Launched in 2022, the Open Network for Digital Commerce (ONDC) in India — a government-supported nonprofit offering a collection of APIs for tech entities and others to devise innovative digital solutions for both consumers and businesses — has rapidly grown, facilitating 12 million transactions monthly across sectors such as food delivery, mobility, and introducing new offerings from major companies like Google and Uber. Designed to empower Indian startups and enterprises within the grocery, food delivery, and logistics sectors to compete against giants like Amazon and Flipkart, the platform is now broadening its spectrum by venturing into the financial services realm, starting with digital lending APIs.
On a recent Thursday, the ONDC revealed its foray into providing unsecured credit options catered to both salaried and self-employed individuals.
This move is pivotal, highlighting India’s efforts — as one of the leading developing economies — to leverage a state-endorsed framework for enhancing digital inclusion and propelling the nation’s tech-driven economic growth.
Moreover, these advancements promise enhanced efficiency. Unlike the conventional lending process that takes days, the ONDC boasts that its digital lending services can complete transactions in a mere six minutes.
The network has welcomed nine lending service entities, including EasyPay, Paisabazaar, and Tata Digital among others, alongside financial institutions like Aditya Birla Finance, DMI Finance, and Karnataka Bank, to provide consumer loan facilities.
With plans for gradual expansion, the ONDC intends to include additional fintech entities and banking institutions to its digital credit services. This includes names such as MobiKwik, Rupeeboss, and several esteemed banks and financial organizations aiming to broaden their reach and service capabilities.
Through adopting the ONDC protocol, lending service providers and financiers on the network will utilize a standardized framework, facilitating broader access. Fintech platforms will gain entry to a vast array of lenders, and in turn, lenders will benefit from increased distribution points.
During a press event in Mumbai, T Koshy, MD and CEO of ONDC, remarked, “The vision behind an open network is to make every product or service that can be cataloged available on this network using the protocol directly. It eliminates the need for multiple integrations.”
To ensure efficient and secure transactions, the network will integrate several government-backed Indian services, including Account Aggregator for data sharing, DigiLocker or Aadhaar for KYC processes, eNACH or eMandate for repayments, and Aadhaar eSign for the disbursement of funds post verification.
An initiative by the Indian commerce ministry, the ONDC is supported by a consortium of commercial banks, amongst other investors. These banks are also involved in the network’s digital lending services. The data traversing through ONDC is anticipated to assist lenders in minimizing bad debt instances while they expand their loan portfolios.
Given the vast and diverse Indian market, managing to scale credit access without falling into the traps of “irresponsible lending” is a formidable challenge.
Nitin Chugh, DMD at SBI, highlighted the importance of implementing “responsible guardrails” as the network scales. During a fireside chat with Koshy, Chugh outlined the necessity for responsible underwriting practices and the establishment of safeguards to maintain accountability across financial services as the platform opens to an expanded user base.
By September’s end, the ONDC aims to further enhance its digital lending offerings to include GST invoice financing loans, and plans are in place to introduce purchase financing and working capital lines for a broader range of market participants. Additionally, ONDC is looking to diversify its financial services to encompass insurance and investment options in the future.
Compiled by Techarena.au.
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