ONDC pilots finserv foray with personal loans; attracts big players for credit, insurance, MF offerings

In the credit segment, while there has been interest expressed by almost 85 firms, there are 7 participants in the pilot phase

In the middle of January 2024, the Open Network for Digital Commerce (ONDC) successfully tested a couple of transactions for personal loans with Easypay and DMI Finance, according to sources. Further, with the technology being tested and optimised, other finserv participants are scheduled to go live over the next few weeks.

This comes at a time when the network has scaled up to consistently seeing over 1 lakh daily transactions in both retail and ride-hailing sectors, almost a year after its foray into food and grocery deliveries with large incentives ruffled the hyperlocal commerce sector.

Within the financial services space, ONDC is building the infrastructure for three broad segments of products — credit, insurance and wealth management.

ONDC’s online dashboard shows that financial services players like Aditya Birla Capital, Tata Capital, Canara Bank, Kotak Mahindra Bank, Bajaj Finserv, Bajaj Allianz, Aditya Birla Health, etc are in various stages of integration with the network.

One of the main focus areas of the government-backed network is to enable loan transactions for small business owners. To that effect, it is drawing up the architecture of a GST invoice-based financing product that is going to be launched soon.

After this, it also has plans to work with buyer-side applications on the network to standardise the data format that resides within their platforms. The endeavour will be that lenders and insurance companies can bake the data into their rule engines to zero in on appropriate customers. This will allow simple processing of the purchase of a financial product in multiple use cases.

For example, supply chain software platforms have data of orders placed by distributors and kirana stores (by frequency, location and value). This transaction data can be used to create a supply chain financing service. Similarly, data from software platforms serving dairy farms and agriculture can be leveraged to give credit to farmers.

In the credit segment, while there has been interest expressed by almost 85 firms, there are 7 participants in the pilot phase. These include buyer-side apps of Easypay, Paynearby, Rapidor and Tata Digital, according to sources. Lenders in the pilot phase are DMI Finance, Aditya Birla Finance and Karnataka Bank.

In insurance, ONDC will launch motor, health and marine insurance in the next 6-8 weeks, said sources. The early participants among buyer-side apps are expected to be Insurance Dekho (Marine, Health, Motor), Policybazaar (Marine) and Cliniq 360 (Health). The insurers who are expected to go live first are Bajaj Allianz (Marine, Motor), Aditya Birla Health (Health) and Kotak General (Marine).

In addition, ONDC is working with select participants to create sachet marine insurance products to Rs 3-5 in order to insure deliveries in transit. This would help mitigate the risk of doing business for smaller sellers. Moreover, life insurance is also on the anvil going forward.

"In wealth management, the first product will be to make sachet mutual fund investments (of less than Rs 100) available to the bottom of the economic pyramid. Currently, the only investment products widely available are fixed deposits and chit funds," said a person aware of the developments.

In order to take the entire mutual fund inventory to the market ONDC has onboarded MF Utilities as the first seller-side app given that it is regulated by SEBI and AMFI. MF Utilities enables a buyer-side app to be able to display a single snapshot of a persons’ investments in mutual funds across platforms and trade in them.

"This is a unique opportunity for distributors to enter where incumbent distributors have a stranglehold on customers. The first cohort of participants among buyer apps are likely to be Appreciate and XFi. Expect the first transactions to happen by April 2024," said a person in the know.

Backed by the government, ONDC seeks to prevent the dominance of a few large platforms, such as Amazon, Flipkart, Ola, Uber, Swiggy, and Zomato, in e-commerce. Through ONDC, the government hopes to increase e-commerce penetration in the country to 25 percent in the next two years, reaching 900 million buyers and 1.2 million sellers through the network. It is projected to generate a gross merchandise value of $48 billion.