology is merely a tool whose potential for misuse must be checked. This demands accountability both of the tool and its makers.

No system is perfect. And when one embarks on an endeavor to build a public platform that impacts an entire nation of over a billion people, some imperfections are bound to emerge. These imperfections should rightly attract criticism and concern from civil society. It is at this point that a natural conflict develops. Between the individuals that built the system with a great degree of dedication, application, and indeed love, and the individuals that are wary of how the said system can be used against the very people it was meant to benefit.

This conflict when left to fester without a set of rules of engagement is bound to devolve into an uncivil discourse that attacks and hurts people on each side, without actually achieving the objective that both parties hold very dearly. We are blessed and privileged that we can build for and speak for millions of our countrymen. Our privilege stems from our education, our abilities, our stature, our connections, and our life’s work. And for the most part, it must be acknowledged that individuals on both sides of this divide tirelessly endeavor to leverage this privilege to better the lives of those less fortunate among us. We build and speak, for our people. And so it is our responsibility that we conduct ourselves with dignity, grace, and generosity of spirit, while fiercely battling on the right path to that better future.

And on that count, I as one of the builders have stumbled. I condoned uncivil behavior by some anonymous handles over a period of ten days. I have owned up to this transgression. It was investigated internally by the iSPIRT Governing Council: Sudham as a team stands dissolved, and I will no longer be communicating on behalf of iSPIRT externally for 4 months.

I am clear the end cannot, and should not justify the means. But the larger lesson here is that we must develop systems and processes internally, and a framework and principles within which we will operate.

In the process of building, there is a set of factors that influence policy making. And this pie chart is an indicative representation of these factors.

IndiaStack2

Facts on the ground: Half of policy making is the policy itself and the data points in reality that led to it. It comprises of everything from the problems the policy endeavours to address, the people who are victims of these problems, previous attempts to solve them, and the data that can back up this approach. It was traditionally a major chunk of all that was needed to make a policy, particularly in a highly centralized society where a chosen few had the privilege and the power to craft and enforce said policies.

Mainstream media was the other major pillar of policy making. By serving as the primary medium of crafting public perception of millions, a chosen few reporters and their editors had the privilege of being the exclusive custodians of the court of public opinion. If you wanted to get the word out and have the people be on your side, these were the people you’d turn to.

The most significant shift in policy making in decades is the rise of social media. The emergence of platforms where individuals could transform into influencers by consistently generating unfiltered content is shifting the balance of power in the perception game. An ever increasing audience of online content consumers now turn to these platforms for their news and information. So much so that it has become a primary source of news for these early adopters.

A simplistic but useful rubric to describe the nature of discourse on social media is to classify into two categories, namely civil and uncivil. Civil discourse is exactly what is sounds like, a respectful engagement, where all parties concerned conduct themselves with a degree of basic human decency. And while the conversation may be informed, or not, backed by facts or utterly fabricated, the debate never descends below a certain level of decorum. In such discourse, there is always room for one to see the reasoning of the other side. It leaves space for empathy. And empathy is the foundation of collaboration. Both parties in such conversations can at times work together once it’s made clear that their objectives are aligned.

On the other hand, there is another side to the conversation on social media. Specifically, the kind that tends to unravel on Twitter. Uncivil discourse is marked by abuse and trolling — where one willfully sows discord and makes inflammatory, extraneous, often untruthful remarks about a topic or an individual with the express purpose of upsetting the target to evoke an emotional response. Such conversations often find themselves unfolding through anonymous handles that can employ such tactics without fear of retribution. Such behavior is malicious and dishonorable, and in the long run saps the soul of the perpetrators themselves, while simultaneously hurting the targets. It is the lowest form of engagement that leaves both parties poorer for it.

Having danced with such tactics myself for ten days in May, I can say with certainty that it is conduct unbecoming of our prior actions and accomplishments. Put it simply, I have learnt my lesson. One that should have been painfully clear to begin with. Such behavior — uncivil comments made while hiding behind anonymity — is loathsome and abhorrent. And I will never engage in or condone such methods ever again.

That brings me to the question, how does one stand up for what one has built, and the cause of inclusion that it aims to serve, while accommodating the concerns of its detractors? To answer this, here is a set of potential principles.

  • True North: If one truly believes their work to be the right thing, it must be showcased in both the intent of how one chooses to engage with critics, and in the stories of impact that showcase how what’s built has actually improved the lives of the people it aims to serve. By making the citizen our north star, and having their best interest guide our actions, we can at the very least be assured of having done the right thing. Regardless of what slings and arrows one takes in the process.
  • Empathy: To truly believe deeply in our hearts that even our harshest critics come from a place of wanting to protect the citizen and to make an effort to understand why they have framed their criticism in that manner
  • Openness: Our policies must be made visible to the community at large through various stages of evolution through discussion papers and roundtables
  • Fervor to educate: A gospel that isn’t sung is never heard. We will work hard to showcase the positive impact of our work and spread the message far and wide.
  • Commitment to civility: No trolling, no anonymity, no abuse. Ever.

Given the course of events that have unfurled recently, I accept the IGCC decisions, and reaffirm my commitment to the iSPIRT mission and values, and to help it emerge as a better organization. This will be my last public post for some time. I look forward to accomplishing our goals (the End) through Means that we can all be proud of.

2017 iSPIRT Annual Letter

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Problem solvers, responsible builders of companies, communities and ecosystems are the foundation for progress and growth of any nation. What drives all of them is a sense of challenge, ownership of problems, allegiance to autonomy, demonstration of personal accountability and the thrill of finding a solution. This energy is fueling a growing product movement in India. iSPIRT is proud to be part of this movement.

Every movement sees itself as a moral enterprise. Our moral imperative is to help lift India out of poverty over the next 20 years (see 2016 Annual Letter). Technology platforms are powering this ambition. These technology platforms have a significant role to play in driving innovation everywhere. Where India stands apart is that it has carefully thought about digital colonization and has boldly decided that its core technology platforms will be public goods.

Since our public technology platforms are open-access, we expect both Indian and Silicon Valley entrepreneurs to participate in building solutions for India’s hard problems. Thus, Indian entrepreneurs will compete with Silicon Valley entrepreneurs not just in the US market, but in the Indian market as well. This inevitable competition will play out in the context of the maturity of the two ecosystems. Hence, unless we develop the Indian technology ecosystem rapidly, our Indian entrepreneurs will not succeed. iSPIRT brings an intensity to building our technology ecosystem that an entrepreneur displays for building her startup.

Four years on, there has been good progress but there is much more to do. We believe that Silicon Valley does an admirable job of innovating for the first billion. India has the potential to innovate for the next six billion.

iSPIRT is ending the year on a high note

ispirt-is-ending-the-year-on-a-high-note

At the beginning of the year when we wrote down our thoughts in the 2016 Annual Letter about aspects such as break away from copy paste entrepreneurship, innovation bridge with Silicon Valley, progress on open market policies, etc. we thought we will score a few wins in the year. The pace of progress has surprised us. In many areas we have exceeded our best expectations.  

The last few months have been particularly hectic for iSPIRT. Some of the wonderful work of iSPIRTers is captured in the four events that took place in the last five weeks:

#PNgrowth, Nov 25th – 28th: This intense 3-day bootcamp is grooming the future category leaders of our Software Product Industry. This was our second PNgrowth bootcamp this year. Read about it in Avinash’s evocative blogpost: Behind the scenes of $2 billion Indian startup movie #PNgrowth.

Startup Bridge India, Dec 2nd: This was our first roadshow in Silicon Valley and was done with TiE SV and Stanford University. We sought out strategic partners for 28 startups that traveled from India. This was organized by our M&A Connect Program, which is now led by Rajan. Read about the matchmaking event in a descriptive blogpost by Roxna: Startup Bridge India: Breaking Down Borders, Barriers and BS.

InnoFest #IndiaInnovates, Dec 8th: We are slowly and steadily building a community of hardware product innovators to cater to the needs of 100m families in ‘India 2’ (beyond metro). Financial inclusion will soon allow them to improve their lives using Indian products. Prathibha, the anchor volunteer behind InnoFest, captures the mood in her blogpost: InnoFest 2016 – Innovation celebrated in Bangalore, and how…

FinTech Leapfrog Council, Dec 16th: India is set to leapfrog the rest of the world in financial inclusion driven by India Stack. The FTLC program combines global best practices with a home-grown, world-class architecture for financial inclusion, and helps incumbent Indian banks create a “leapfrog roadmap” for their organizations. Venky, the anchor volunteer driving this initiative, describes the thinking behind FTLC in his blogpost: A Leapfrog moment for Indian Banking.

We are ending the year on a high note!

Next year will be a busy one for us given market inflections and the heightened expectations from us. This presents iSPIRT and each of us with a unique opportunity to contribute and make a difference.

With loads of best wishes for 2017 from all of us volunteers at iSPIRT.

A Leapfrog moment for Indian Banking

At iSPIRT, our belief is that banking will change more in the next five years than it has in the last 50 years. For a variety of reasons, the changes happening in India will follow a path that is very different from other countries. Indian Banks therefore have two choices: Create a new playbook to deal with these changes, or stick to the old rulebook and risk being disrupted.

In mid-2015, Nandan Nilekani gave a talk titled, The Whatsapp Moment in Banking that went viral within banking circles. The analogy was derived from the manner in which the sharp growth of Whatsapp had hit the SMS revenues of the global telecom industry. SMS used to account for 10-15 percent of the global telco industry revenues but Whatsapp, a company that had a mere 40 people in 2009 easily eclipsed them with a traffic of 30 billion messages per day. As against this, all the incumbent telcos of the world put together accounted for just 20 million messages per day! Similarly, a growing confluence of technologies would allow new age banks to handle millions of customers at a very low cost, without costly branches and expensive technologies; and with a minimum staff strength.

Responding to this challenge, Mrs. Arundhati Bhattacharya, the Chairman of the State Bank of India, India’s largest bank, brought a team of more than 30 senior leaders from SBI to Bangalore for a half-day session on how banking is being transformed in July 2015. This session became the forerunner for a forum called the FinTech Leapfrog Council (FTLC) that iSPIRT set up to help incumbent banks navigate the disruptive changes facing them.

001For incumbent banks to transform themselves is a truly difficult challenge, but given that these banks cumulatively account for more than 30 percent of the Indian banking sector, their transformation is of national importance. In the first phase of FTLC, four banks — SBI, Bank of Baroda, Axis Bank and IDFC Bank — were invited to join FTLC, and all four of them accepted. FTLC then helped the banks through quarterly workshops that consisted of deep-dives focused on disruptions in areas like alternative lending, payments and analytics; and emerging technologies like the Unified Payment Interface, and the IndiaStack, which enables cashless, presenceless and paperless transactions with a consent layer on top. Some of the industry leaders who spoke at FTLC workshops, which attracts the CEOs and top management of the four banks are:

  • Shamir Karkal, Head of Open APIs at BBVA Bank, Spain, and co-founder of Simple Bank
  • S Ramakrishnan, former Chief Data Officer of Citibank
  • Prof. Saras Sarasvathy of the Darden School of Business
  • Nandan Nilekani
  • Sharad Sharma, co-founder of iSPIRT
  • Sanjay Swamy, Managing Partner of Prime Ventures.

While everyone agrees that what a bank looks like 5-10 years from now would be radically different, no one can predict exactly what the bank of the future will look like. In this situation, banks face one of the most disconcerting forms of change that we call non-linear change. In the FTLC taxonomy, there are three kinds of change:

  1. Incremental change focussed on process improvement — for example, approving a loan in five days as opposed to seven days
  2. Disruptive change which is very painful, but where the end state is well known. Several MNC IT services companies faced this, when they recognized that they had to embrace the Global Delivery Model perfected by Indian services companies. In the last few years, many of these MNCs turned around their business models and reached a point where most of their employees are in India. The change was painful, but they had a sense of where they were and where they need to be.
  3. Non-Linear Change, where the end state is difficult to predict. In the telecom industry, who would have predicted that Whatsapp would carry 30 billion messages a day? In the transport industry, who would have predicted that Uber, a company founded in March 2009, would be valued at $62.5 billion in June 2015?

To navigate the Non Linear Change, iSPIRT helped the FTLC banks embrace Non Predictive Control (NPC), a method researched by Prof. Saras Sarasvathy of the Darden School of Business. While strategic planning helps organizations in situations where the future is predictable, NPC helps banks in situations where the future is unpredictable. For instance, its is clear that a large expansion will take place in non­-collateralized debt to the under­banked, but it is impossible to know what this alternative lending system will exactly look like. Hence, it’s imperative that banks bet on several competing scenarios, monitor progress on all of them, and then retire or double down on each bet. iSPIRT curated a set of startups in Alternative Lending and Payments, and set up several pilots with the FTLC banks, to help them master the NPC methodology.

For Indian banks, another development, unique to our country, is the emergence of the IndiaStack, a powerful set of Open APIs to enable cashless, presence less and paperless transactions with a consent layer that empowers users with control over their data. iSPIRT has been closely involved in the development of the IndiaStack, which rides on top of the JAM trinity consisting of JanDhan bank accounts, Aadhaar biometric identification and Mobilephones.

The Government promoting financial inclusion through Jhan Dhan Yojana, has led to over 263 million new bank accounts being opened. With RBI giving licences to over 20 new banks, including small banks and payment banks, the competitive intensity of the sector is set to increase. Over 1 billion Indian residents now have Aadhaar, an online biometric identity, and smartphones are expected to reach a penetration of 700 million by 2020. One can visualise a future where every adult Indian has an Aadhaar number, a smartphone and a bank account. Already over 367 million Indian residents have an Aadhaar linked bank account and more than 1 billion DBT (Direct Benefit Transfer) transactions have happened, whose value is in the billions of dollars. Those banks that leverage the JAM trinity and the India Stack will be able to reach out to a vast new set of customers, at a dramatically lower cost. For example, it is estimated that the cost of complying with the mandatory Know Your Customer (KYC) norms can be brought down from Rs 1,000 to Rs 5, by using the IndiaStack. This alone can enable the process of financial inclusion for millions of Indians.

Industry experts, like Bill Gates, and many others who have been following these developments, feel that India is set to leapfrog the rest of the world in financial inclusion. The FTLC program combines global best practices with a home-grown, world-class architecture for financial inclusion, and helps incumbent Indian banks create a “leapfrog roadmap” for their organizations.