In a strategic move, the Open Network for Digital Commerce (ONDC), a government-backed network of digital commerce, is set to venture into financial services, signaling potential disruptions in the fintech space. While this move could offer automatic scalability for lending to tech startups, specifics are yet to emerge.
ONDC is yet to clarify the future fees for seller apps and buyer apps, even for e-commerce. Industry insiders wonder if ONDC’s foray into financial services will follow the trajectory of Unified Payments Interface (UPI), where companies supported the platform without significant revenue.
The plan
ONDC is poised to extend its services to encompass financial functions, including credit, insurance, investments and gift cards. This strategic move follows the platform’s successful foray into sectors such as food, grocery, fashion, travel and electronics.
With more than 65 entities expressing interest in participating in the network as either buyer and seller applications (lending institutions) or technology service providers, the integration process is gaining momentum. More than 20 entities have already started their integration journey, with notable names like Tata Digital, India Lends, Easy Pay, DMI Finance, Aditya Birla Finance and Karnataka Bank among them.
ONDC is also set to initiate offerings with personal loans and GST-based loans targeting individuals and sole proprietors, respectively. The API draft specifications for these services were unveiled in early August for market feedback.
ONDC’s initial offerings encompass health insurance, marine insurance and motor insurance. In investments, the platform will introduce mutual fund investment options.
Partnering with MFU (MF Utilities India) for equity investments, ONDC aims to onboard asset management companies as vendor applications. This strategic expansion into financial services underscores ONDC’s commitment to becoming a comprehensive digital commerce platform.
OCEN appearance
Also, the emergence of OCEN is poised to transform India’s digital lending landscape, offering a variety of credit products and services that cater to the dynamic needs of consumers and businesses. While OCEN presents opportunities for efficiency and transparency in credit delivery, its full potential may take time to scale up, requiring collaboration between multiple stakeholders.
In comparison, OCEN and ONDC are seen as complementary initiatives rather than direct competitors. OCEN, a protocol standardizing credit flows between lenders and marketplaces, and ONDC, an open and interoperable network for electronic commerce, can mutually benefit from data leverage and network effects. This cooperation could lead to innovative proposals, such as cash flow-based lending and expanded customer bases for credit products. The evolving landscape suggests that fintech players need to adapt quickly to navigate the changing dynamics spurred by ONDC’s financial services entry.
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