After UPI, Aadhaar, and DigiLocker, India’s chief technology officer, Nandan Nilekani is betting big on, what you may call, Finternet.
In an exclusive interview with AIM, Pramod Varma, the CTO of EkStep Foundation who partnered with Nilekani on this project, spilled the beans on Finternet. Citing the vision paper, Varma explained that Finternet was inspired by the nature of the internet.
What is Finternet?
“The internet itself has no borders and no specific purpose of its own. But it has unleashed countless possibilities through the innovations of entrepreneurs, leading to what we now recognize as the post-internet effect,” explained Verma.
He said, at present, people engage in activities like podcasting, streaming, and gaming, which are all powered by the internet. “The way the internet continues to push the boundaries is truly remarkable. Similarly, a vision is emerging for a universal financial transaction infrastructure, a layer above the internet, called the Finternet,” explained Verma.
The concept refers to an interconnected network of multiple financial ecosystems, much like the internet. This vision aims to empower individuals and businesses by placing them at the centre of their financial lives, enabling seamless and efficient transactions across various platforms and asset types.
It envisions a system where individuals and businesses can transfer any financial asset—money, stocks, or property—at any time, from any device to anyone globally. This would make financial transactions inexpensive, secure, and nearly instantaneous.
The foundation is built on unified ledgers that facilitate the digital representation of physical assets through tokenisation. This allows for automated transactions via smart contracts, significantly reducing the complexity and time involved in traditional financial processes.
It emphasises a user-centric design that lowers the barriers between different financial services, promoting greater access and inclusivity. Moreover, it seeks to address the existing inefficiencies in the financial system, particularly in emerging and developing economies where access to financial services is often limited.
A robust legal and governance framework is essential for the Finternet to ensure trust and compliance. Central banks would play a crucial role in maintaining the integrity of money while collaborating with commercial banks to foster innovation and security.
The Future is Finternet
Terming it as the future of financing systems, Infosys co-founder and chairman Nilekani provided a glimpse into how India’s fintech landscape would look like in the near future. According to him, Finternet will be user-centric and unified, which means it will cover all types of assets with a universal infrastructure.
He offered his insights on the concept of tokenisation of assets in the digital world with the help of advances in cryptography.
“Finternet is a fresh take on global finance, defined by the three U’s: user centric, unified, and universal. It puts the user at the core and aims to be a universal solution that cuts through asset classes of all types.
“Finternet combines the best of the regulated world with the best that the tokenisation technology can offer us. It uses the basic construct of tokens and then enables universal interoperability and composability,” he said.
Speaking at the Global Fintech Fest (GFF), he said, there has been major innovation in the financial ecosystem. “This is happening in India and around the world. But we also see that financial systems are unable to handle the demand from users, who want more choice and control,” he explained.
Three Ways the Finternet Will Revolutionise the Global Economy
Financial tasks may take days to complete and rely on time-consuming clearings and bundles of paperwork. As such, the current financial system is not able to cope with the users’ demands.
This is the process of converting rights to an asset into a digital token on a blockchain or similar technology. “From your savings account to your artwork, every asset can be tokenised. This process simplifies ownership, transfer, and trading across a unified global ledger,” shared Nilekani.
Consider the process of owning real estate, such as an apartment. Currently, selling the apartment or even a portion of it involves a lengthy and complex process, including finding buyers, managing extensive paperwork, and complying with local regulations.
However, with tokenised fractional ownership, the apartment could be divided into 1,000 tokens, each representing a 0.1% share of the property. These tokens could then be traded on a digital marketplace, enabling fractional ownership.
Finternet prioritises users, putting them at its centre and offering them complete control over their financial assets, whether it’s deposits, real estate, or non-fungible tokens.
“It puts the user at the heart of what we want to solve because users want more control over their lives. It has to be unified, which means that it should come across all asset classes. It could be shares, it could be bonds, it could be deposits, it could be paintings, it could be horses, it doesn’t matter,” emphasised Nilekani.
He proposed a big internet architecture system where the tokens could be bought and sold across different ledgers and so on to create a phone transaction.
Imagine you have digital tokens on a blockchain in India, and you want to use them to purchase goods from a company that operates on a different blockchain in Germany. Global interoperability would allow these two blockchains to communicate and process the transaction without needing to convert the tokens or go through multiple intermediaries.
“What we need to do is bring the power of cryptography, the power of tokenisation to all these things. In other words, can we think of a way to do the best that tokenization technology can offer us and that’s what the Big Internet does. Because it uses these basic constructs of tokens and then enables universal interoperability,” explained Nilekani.
Implementation and Future Prospects
Nilekani mentioned that the implementation of Finternet is not a distant goal but already underway with various labs around the world actively working on its development. He, along with a team from the Bank for International Settlements (BIS), released a white paper in April 2024 detailing the potential of the Finternet to transform financial services globally.
This ambitious vision aims to combine the best aspects of regulated financial systems with the innovative capabilities of tokenisation and blockchain technology, ultimately creating a more inclusive and efficient financial ecosystem.
