iSPIRT works to transform India into a hub for new generation software products, by addressing crucial government policy, creating market catalysts and grow the maturity of product entrepreneurs. Welcome to the Official Insights!
In our most recent OpenHouse, we embark on an insightful exploration of the transformative landscape in MSME lending, featuring Bhavik Vasa, the Founder of GetVantage, and Sagar Parikh. The conversation delves into the potential of creating groundbreaking impact through interoperable networks, particularly focusing on OCEN. The discussion navigates the dynamic intersection of finance and technology, highlighting how inventive solutions are reshaping the lending panorama. Emphasizing the crucial role of interoperability, the dialogue underscores its significance in bridging the credit gap, propelling the MSME sector into a new era of unprecedented growth.
Key Takeaways:
Network Effects Unleashed: OCEN catalyzes network effects, narrowing the credit gap and expanding the market, fostering inclusivity and vibrancy.
Efficiency through Interoperability: Standardized protocols cut costs and efforts, providing high-quality data for lenders while empowering MSMEs with smoother access to loans.
Addressing Unmet Needs: Explore how interoperable networks bridge gaps in unsecured lending, catering to shorter tenures and smaller loan sizes.
Tech-Enabled Business Growth: Witness the role of unsecured lending in a tech-driven landscape, fostering a circular consumption economy for economic growth.
Personalized FinTech Solutions: Bhavik advocates for a borrower-centric approach, urging lenders to view lending through a tech and data-driven lens, benefiting both parties.
Collaboration Dynamics: Conclude with insights on how NBFCs and banks can coexist and collaborate, playing to their strengths for a more robust lending environment.
Ready to unlock the future of MSME lending? Join the conversation now!
Intermediaries and Fintechs have played an important role in the lending ecosystem, but the impact is mostly seen in consumer lending and not so much in MSME lending, especially for unsecured, small ticket and short duration loans. What are the missing pieces in the lending process for which advanced tech and a mindset shift can utilise a digital infrastructure like OCEN (Open Credit Enablement Network) and unlock this credit supply for MSMEs?
Recently, we hosted Lizzie Chapman in an insightful conversation with Sagar Parikh. She shared her views on where the intermediaries and FinTechs can further become a value add in a profitable manner by pushing the boundaries of technology.
Points discussed:
Digital infrastructure & its impact on the costs, penetration & process for lending eco-system
Unsecured MSME loans not as solved as unsecured consumer loans. Cashflow lending addresses the concerns around unsecured lending to MSMEs.
DPI such as OCEN facilitating the availability, quality, aggregation of data for credit underwriting along with loan disbursement for MSMEs
Need for Intermediaries & Fintechs to harness technology to conceptualise innovative lending products, advanced ways of pricing and matching risks & address the opex challenges in collections & repayments
Investors tend to prefer businesses that touch the customer end to end. They should see that being part of the value chain can be as profitable as owning the value chain.
OCEN is creating dispute resolution mechanisms but intermediaries should also innovate for transparency and building trust with the customers so as to enable a safe, stable, secure growth in short term cashflow lending for MSME credit.
In an era of evolving financial landscapes, the realm of lending is witnessing a significant shift—from the traditional collateral-based approach to the more contemporary cash flow lending model facilitated by OCEN (Open Credit Enablement Network). Recently, we hosted UGro Capital in an insightful conversation with Shachindra Nath, shedding light on this transformative paradigm in lending and delving into its profound implications.
Points discussed:
Transitioning from Collateral to Cash Flow Lending
OCEN plays a pivotal role in revolutionising MSME lending in India. This innovative open network is specifically designed to serve those new to credit, employing an omni-channel approach that democratises and simplifies access to lending.
Currently, the market lacks a scalable and profitable model for short-term, low-value MSME loans – a significant gap that OCEN has adeptly filled with itsGeM-SAHAY pilots.
Amidst the confusion and excitement surrounding OCEN versus ONDC, and the broader impact of open networks in the lending sphere, this blog aims to provide clarity and insight. Let’s dive in and explore these transformative developments.
🔀 OCEN or ONDC: Which is better for short tenure MSME lending?
There’s much debate about which lending framework potential partners should explore. Rahul Mathur (Associate Director, InsuranceDekho) captures this perfectly in his tweet, presented as a checklist below:
🗣️ “Turns out, the focus in lending for ONDC v/s OCEN is very different (see the
image below)
(1) 💰Type of loan: Type 1 personal loan v/s Type 4 MSME loan
(2) 🔎GTM: Online v/s Omni-channel (assisted)
(3) 🙇Persona: Eligible for credit v/s New to credit
(4) 🌟Objective: Bring credit to point of commerce v/s Democratize credit access
To summarize, there are some good reasons why ONDC has launched loans
independently of the OCEN network.
Over time, OCEN will expand to include further lending use-cases & products.
And, at that point, ONDC <> OCEN interoperability would make sense.”
Clearly, OCEN is the undisputed option for short tenure, low ticket size lending for new to credit MSMEs. Over time the lending use cases will be expanded to service the traditional form of loans.
OCEN and ONDC, while both operating in the lending space, are tailored for very different use cases and audiences. While they may overlap in some cases, the larger ecosystem benefits from introduction of newer networks. In the end, it’s all about solving the most challenging problems 🙂
Let’s further understand how OCEN addresses the MSME lending problem in India.
📈 OCEN makes small ticket size lending a reality
OCEN’s primary goal is to make short-term lending profitable. Something which we’ve achieved in our pilots with the Government e-Marketplace, through the GeM-SAHAY app.
One of our volunteers explains the economics in this blog post:Evaluating the short term lending opportunity, where he shows how lenders can earn 2.2x higher revenue with the same capital through the adoption of the OCEN framework.
The significant 2.2x increase in revenue is attributed to the introduction of a crucial role known as the borrower’s agent. These agents not only reduce the cost of servicing a loan but also heighten accountability within the system.
Borrower’s Agents (BAs) assume a variety of roles traditionally outsourced by lenders, BAs function as data providers, collections agents, escrow account managers, and product providers.
By integrating these services and cohesively binding the network, BAs enable lenders to efficiently service low-cost loans even in remote areas. In performing these four key roles, the borrower’s agent emerges as the cornerstone of the open network, vital for its effective operation.
The role of borrower’s agent has been discussed in depth in one of our open house sessions:
OCEN is changing the game by making even the tiniest loans worthwhile for both the lender and the borrower.
🌐 Efficacy of Open networks and streamlining the lending process
Some people we’ve spoken to, worry that open networks will lead to the commodification of lending, which, in turn, is bad for the overall market. However, this couldn’t be farther from the truth 🙂.
OCEN streamlines the lending process by introducing roles such as the borrower’s agent, KYC agents, and collection partners. These roles combine to create a bundle that lenders can easily integrate into their processes to start lending.
Newer and smaller lenders will benefit from the transparency and scale offered by open networks.
Closed network auctions, which are common today, see lenders bidding down for loans. However, their lack of transparency and scale often results in low profitability.
Open networks, on the other hand, provide scale and transparency that leads to low cost of servicing, more borrowers to choose from, and reliability in the system through a borrower’s agent.
Larger lenders benefit from the low cost of servicing a loan that comes with open networks
Larger lenders will benefit from open networks as it provides the technical chops of a borrower’s agent. BAs can help with KYC, collections and other parts of servicing a loan while absorbing some of the costs.
We’ve seen such effects before, with the introduction of Aadhaar and UPI, where KYC and collections became far cheaper enabling large lenders to facilitate smaller ticket size loans.
In conclusion
Through OCEN, the potential to unlock a ~$300 billion credit market in India becomes a tangible reality. This is demonstrated by the increased revenue potential and the introduction of the borrower’s agent role, enhancing loan servicing efficiency and accountability.
Moreover, OCEN’s streamlined lending process benefits the entire market, by offering scalability and cost-effectiveness to both emerging and established lenders.
Thus, embracing OCEN is not just a choice but a strategic direction for expanding market possibilities and empowering both lenders and borrowers in the dynamic credit landscape of India.
📢Calling all lenders to understand how a short tenor loan can become both an effective and profitable business opportunity under OCEN 4.0. 🔑📈
If you are a lender looking for the next big opportunity in lending to the thousands of MSMEs currently unable to access loans, then don’t miss this introduction to OCEN 4.0. 💡
Here we deep-dive into how a new underwriting model enabled by OCEN 4.0 makes it viable and profitable to provide loans to MSMEs traditionally considered unfavourable candidates for loans given the associated high delinquency rates. Our OCEN pilots show, in some cases, it is even possible to create short tenor loans that are twice as profitable as long tenor loans. 🌟🚀🚀
📢Calling all loan agents keen to understand the OCEN 4.0 business opportunity. 🔑📈
OCEN 4.0 introduces a new and powerful role – the Borrowers Agent(BA). If you are looking to play a pivotal role in the MSME lending ecosystem without lending from your own balance sheet, this new role of a BA may be what you want to understand really well. 💡
The BA role is critical to the OCEN story. In this session, we deep-dive on what this role entails, why it is the linchpin of the OCEN 4.0 model, how BAs enable lenders to go remote, and how this role wields a lot of power. We also talk through how to get started, possible business models for BAs and what to focus on to be a successful Borrowers Agent. 🌟🚀🚀
📢👷🧑💻Calling all TSPs and participants eager to dive into OCEN 4.0 APIs.
If you are wanting to understand the tech, the APIs and get started on building for OCEN 4.0, our second open house on OCEN 4.0 is here for you !! 💡
In this session, we do a deep-dive on the architecture, the loan journey on OCEN 4.0 components, the APIs in the OCEN spec and share how you can build for a participant by mocking the APIs of the other. 📝🔑🧑💻
We’re thrilled to unveil OCEN 4.0, the latest advancement in our Open Credit Enablement Network protocol, revolutionizing cash flow-based MSME lending. 🌟
OCEN 4.0 represents a significant leap forward from our ongoing GeM SAHAY and GST SAHAY pilots. In this iteration, along with updated API specifications, we have also added the OCEN Registry, Product Network and rules, specialized participant roles and much more. All these features help us unlock cash-flow-based lending to match the scale, complexity and needs of Bharat. 🔑📈
Check out our introductory open house session on OCEN 4.0
🔍 More details? The API and documentation of OCEN 4.0 are publicly available at http://ocen.dev and will be updated with FAQs from the open house sessions.
🔮 What’s next? Yes, a lot is happening. We have more open house sessions coming out in the following weeks. We are also actively onboarding Wave 1 partners for OCEN 4.0.
❓Questions? Submit your questions here. 📩Contact? Reach the OCEN 4.0 team at [email protected]
Please note: The blog post is authored by our volunteers, Aravind R andSagar Parikh.
“The ‘Landline to Mobile’ leapfrog for MSME credit is here.”
On Friday evening we hosted the first open house discussion on the new Open Credit Enablement Network (OCEN). It is the next chapter of the ‘India Stack’ story, one that has provided the building blocks for public digital infrastructure in our country.
The past decade has seen us widen the net for financial inclusion in India on the back of open infrastructure for digital identity (Aadhaar, eKYC, eSign) and payments (UPI, AEPS). This year will also see the launch of the Account Aggregator framework, ushering in a new era for data governance in India. Similarly, OCEN is a new paradigm for credit that seeks to provide a common language for lenders and marketplaces to build innovative, financial credit products at scale.
The first session on OCEN covered the following topics broadly
By Sharad Sharma
An introduction to iSPIRT and our values
An overview of India Stack and where OCEN fits in
By Siddharth Shetty
A product demo of Sahay, the reference app for OCEN
By Ankit Singh
The reason for the credit gap in India
The challenges for lenders and prospective credit marketplaces
A reimagined credit ecosystem with OCEN and Loan Service Providers (LSPs)
Access to credit is a crucial part of any flourishing economy. It is safe to say that India’s economic engine has not yet gotten out of second gear because of our inability to guide formal credit into the hands of the people and businesses that need it most. The unit economics of our current lending set-up are broken, and don’t suit the needs of either borrowers or lenders. The challenges range from high costs of customer discovery to lack of trustworthy data for underwriting, and an overall mismatch in ticket size, tenure and interest rates of loans. This has resulted in a whopping MSME credit gap of over $330 bn.
OCEN is an effort to recognise that the touchpoints for delivering financial products to individuals and MSMEs extends beyond traditional lenders. In order to democratize access to credit in India, OCEN reimagines an ecosystem where every service provider can become a Fintech-enabled credit marketplace.
This means that whether you’re an aggregator, a payment gateway, a software provider or any other company that interfaces with consumers, you can now fill in a crucial role in India’s lending value chain. OCEN will allow you to effectively ‘plug in’ lending capabilities into your existing product or service offerings, enabling you to play the role of a Loan Service Provider (LSP) in this framework.
At one end this will simplify and reduce the cost of acquiring and analysing new customers. Working in tandem with the Account Aggregator framework it will also allow applicants to leverage different data sources so that lending can become a Cash flow based operation instead of the existing balance sheet focus. Overall these open standards will enable lenders to accelerate the disbursal of formal credit while allowing LSPs to holistically serve their existing customers.
India’s new credit rails are ready to be laid out, and we look forward to working with our spirited fintech ecosystem participants over the coming months.
We will be hosting weekly open house sessions to keep diving deeper into OCEN.The next session will focus on Open Credit Enablement Network (OCEN) APIs at 5 pm IST on 31st July 2020.
Readers who wish to learn more about OCEN are encouraged to share this blog post and sign up again for the session here: https://bit.ly/LSPOpenHouse (same embedded below)
As always, in order to successfully create a new credit ecosystem for Bharat it will take the collaborative effort of participants from every corner of our fintech ecosystem.
Readers may also submit any questions about OCEN on the google form: https://bit.ly/LSPQA. We shall do our best to answer these questions during next Friday’s open house discussion.
About the Author: The post is authored by our volunteer Rahul Sanghi.
Technology has been a boon to healthcare. Minimally-invasive procedures have significantly increased safety and recovery time of surgeries. Global collaboration between doctors has improved diagnosis and treatment. Rise in awareness of patients has increased the demand for good quality healthcare services. These improvements, coupled with the growing penetration of IT infrastructure, are generating huge volumes of digital health data in the country.
However, healthcare in India is diverse and fragmented. During an entire life cycle, an individual is served by numerous healthcare providers, of different sizes, geographies, and constitutions. The IT systems of different providers are often developed independently of each other, without adherence to common standards. This fragmentation has the undesirable consequence of the systems communicating poorly, fostering redundant data collection across systems, inadequate patient identification, and, in many cases, privacy violations.
We believe that this can be addressed through two major steps. Firstly, open standards have to be established for health data collection, storage, sharing and aggregation in a safe and standardised manner to keep the privacy of patients intact. Secondly, patients should be given complete control over their data. This places them at the centre of their healthcare and empowers them to use their data for value-based services of their choice. As the next wave of services is built atop digital health data, data protection and empowerment will be key to transforming healthcare.
Numerous primary health care services are already shifting to smartphones and other electronic devices. There are apps and websites for diagnosing various common illnesses. This not only increases coverage but also takes the burden away from existing infrastructures which can then cater to secondary and tertiary services. Data shared from devices that track steps, measure heartbeats, count calories or analyse sleeping patterns can be used to monitor behavioural and lifestyle changes – a key enabler for digital therapeutic services. Moreover, this data can not only be used for monitoring but also for predicting the onset of diseases! For example, an irregular heartbeat pattern can be flagged by such a device, prompting immediate corrective measures. Thus, we see that as more and more people generate digital health data, control it and utilise it for their own care, we will gradually transition to a better, broader and preventive healthcare delivery system.
In this context, we welcome the proposed DISHA Act that seeks to Protect and Empower individuals in regards to their electronic health data. We have provided our feedback on the DISHA Act and have also proposed technological approaches in our response. This blog post lays out a broad overview of our response.
As our previous blog post articulates the principles underlying our Data Empowerment and Protection Architecture, we have framed our response keeping these core principles in mind. We believe that individuals should have complete control of their data and should be able to use it for their empowerment. This requires laying out clear definitions for use of data, strict laws to ensure accountability and agile regulators; thus, enabling a framework that addresses privacy, security and confidentiality while simultaneously improving transparency and interoperability.
While the proposed DISHA Act aligns broadly with our core principles, we have offered recommendations to expand certain aspects of the proposal. These include a comprehensive definition of consent (open standards, revocable, granular, auditable, notifiable, secure), distinction between different forms of health data (anonymization, deidentification, pseudonymous), commercial use of data (allowed for benefit but restricted for harm) and types and penalties in cases of breach (evaluation based on extent of compliance).
Additionally, we have outlined the technological aspects for implementation of the Act. We have used learnings from the Digital Locker Framework and Electronic Consent Framework (adopted by RBI’s Account Aggregator), previously published by MeitY. This involves the role of Data Fiduciaries – entities that not only manage consent but also ensure that it aligns with the interests of the user (and not with those of the data consumer or data provider). Data Fiduciaries only act as messengers of encrypted data without having access to the data – thus their prime task remains managing the Electronic Data Consent. Furthermore, we have highlighted the need to use open and set standards for accessing and maintaining health records (open APIs), consented sharing (consent framework) and maintaining accountability and traceability through digitally verified documents. We have also underscored the need for standardisation of data through health data dictionaries, which will open up the data for further use cases. Lastly, we have alluded to the need to create aggregated anonymised datasets to enable advanced analytics which would drive data-driven policy making.
We look forward to the announcement and implementation of the DISHA Act. As we move towards a future with an exponential rise in digital health data, it is critical that we build the right set of protections and empowerments for users, thus enabling them to become engaged participants and better managers of their health care.
We have submitted our response. You can find the detailed document of our response to DISHA Act below
iSPIRT and SBI had a 4-hour meeting on the future of banking. 30+ seniormost officers of SBI – including all the MDs, DMDs, CGMs, and GMs – participated. Two SBI Board members were also present. Nandan Nilekani chaired the session from iSPIRT side.
The first session was about understanding the technology trends that are shaping banking. There was special focus on understanding implications of eKYC, Aadhaar, new payment infrastructure and GST Network. There was also a good discussion how point-solutions by startups are changing banking.
The second session showcased 7 Fintech software product companies (Novopay, Happay,Vote4Cash, CapitalFloat, CustomerXPS, ProbeEquity, Enstage) and 2 non-FinTech product companies(InMobi, TeamIndus). The third session session was about SBI strategy. This was a very productive discussion. We can’t share the details as it was confidential.
This meeting brought together two threads within iSPIRT. One thread was related to its Policy work related to Open APIs (that is shaping the technology infrastructure of banking and finance in India) and the push for Cashless India. The other thread was InTech50, which is a market catalyst that helps big companies leverage software products startups to drive innovation throughout their business.
iSPIRT is fostering many such dialogs with not just banking giants like SBI, but with Regulatory institutions like SEBI, RBI and others, to fashion a new India.
APIs are important public goods that must be done right. They must not be held captive to commercial interests. This is why iSPIRT is helping Government in this area. iSPIRT’s work is inspired by Open Source movement and IETF methods. It fits with our charter of creating public goods without public money.
Our Open API effort is based on some core principles:
– Like IETF, iSPIRT is not a member organization. Participation is “People, not companies”.
– “Design is a team sport”. Focus is on building a modern architecture for country-scale technology systems.
– iSPIRT API Teams have people who are “Competent experts that are completely free of conflicts”.
– Technical decisions emerge from intense discussion. They are informed by prototypes, not theory. Motto is: “Code walks, bullshit talks”.
Today Economic Times carries an article about this Open API effort. The article conveys the progress that we are making. More is on its way.
Source: Economic Times
We will soon be launching a micro-site to build engagement with your community. Watch this space.
The first session was about understanding the technology trends that are shaping banking. There was special focus on understanding implications of eKYC, Aadhaar, new payment infrastructure and GST Network. There was also a good discussion how point-solutions by startups are changing banking.
iSPIRT is fostering many such dialogs with not just banking giants like 
Our Open API effort is based on some core principles: