‘There are always trade offs’: Nithin Kamath flags a hidden flaw in India’s digital finance push

Zerodha co-founder Nithin Kamath has sounded a note of caution on India’s rapidly expanding digital infrastructure, warning that while Aadhaar-based systems have boosted financial inclusion, technical limitations continue to hurt the poor and rural populations the most.

In a detailed post on X, Kamath credited Aadhaar e-Sign and eKYC with opening access to formal finance in Tier 2 and Tier 3 cities. “The entire Indian financial services industry, including Zerodha, has been a massive beneficiary of the ease of digital onboarding,” he wrote, adding that this digital push has reached many first-time users in underserved regions.

However, Kamath flagged critical gaps in infrastructure and implementation. “People in remote parts of India still struggle with mobile connectivity, leading to delays in verification and the disbursal of benefits,” he noted, pointing to issues with OTP verification and unreliable biometric devices as major hurdles.

“These technological systems tend to affect the poor and vulnerable the most,” Kamath emphasized. Despite the efficiency and fraud-reduction benefits of digitization, he stressed that “no technology is perfect” and warned of unintended negative consequences when systems fail.

He also highlighted regulatory safeguards, noting that the Securities and Exchange Board of India (SEBI) requires brokers to provide multiple access modes beyond just mobile apps. This, he argued, underscores the importance of designing systems that can “gracefully degrade” without excluding users.

Kamath called for a “first-principle” approach to public tech—one that plans for failure and maintains service continuity for the economically vulnerable. “Even minor disruptions to daily lives can have unintended negative side effects, especially when multiple national efforts for financial inclusion and economic upliftment are underway,” he wrote.