From UPSC perspective, the following things are important :
Prelims level : API
Mains level : Paper 3- Issues of dominance of some platforms on the internet and solution
We are familiar with the dominance of some platforms on the internet. That dominance start to create problems. This article discusses the issues with dominance and suggests the solution drawing on the success of UPI.
Platforms on the internet
- Platforms are technology layers that leverage the internet to bring together producers, resellers and consumers.
- Platforms reduce transaction costs by cutting out intermediaries.
- Amazon started by selling books but became a profitable giant by creating the e-commerce platform called Amazon Marketplace.
- The most valuable companies today are platforms for search, social interaction, advertising, insurance, travel, real estate, etc.
Issues with the platforms
- 1)The promise of the internet was disintermediation, but the process has hit a speed breaker with major platforms taking on the role of mediation.
- 2) There may be multiple platforms in the game to start with, but due to network effects and the non-portability/lock-in, only a few monopolies space.
- 3) Big platforms have tried to create a sort of cartel in which to trap the customers while fencing off the rest of the internet.
- 4) The platforms amass data about users which is used to influence user behaviour, which is not limited to guiding the buying decisions.
So, what is the solution?
Let’s look at the success story of the UPI
- Unified Payment Interface (UPI) is a set of protocols that standardises the language of money transfer.
- It is an interface: a simple and structured protocol for instructions and a clearinghouse that relays well-formed requests to concerned parties for execution.
- Once the language is there, a user may choose any app to link their bank account to a UPI ID and make a pay or collect request involving any other bank account.
- UPI handled 1.3 billion transactions in June 2020, overtaking the aggregate number of transactions of all legacy “platforms”.
- UPI succeeded because it treated all players, big or small, equally.
- This allowed third-party innovators to drive adoption by creating solutions that addressed the need of the people.
Solution: Adopting of open protocols
- Application Programming Interfaces (or API) are protocols that define the meaning of data exchanged between two computers.
- Universally accepted API definitions could allow a cabbie to be discovered by any cab aggregator app the rider may choose.
- In healthcare, it could facilitate finding a doctor, booking an ambulance, taking out insurance, filing a claim, sharing a medical report or purchasing medicines from a pharmacy.
Advantages of open protocols
- Open protocols create ecosystems that are non-rivalrous and non-excludable by design.
- Even smallest of application developers or start-ups can offer low-cost, locally relevant solutions using the protocol.
- We can address the needs of the diverse business community and achieve much greater penetration for e-commerce than the 10 per cent of today.
- Open systems have the potential to transform education, food delivery, by enabling entrepreneurs to compete on their quality and reputation alone.
- Portability from one application to another, privacy and data empowerment will be some of the issues taken care of.
- We can reduce our dependence on foreign platforms.
Consider the question “What are APIs? Examine the issues created by the dominant internet platforms and how the adoption of open protocols for API could address the problem?”
With such a huge potential in APIs open protocols, the government must bring out the policy for the creation of open protocols and realise the untapped potential it offers.