ONDC: Creating Markets and Expanding Choices in Financial Services and Beyond

In financial services, while the challenges differ, the objective remains the same. Digitisation enables products to reach distant markets, shared Hrushikesh Mehta, Senior Vice President Services, Open Network for Digital Commerce (ONDC), in an exclusive interaction with Srajan Agarwal of Elets News Network (ENN).

Could you provide me an overview of ONDCs role in facilitating digital commerce, particularly in the financial service sector?

ONDCs role can be summarised in two sentences: it creates markets for sellers and offers choice for buyers. The challenge with e-commerce today is that a few big players dominate the market, control the inventory, generate demand, and charge high commissions, which favors larger sellers and leaves out smaller sellers and MSMEs. ONDC has developed standardised rails and an ecosystem with seller apps that function like Swiggy, Zomato, or Amazon, allowing even small roadside vendors to list and sell their products.

For example, a samosa seller can list their product, and a user in Andheri can search
for samosas, see the product, and order it. Logistics is provided as a separate service, allowing the seller to select a logistics provider, and the product is delivered to the buyer. This model can also be applied nationally, enabling sellers from different regions to reach buyers across the country.The goal is to expand markets for sellers and provide more choices for buyers.

In financial services, while the challenges differ, the objective remains the same.
Digitisation enables products to reach distant markets. For instance, a small lender or mutual fund can use standardised APIs to reach any part of the country. Startups can plug into these digital highways and access the same inventory as large players without significant time investment, catering to niche markets. ONDC thus acts as a demand and supply aggregator, providing instant distribution for startups and enabling banks, mutual funds, and NBFCs to access broader markets.

In essence, ONDC facilitates markets for sellers, choices for buyers, and serves as the API that connects various digital public goods to deliver financial services to the last mile.

The financial service landscape is rapidly evolving. So sir, how is ONDC leveraging the rapidly growing technologies like AI, ML, blockchain or to empower business and consumers, especially in the underserved areas?

ONDC represents an evolution in digital public infrastructure. While we don’t directly use AI and ML, they are employed at the edges of our ecosystem. For instance, lenders might use AI for credit evaluation, and the front-end apps of loan service providers could use AI to offer personalised product recommendations based on customer data.

Think of ONDC as the digital highways similar to government-built highways that connect cities and facilitate commerce. Our role is to connect places of business, enabling commerce to happen. While AI and ML are utilised within our ecosystem, they are not currently a part of our core operations.

In what ways ONC is collaborating with banks and fintechs and other stakeholders to expand the range of financial services?
So, our job is to serve the underserved and build infrastructure that brings products to them. For you and me, there’s no point in building infrastructure to get loans faster since we already receive phone calls offering them. We’ve started with unsecured, small-ticket loans for both individuals and MSMEs. We’re also working on alternative or derived data loans. For example, data from SaaS software used by Kirana stores to place orders can be utilised to underwrite loans for those stores. The data is collected by the front-end app and shared with the lender based on consent.

Similarly, we’re implementing solutions for farmers and the dairy sector. This approach can be extended to various sectors, such as Swiggy restaurants or Amazon merchants. Additionally, we’re introducing purchase financing, allowing you to buy a phone or a Kirana store to stock up for the next month’s sales. We’re also providing B2B credit for larger ticket loans. Typically, one has to shop around for a loan, but we aim to offer pre-approved offers instantly, subject to KYC.

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We’ve started pilot transactions, with about 30 loans already processed. The sanctioning takes about siX minutes and another three to four minutes for disbursal, making it a fully digital process completed in just 10 minutes. It’s quick and smooth, and we’re optimistic about scaling this in the future.