India is the 8th largest digital commerce market globally. Yet, e-commerce accounts for only 7% of the total retail market. However, the potential for growth in digital commerce cannot be ignored—especially considering that we’re a nation with a smartphone penetration of 71% and are digitising at supersonic speed.

The government recognised this potential amidst the first wave of the COVID pandemic. And so, the phenomenon we now call ONDC (Open Network for Digital Commerce) was established. Today, ONDC is  touted as the UPI of e-commerce, with hopes of disrupting Indian retail. 

Let’s take a closer look. 

What is ONDC?

ONDC is a government-backed initiative that aims to democratise e-commerce. It is an interconnected network that allows the free flow of business and operations among all e-commerce players. 

ONDC means different things to each stakeholder in the ecosystem, depending on who is asking:

• From a regulatory perspective , ONDC is non-profit company established by the Department for Promotion of Industry and Internal trade

• From an e-commerce participant point of view, it is a network that allows all players in the ecosystem to freely collaborate across use cases. ONDC categorises players into four roles: 

1. Buyer network participant

2. Seller network participant

3. Gateway

4. Technology service provider

• From a tech perspective , ONDC is a communication protocol (built on the Beckn protocol) that allows interaction between buyers and sellers. ONDC creates a uniform API standard between participants. This means if a buyer app is connected with one seller, then it can connect to all sellers through the same technology.

 The ONDC network allows fluid interaction between the players through three key features :

• Interoperability: Players can collaborate without being restricted to any one platform. They can leverage the network to do business with any buyer, seller, or service.

• Unbundled modules: Any whole business activity on ONDC can be broken down into smaller parts. So an activity on a marketplace, for example, is the sum total of smaller services and participants coming together: i.e., multiple sellers, catalogue management, logistics providers, financial service providers, and more. Each of these roles are fulfilled by participants within the ONDC network.

• Decentralisation: ONDC is platform-agnostic which means that both buyers and sellers can own their operations and choose who they want to partner and share their data with.

So far, the ONDC network has witnessed success stories across use cases: from ride-hailing to hyper-local grocery delivery . With financial service providers enthusiastically participating on the network, a wide range of possibilities has opened up for both businesses and financial services.

So, what does this mean for lenders?

What’s in it for lenders?

ONDC, being a network that connects several participants, can open up new channels of revenue for financial services, including lenders. Here are some ways that lenders can cash in on the ONDC opportunity:

• New channels of business: Joining the ONDC network gives lenders exposure to several players in the e-commerce ecosystem—from sellers, buyers, fintechs, and more. This means offering credit through new channels including credit marketplaces, buyer apps, and invoice financing apps. And what’s more—the network is only getting bigger. This means an ever-growing potential customer-base.

• Offering of diverse products, across cohorts: ONDC brings together a diverse range of players—MSMEs, buyers of B2B and B2C products, and tech enablers among others. This gives lenders the opportunity to tap into new borrower cohorts and offer a variety of products including business loans, personal loans, lines of credit, and inventory discounting services.  

• Better underwriting: ONDC makes data on platforms more accessible, enabling lenders to underwrite borrowers with greater accuracy. For instance, if an MSME business applies for a business loan via an ONDC-enabled B2B platform, lenders can determine the creditworthiness of the borrower by accessing the applicant business’ sales data.

• Personalised lender-borrower relationship: Lenders can leverage borrower-related data on ONDC to provide a more data-led, personalised experience to their customers. For instance, details like borrower name and PAN can be used to auto-fill forms, making the application journey smoother. Data can also be used to personalise the lenders’ communication to borrowers for collections, cross-selling, upselling, and more.

How can lenders get onboard ONDC?  

The ONDC has a wide range of sellers across categories—from food and beverages to beauty and personal care. Similarly, lenders, being providers of a service—i.e., credit products—on the ONDC platform, will be considered ‘sellers’ in the ecosystem. While the registration process is a discussion for another day, the tech piece of the puzzle is where FinBox’s expertise comes in!  

Here’s is a quick checklist for lenders on the tech needed for getting onboard ONDC:

• Expose a standard set of APIs and functionalities to be added as a “seller” on ONDC

• Host the following flows:

• Receiving and processing data from Account Aggregator

• Fetching and processing Credit Bureau Data 

• Executing BRE (policies may change based on buyer app and partner data)

• Building the KYC Flow

• Orchestrating the flow of other functionalities like Pennydrop, NACH, and loan agreement

• Fulfil any other technical requirements of the ONDC Network

Looking for a solutions provider who can get you ONDC-ready? Get in touch with us.

Introducing FinBox’s ONDC stack for lenders 

FinBox, with its credit infrastructure expertise now offers an API middleware that’s built for ONDC partnerships. Here’s how we can enable tech that can get you get on to the network:

• One middleware, easy ONDC onboarding: FinBox creates a middleware layer over lenders’ existing systems and exposes it in a set of ONDC-adhering APIs

• Fill in the tech gaps: FinBox also  fills in the gaps in lenders’ infrastructure wherever required. This can include:

1. Bureau Pull Module

2. KYC Module

3. BRE (FinBox Sentinel)

4. Third-party integrations like Pennydrop, NACH, e-Sign

5. Bank Statement Analyser (with Account Aggregator Integration)

• Robust integration and analytics: Our middleware is integrated with native lending systems and gives lenders high uptime, monitoring dashboards, and rich analytics. 

In conclusion 

With its sights set on making e-commerce inclusive, ONDC aims to connect over 80-90 million entrepreneurs, and 6-7x more MSMEs into the digital commerce fold. And lenders are a crucial part of this inclusion story. So if you’re a lender looking to get aboard the ONDC train, FinBox’s API middleware can get you there! 

Contact us to know more !