India’s Open Commerce Network Expands Its Reach into Digital Lending

Since its inception in 2022, India’s Open Network for Digital Commerce (ONDC) has rapidly evolved into a pivotal force in the country’s digital economy. Originally designed as a government-funded nonprofit initiative, the ONDC provides a set of APIs that allow tech companies and other stakeholders to create innovative digital services for consumers and businesses. This initiative has dramatically expanded, enabling 12 million monthly transactions across sectors like food delivery and mobility, with major players like Google and Uber participating in the network. Additionally, the ONDC has facilitated connections between Indian startups, enterprises in grocery, food delivery, logistics, and giants like Amazon and Flipkart.

Now, the ONDC is poised for further growth as it ventures into the financial services sector, starting with the introduction of APIs for digital lending. This expansion into fintech represents a significant development, reflecting India’s broader strategy to leverage government-backed frameworks to enhance digital inclusion and drive economic growth. The ONDC’s new credit services will offer unsecured loans to both salaried individuals and the self-employed, marking a substantial shift in how financial services are delivered in the country.

The introduction of digital credit services through the ONDC is groundbreaking, not only for its potential reach but also for its efficiency. Traditional loans, which typically take several days to process, can now be delivered within six minutes through the network. This is made possible by the ONDC’s integration with various fintech platforms and lending service providers. Initially, the network has onboarded nine lending service providers, including EasyPay, Paisabazaar, Tata Digital, Invoicepe, Cliniq360, Zyapaar, IndiPe, TyrePlex, and PayNearby. These platforms will work in tandem with lenders such as Aditya Birla Finance, DMI Finance, and Karnataka Bank to provide consumers with quick and easy access to loans.

As the ONDC scales its digital credit services, it plans to incorporate additional fintech players and financial institutions, including MobiKwik, Rupeeboss, Samridh.ai, HDFC Bank, IDFC First Bank, and others. The network’s protocol will serve as a standardized framework, broadening the reach for both fintech platforms and lenders. This integration offers fintech companies access to multiple lenders while providing lenders with various distribution points, thereby enhancing the overall efficiency of the lending process.

The ONDC’s expansion into financial services underscores India’s commitment to fostering a digitally inclusive economy. By leveraging government-backed services such as Account Aggregator for data, DigiLocker or Aadhaar for KYC (Know Your Customer), eNACH or eMandate for repayment, and Aadhaar eSign for disbursing funds, the ONDC aims to streamline and secure the lending process. This approach not only reduces the time and effort required for transactions but also minimizes the risk of bad debts, as lenders can use the network’s data to make informed decisions.

However, the rapid scaling of digital credit access also brings challenges. The sheer size and diversity of the Indian market necessitate robust measures to prevent irresponsible lending practices. Nitin Chugh, Deputy Managing Director at SBI, highlighted the need for "responsible guardrails" to ensure that the expansion of credit access does not lead to financial instability. As the ONDC opens up lending at scale, the importance of prudent underwriting and responsible financial management will become increasingly critical.

Looking ahead, the ONDC has ambitious plans to further diversify its financial offerings. By the end of September, the network intends to expand its digital lending services to include GST invoice financing loans. Additionally, the ONDC plans to introduce purchase financing for individuals and sole proprietors, as well as working capital lines for private companies. Beyond lending, the network also has its sights set on offering insurance and investment services, thereby creating a comprehensive financial ecosystem within its platform.

This strategic expansion into financial services is poised to enhance the ONDC’s impact on India’s economy, providing businesses and consumers with easier access to essential financial tools. As the ONDC continues to grow, it will play a crucial role in shaping the future of digital commerce and financial inclusion in India, aligning with the country’s broader goals of technological advancement and sustainable economic development.