After the global economy was put on life support during the pandemic, OCEN sparked a lot of interest in the financial world. It was first introduced as part of IndiaStack in 2020 by Infosys CEO Nandan Nilekani and is still a hot topic today. Simply put, OCEN (open credit enabled network) is an application that aims to connect loan service providers and lenders in order to provide MSMEs with easy financing.
All stakeholders are waiting with bated breath for its launch, as it intends to bring profitability, ease, and comfort to the digital lending industry. This post will examine why OCEN is hailed as the future of financial transactions.
What is OCEN?
Only 11% of India’s 63 million MSMEs (Micro, Small, and Medium Enterprises) have formal credit access. The remainder must rely on non-banking financial companies (NBFCs) or money lenders to obtain funds at exorbitant interest rates. This problem will be solved by OCEN, a digital platform.
It will provide MSMEs with low-interest credit quickly. It will also provide lenders with consent-based verified public and private information about the borrower.
Based on this information, lenders will provide the borrower with a customized loan. OCEN is an infrastructure protocol that will connect borrowers and lenders through consent-based, safe, and secure data exchange.
9 Reasons that Makes OCEN an Important Part of the Future
OCEN will transform the digital lending industry in India. It will make customer data and loans available to lenders and borrowers at the touch of a button. The following are the factors that make OCEN the future of financial transactions:
- Vast market
The Indian economy is now worth $5 trillion, with MSMEs accounting for 30% of the country’s GDP. However, despite demand of Rs 37 trillion, the latter has a credit deficit of Rs 20-25 trillion.
OCEN works to close the funding gap for cash-strapped MSMEs by leveraging technology. Its goal is to bring together lenders, loan service providers, and account aggregators to make finance available to MSMEs.
Lenders and loan service providers will save money thanks to OCEN. For example, the cost of obtaining a bank loan is 6.30% of the loan amount.
This cost includes, among other things, documentation, shipping, and processing fees. Furthermore, thanks to OCEN, the entire lending cycle, from loan verification to disbursement, will be completed online.
As a result, lenders will save money on administrative expenses and will be able to lend to a broader range of borrowers.
Because the loan service providers (LSPs) will also be marketplace and eCommerce platforms, finding new borrowers will be simple. In this case, LSPs will connect lenders with customers and vice versa. This will save lenders time and money on client acquisition.
MSMEs have different financing requirements than large-ticket customers. Because of the seamless flow of consent-based data between LSPs and lenders, lenders would be able to offer borrowers personalized loans.
Amazon Pay is a great example of how this can be accomplished. Amazon is an eCommerce behemoth that has access to the transaction histories of its customers.
Customers can now obtain financing for their purchases via the company’s bank partnerships. Once OCEN is fully operational, expect meal delivery services to enter this market.
Everyone in the OCEN ecosystem is fast but not furious. Previously, it was difficult for MSMEs to obtain a loan from the conventional credit market; now, various lenders on the LSPs platform will compete for their attention.
They will also be able to obtain funds more quickly because the entire credit process will be computerized.
Loan applications are currently processed in 5 to 7 days by digital lenders. With OCEN, they will be able to complete the task more quickly. Because of the seamless flow of information between all stakeholders, loan applications would be approved in real time. It will simplify things for both lenders and borrowers.
India’s digital lending business will be worth $350 million by 2023. Its market share is expected to increase to 48% in 2023, up from 23% in 2018.
The purpose of OCEN is to address current loan processing issues such as verification, data interchange, and other aspects of the lending cycle; lenders should expect a fivefold increase in revenue.
In addition to lenders, OCEN will assist the unbanked population, which has been overlooked by the formal credit market. Borrowers no longer have to wait for loan or credit approvals for several days.
They will instead be able to request a loan from their mobile phone at any time of day and receive prompt approval.
OCEN will open up new opportunities for Indian lenders and borrowers. It will make tailored loans available to a sizable unbanked population.
This will also result in financial inclusion of the unbanked, bringing 1 billion people into the credit market. As a result, the Indian economy, which is still recovering from the pandemic, will benefit.
It comes as no surprise that OCEN is the most anticipated application among lenders and lending service providers. It will enable them to quickly analyze customer data and provide lenders with unique credit solutions. It is an app that will benefit all stakeholders, including small and medium-sized businesses.
Ignosis has plug and play solutions which helps Lenders and LSPs to go live on OCEN within just a week of time. Its OCEN solutions are highly integrable with any of the systems. Hence, Lenders and LSPs can strategically be part of OCEN with Pirimid’s high end solutions.