Since its launch in 2022, India’s Open Network for Digital Commerce – a government-funded nonprofit that provides a set of APIs for tech companies and others to build new digital services for shoppers and businesses – has grown to 12 million monthly transactions in areas like food delivery and mobility, as well as new services from companies like Google and Uber. The network also helps connect Indian startups and companies in food, food delivery and logistics with Amazon and Flipkart. Now, with an infusion of fintech, that number is expected to grow: The ONDC is expanding into financial services, starting with APIs for digital lending.
On Thursday, the ONDC introduced a new loan offer to provide unsecured loans to employees and the self-employed.
The new APIs are significant because they underscore how India, one of the world’s largest emerging economies, is using a government-backed framework to increase both digital inclusion and technology-enabled GDP.
They also help increase efficiency. ONDC claims that unlike traditional loans, which take several days to process, digital loans are disbursed through the network in six minutes.
The network has onboarded nine credit service providers, namely Easypay, Paisabazaar, Tata Digital, Invoicepe, Cliniq360, Zyapaar, Indipe, Tyreplex and Paynearby, along with lenders Aditya Birla Finance, DMI Finance and Karnataka Bank to provide credit to consumers.
ONDC plans to expand its digital lending business in a phased manner by adding other fintech players such as Mobikwik, Rupeeboss and Samridh.ai, as well as banks and financial institutions such as HDFC Bank, IDFC First Bank, Faircent, Pahal Finance, Fibe, Tata Capital, Kotak Mahindra Bank, Axis Finance, FTCash and Central Bank of India.
Loan servicers and lenders on the network will use the ONDC protocol as a standardized framework to achieve greater reach. While fintech platforms will gain access to multiple lenders by integrating the framework, lenders will gain a number of distribution points.
“The idea of an open network is ultimately that any catalogable product or service should be available on the network through this protocol. It does not have to go through multiple integrations,” said T Koshy, managing director and CEO of ONDC, at a press conference in Mumbai.
The network will use Indian government supported services like Account Aggregator for data, Digilocker or Aadhaar for KYC, eNACH or eMandate for repayment and Aadhaar eSign to disburse money after verifying the debtor.
ONDC, an initiative of India’s Ministry of Commerce, has a list of commercial banks as its investors, including those that will work on the digital lending service. The data coming through the network will help lenders limit the number of bad debts even as they expand their loan books.
Given the enormous size and broad demographic reach of the Indian market, it is a challenge for the economy to avoid ‘irresponsible lending’ while expanding access to credit.
“We need to put responsible guardrails in place as we expand. And fortunately, there have been no accidents… But if we allow large-scale lending, it is very, very likely that there will be irresponsible lending as well,” warned Nitin Chugh, DMD at SBI, in a conversation with Koshy at the event. “Lending needs to be done responsibly and as we open up financial services to all participants, we need to put those guardrails in place so that people can continue to respond.”
By the end of September, ONDC plans to expand the digital lending business on its network to include GST invoice finance loans. The network also intends to introduce purchase finance for individuals and sole proprietors and working capital loans for private businesses. In addition, over time, ONDC will offer insurance and investments as other key financial offerings through its network.
