India made over 1.3 billion UPI transactions last month. Spread over 150 banks and hundreds of mobile apps, every single UPI transaction followed the same identical flow—Apps asked for the same set of user inputs, showed the same screens, used a common PIN to authenticate and displayed the same messages. Which begs the question;
What if loan applications were like this too?
What if we could dramatically simplify loan applications to make them almost as simple as making a UPI payment? Imagine a world in which every loan application is simplified, standardised, and digitised, regardless of which lender you approached—no more chasing after bank statements (don't forget to get it stamped!), no more signing every page of endless agreements (in blue ink Saar, black ink not acceptable!), no more branch manager certificates, no more filling out half a dozen forms, or uploading your grandparents’ kundalis.
And for those less fortunate among us, no more implicit judgement of a loan application based on arbitrary social status indicators like dark skin, or a poorer grasp of English. When it comes to financial inclusion, human biases and prejudices often come in the way of access to credit to those who need it the most.
What if we had a standardised fully digital credit flow, powered by a uniform set of open APIs? And what if we used these APIs to make credit available via any and all apps borrowers use—the UPI payment app used by a vegetable seller, the delivery agent partner app used by a food delivery boy, or the accounting software used by an SME—all of them.
This is OCEN—the Open Credit Enablement Network. A single API with a uniform flow to power a billion loans for India.
Credit as an SDK for Indian apps
In India, the design of financial products is held hostage by distribution costs. Today large lenders favour larger ticket size loans because they create enough unit margin to cover the costs of distribution, servicing, and collections. The unit-economics of sachet-sized loans can be improved through a digital paperless customer experience. By lowering CAC, op-ex, and collection costs, through digitisation, we can make a small ticket-size loan of around ₹10,000 with a repayment cycle of a few days viable for even the largest banks.
Further, India needs new ways of distributing these credit products at massive scale. Only deeply-embedded digital distribution at scale can make smaller and affordable credit products economically viable for lenders. We can achieve this by seamlessly embedding lending flows into the very activity the credit is funding:
Credit for fuel for a trucker should be available at the point and time of fuelling.
A kirana store needs credit offers at the time of placing orders with their distributor.
A B2B SME struggling to collect payments from corporates, needs invoice financing immediately after a completed delivery.
Enabling these flows requires us to move selling loans via generic DSAs, agents, and towards specialised originators that work and transact deeply with the end-borrower in specific business flows. These entities haven't distributed financial products historically and are unfamiliar with existing paper-based processes of lenders, and are unwilling to take them on.
For specialised origination to work, we need to remove the barriers between lenders and these new-age originators. With OCEN APIs loan applications will be simplified, standardised, and digitised thus making it easier for new types of distributors to integrate and work with multiple lenders. Thus extending their ability to reach, underwrite, and collect from a borrower anywhere in the country.
In effect, India needs a new class of loan products—both in terms of design and distribution—to meet the special needs of the trucker, the kirana store and the B2B manufacturer, and to enable specialised lenders to reach these borrowers.
The OCEN APIs enable financial institutions to deliver their products to wherever their customers are. A standardised API between a lender and a mobile app provider means the kirana store can get and manage a loan entirely on a non-financial app like WhatsApp—no paperwork, no branch visits, and no phone calls.
OCEN APIs are designed for easy plug and play by customer facing platforms and apps, with minimal integration efforts.
The OCEN APIs thus create a common interface—like UPI—so that value-chain players who are close to an MSME and financial institutions which have a deep understanding of the MSME’s business can come together to create a new class of loan products.
At Setu, we have been keen students of OCEN since inception. We've worked hard to be the first place to experience live OCEN APIs, and are excited about accelerating this invention of new loan products to serve the 63 million credit-starved MSMEs of India to unlock an opportunity worth ₹25 lakh crores. Here’s a sample experience we’ve created for someone to get a loan—
Click the links above if you'd like to experience OCEN APIs and learn how they can revolutionise small business credit in India. Long live the revolution!
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