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DPI and Private Competition

Question: Does building Digital Public Infrastructure hamper the growth of a competitive economy?
Short Answer: Not if it is built in accordance with best practice design principles. DPI increases healthy, fair competition in an economy amongst players and triggers tremendous market value. DPI means public interest, not necessarily public ownership or execution.
Long Answer: The word ‘public’ of Digital Public Infrastructure is often misconstrued to mean that all components of the infrastructure will be owned and operated by the government, leaving little room for private sector players to build solutions and derive value. One hesitation in adopting DPI lies in the misunderstanding that it will obstruct the free flow of competition in a laissez faire economy, or crowd out the private sector from providing services.
However, there is much more nuance here. The word ‘public’ in DPI denotes that all solutions built, whether private or by the government, are in the best interests of the public. It signals that the individual should be at the centre of the economy and at the heart of all endeavours. The role of the government in DPI may simply be to lay out the rules which enforce this idea of ‘people before profits’ to nurture free and fair competition that is the backbone of any healthy society.
Every sport is played according to certain rules, and there are penalties for violating them - yet, we don’t look at these rules as obstructions to the game but rather as necessary guardrails which keep players safe and the game interesting. Similarly, the DPI game is about laying down certain rules - such as Interoperability, Privacy and Security, Federation, Inclusion and Minimalism - which act as guardrails to prevent monopolies, unfair practices, and dictatorial tendencies.
Not only does DPI allow for competition in the existing economy, it also creates new avenues for private sector growth and innovation. The analogy commonly used is that DPI doesn’t just allow more people to eat from the pie but it also increases the size of the pie so that everyone, including incumbents, get a larger market share in ways they could not have previously imagined.
DPI creates potential for competition at every level of its execution, adoption, and growth. For example, in Payments, the government attempts to build only when decades of market players trying to solve this problem have resulted in silos, exclusions and market failures. The government builds only the minimalistic rails and not necessarily the applications (innovation layer). The market players can build their own apps on top of the rails (adoption layer). Once you build DPI in payments, it also unlocks other layers such as lending where a new playing field for market players (execution layer).
The layers of private participation (in more detail) are:
  1. 1.
    Innovation Layer:
Once DPI has scaled, there are various ancillary services that can be built on top of it that leverage its benefits. For example, the interoperability and verified credentials gained through Open Banking (data-sharing as well as payments) create the foundation for Insurance, Lending, and eCommerce use cases to be built on top of it. DPI attempts to solve only the minimum bottleneck - e.g. verifying a few profile data fields - without entering the realm of final solutions or service delivery.
  1. 2.
    Adoption Layer:
Once the DPI has been built, it is only successful if it adopted by the market players to offer improved services to people of the country to truly scale. Every country has its share of diversity in the form of demographics, abilities, income levels etc., and no single platform can adequately cater to all of them. The second layer of the DPI approach - market innovation layer - pushes for private sector innovation and competition to cater to these different segments of society using User Experience as the key differentiator. By creating a level playing field, the DPI approach ensures that the best player wins on the basis of the value provided to the end user.
  1. 3.
    Execution Layer:
While the DPI approach can be triggered by the government, it actually requires significant private sector participation - typically via Technology Service Providers (TSPs) and System Integrators (SIs) to roll out the DPI on a nation-wide scale. This allows for innovation from and competition between various market players to offer the best contract and build at a country level using best practices for design and governance.
There is a widely popular anecdote from the Indian sphere in this regard. It is said that after India’s foundational identity ‘Aadhaar’ had scaled, and offered eKYC services on top of it, Amazon went to the Indian Government and requested for an Aadhaar for businesses!
Amazon said that the only way for them to accurately verify businesses that wanted to be listed on its e-commerce platform was through national, digitally signed documents for a business including the eKYC ability.
This is the perfect example to display that even the largest private sector players benefit from the DPI approach because it allows them capabilities and functionalities it could not have previously solved.
DPI solves for every last individual in the country - and this includes the individuals running private sector businesses!