Why India’s Digital Infrastructure Struggles Beyond UPI and Aadhaar

In the summer of 2022, Sachin (name changed), who owns a grocery shop in the tony Indiranagar area of Bengaluru, was visited by an enthusiastic group of techies. They convinced him to get on board the Open Network for Digital Commerce (ONDC), which would help him sell online at practically no additional cost. He was told it would help him compete with quick commerce platforms like Zepto and Blinkit.

At first he got a few orders every day on ONDC. It rose to around a dozen a couple of months later. But later that dropped again and became more of a hassle to keep up with.

Hundreds of kilometres away in Varanasi, Jyotsana, a homemaker chasing a long-deferred dream of higher education, turned to DigiLocker, the state-owned online document-storage platform, to retrieve her class 10 and 12 certificates for a central university application. The platform failed to fetch her records. With no time to travel to her hometown for physical copies, she missed the admission deadline.

These aren’t glitches. They’re structural warning signs that India’s digital public infrastructure may be losing momentum where it matters most: at the last mile.

Over the past decade, India has built one of the most ambitious digital public infrastructure (DPI) ecosystems in the world. Aadhaar, its biometric identity platform, and the unified payments interface (UPI), have radically reshaped how over a billion Indians prove identity and transfer money. Together, they’ve driven financial inclusion, curbed leakages in welfare delivery and earned praise from the World Bank and G20.

By the end of 2024, over 1.4bn Indians were registered on Aadhaar. UPI was clocking nearly 18.4bn transactions a month. Both platforms had successfully restructured the relationship between citizens, government and the economy.

But nearly a decade since Aadhaar and UPI became household names, India’s next-generation DPI initiatives—DigiLocker, the account aggregator (AA) framework, ONDC and the Unified Health Interface (UHI)—are struggling to replicate the same magic. While their user base is sizeable on paper, real-world adoption remains patchy, revealing gaps in utility and execution.

Promise Vs Reality

Buoyed by the overwhelming success of Aadhaar and UPI, the government rolled out next-generation DPIs over the past decade. DigiLocker, introduced in 2015, a year before UPI, has grown into one of the largest platforms in this ecosystem. As of July 2025, DigiLocker reported an estimated 545mn users, surpassing even UPI’s user base.

Yet despite these impressive numbers, user experience tells a different story. Many report challenges in retrieving older documents from the platform. Several educational institutions and universities still insist on physical copies, despite the availability of digital documents. This gap between policy and practice continues to undermine the platform’s utility.

Another key DPI initiative, the AA framework, went live in 2021 to enable small businesses to share their financial data with lenders and financial institutions. Four stakeholders make up the AA ecosystem. The account aggregator that acts as a consent-based platform to facilitate data sharing; financial information providers (FIPs), such as banks; financial information users (FIUs), such as lenders; and the user, who gives consent for their data to be shared.

However, the reality on the ground remains largely analogue. Mandar Kagade, founder and principal, Black Dot Public Policy Advisers, a fintech advisory, says MSMEs that want to take out a loan must still go through face-to-face meetings, physical document submission and manual verification.

Kagade points out that not all banks function as FIPs and FIUs. This means that when a business that applies for a loan from a bank that is not registered as an FIU, or holds an account with a bank that is not an FIP, the AA framework ceases to work.

Diagnosing the Stall

According to Charru Malhotra, senior professor, e-governance and information and communication technology at the Indian Institute of Public Administration, the biggest advantage of UPI and Aadhaar lies in their “problem-utility fit”.

“In both initiatives, the frequency of user needs is very high. Everyone needs identity verification regularly and everyone is making payments all the time. With UPI, people are transferring as little as ₹1.75 to paying thousands or even lakhs for bills, shopping or services,” she says.

This everyday relevance is the backbone of their success. In contrast, newer platforms like the AA framework, despite 80–90mn active users, cater to use cases that aren’t part of the daily routines of most Indians.

There are also structural hurdles. Under the AA framework, all FIPs and FIUs must be registered with and verified by the RBI or a financial-sector regulator before they can participate in the system. Sahamati, the self-regulatory body overseeing the AA ecosystem, has clarified: only companies regulated by one of the four financial watchdogs—RBI, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority—or the Department of Revenue can act as FIPs or FIUs. This limits participation, especially from new-age fintech players.

Meanwhile, ONDC faces challenges of a different kind.

Chirantan Sharma, head of product at online gifting platform Ferns N Petals (FNP), and which operates in the retail category on ONDC, says competition from delivery platforms Swiggy, Zomato and Zepto has made it difficult to retain users on the platform.

“The lack of repeat users is leading buyer apps to gradually lose interest in ONDC. For FNP as well, the platform has not emerged as a significant source of business. We have seen a similar trend,” says Sharma.

ONDC’s early surge was fuelled by heavy discounts that attracted price-sensitive customers. As those subsidies tapered, order volumes dropped sharply. The platform’s appeal lies in democratising digital commerce, but without consistent incentives, users drift back to established apps with stronger logistics and customer experience.

Deepak Ravindran, co-founder of Kirana Pro, a buyer app on ONDC, says it could still be a “game-changer” as they no longer have to worry about acquiring merchants or managing delivery partners. He believes targeted incentives that encourage customer adoption could be a turning point. This would benefit not just the ONDC platform, but also registered buyer apps and sellers.

It is not that the idea of ONDC lacked merit. It holds promise, particularly for small businesses and kirana stores that were excluded from the early waves of e-commerce and quick commerce.

Building Trust

The story of India’s newer DPIs is not one of failure, but of early-stage friction. While the AA framework and ONDC are widening their reach, both are yet to mature and must simplify access and build everyday relevance if they are to match the runaway success of UPI.

Sharad Sharma, founder, iSPIRT, a think tank, says that one cannot compare the scale of these newer platforms with foundational DPIs, such as Aadhaar and UPI, as they solve more nuanced problems that require ecosystem readiness and behavioural change.

“UPI and Aadhaar also enjoyed massive government-backed communication campaigns. The newer platforms are still building public understanding and trust, which is essential for scale,” says Sharma.

The success of an innovation also depends on the demand-supply dynamic. UPI, launched in April 2016, found its perfect inflection point when demonetisation was announced later that year. The sudden surge in demand for cashless-payment solutions aligned seamlessly with UPI’s availability, allowing both to converge at just the right moment.

Sharma points out that while UPI and Aadhaar gained traction through cohesive, government-led campaigns, the messaging around newer DPIs has been fragmented and confined to industry events or digital channels.

If one looks at the data, the user base of these newer additions to India’s DPI stack is considerable. The data, along with user experiences, clearly suggests that scale is not the challenge for these DPIs, but mass adoption is. A significant number of people remain unaware of these platforms, or have logged in once and never returned, indicating limited sustained engagement.

The Next Phase

Pramod Kumar Verma, chief architect of India Stack, the set of open digital platforms that enables payments and data sharing, has emphasised that for DPIs to achieve widespread adoption, they must be incentivised effectively.

Moreover, government mandates, such as linking Aadhaar to access subsidies and pensions turned it into a win-win proposition: users were motivated by necessity and the system saw rapid uptake. These nudges helped make UPI and Aadhaar household platforms, a model that newer DPIs could learn from.

Abhishek Singh, additional secretary at the Ministry of Electronics and Information Technology, believes that UPI succeeded because it addresses an everyday need for seamless digital payments, whereas newer DPIs are designed for more specific use cases.

He points out that public-private partnerships are crucial for the growth of DPIs. Such collaboration is already underway. For instance, in the AA ecosystem, several private companies are actively functioning as licensed account aggregators, helping drive the ecosystem forward.

When asked about the growth and better scope of adoption of newer DPIs in India, Singh emphasised the importance of integrating AI and supporting regional languages to enhance accessibility and inclusivity.

“I believe things are moving very fast. AI will play a major role in the next phase. Public services will soon be voice-enabled and available in all Indian languages. Future DPIs will be AI-integrated, and will make them far more accessible and inclusive,” says Singh.