Over the last decade, Indians witnessed several notable changes in every sector. Digitization of almost all the sectors was happening pretty fast and the pandemic kind of boosted that process a lot more.
From buying groceries to shopping for festivals, paying bills to applying for loans, each and everything became a lot easier. Just a handful of clicks can help us to get done with all of it in a matter of seconds.
UPI payments, eCommerce platforms, each and every digitalized sector became a major part of our daily lives. While making payment through UPI has ended up being the most convenient option for us, OCEN is going to play a similar role in the lending value chain.
Even though we are still not familiar with this new term yet, the gist of its capabilities seems to be pretty alluring as of now.
So let’s just delve in deeper and try to get familiar with it to some extent.
What exactly is this OCEN?
OCEN, (pronounced as O-ken) is an open protocol infrastructure that is being built to fulfill the various needs of the lending value chain. The infrastructure of OCEN is being built by the IT companies in a way so that it can simplify the whole credit-based system and make it more useful for the people in need.
This framework is going to provide a common language that will help the lenders and digital platforms to collaborate and form partnerships and these collaborations are commonly referred to as Lending Service Providers (LSPs).
In July 2020, Nandan Nilekani, the architect of Aadhaar announced the launch of this digitalized credit infrastructure termed as Open Credit Enablement Network protocol (OCEN). Since then, the whole industry is pretty desperate to find out more about it.
We are entirely dependent on the traditional system for applying for a loan and every other monetary need. The whole process is quite lengthy and at times, the small or medium-sized businesses and organizations do not get the required help at the time of their necessity.
That is what portrays that a country like India needs the implementation of OCEN real bad. In the end, a major portion of our economy is dependent on various medium and small-sized businesses as well as startups.
Unfolding Technology and OCEN
The launch of UIDAI in 2009 was the first step that made us familiar with IndiaStack. This IndiaStack is none other than a set of open Application Programming Interfaces that permits businesses, governments, startups, and developers to utilize the digital framework.
All the public digital infrastructure such as Aadhaar, UPI, BharatPay, eKYC, eSign, and many other platforms are open APIs delivered by IndiaStack. The introduction of IndiaStack eased the job for us in a number of aspects. Different official works can be done today in a seamless way and it also does promote paperless, presence-less, and cashless services.
Coming back to the launch of OCEN; it was notified to us that this system of distribution of credit will be provided with a number of interaction points. It will deliver a varied range of financial services smoothly.
The digital platforms are going to take a prominent position in this lending value chain. Besides that, they will be highly responsible for the delivery of different financial services to the end-users.
Lackings in Credit-Based Lending for Medium and small-sized business owners
Unorganized businesses and MSMEs end up missing the opportunities of modifying their services as often they do not get the required credit-based assistance at the time of their needs.
The shortage of proper infrastructure and the negligence towards technology are the major problems that do not allow the small and unorganized businesses and companies to grow adequately. The money lenders such as banks and NBFCs are stuck in the same loop of insufficiency of improvement.
That is why the credit and monetary help does not reach the ones in need, timely. Besides that, the lenders (banks) often ask for collaterals or vital data which the business owners fail to provide. They do not have any formal records of their credit history and that is why they cannot opt for the loans even when they need them more when compared with the larger enterprises.
The banks have a decent rate of interest which is why availing loan facilities from them is more beneficial for MSMEs. However, due to a lack of proper documents and as it is a lengthy process they seek the required monetary help from the NBFCs.
The NBFCs charge a lot more when compared with the banks but they do offer customized services. Besides that, the loan gets sanctioned within a short period too.
The incorporation of technology and adapting OCEN will allow businesses and organizations of all sizes to avail loan facilities quite swiftly. Besides being done within a less amount of time, it will be cost-effective too.
On the other hand, small shop owners, farmers, and traders are opting for digital transactions which will allow them to generate a track record of their expenses and that will allow the lenders to build trust in their consumers.
OCEN will be acting as a common means here and will take the responsibility of connecting the lenders with the business owners. The unique financial products will soon be sorting out the capital issues for these small and medium-sized businesses in no time.
OCEN Framework and Cashless Lending
The main goal behind the launch of OCEN is to ease the loan application process. The Loan will be processed and credited to the borrower’s bank account in just few clicks. It will also make it prompt and hassle-free when compared to the traditional methods which are quite lengthy and costly (in the case of NBFCS).
OCEN will also let the banks work jointly with NBFCs which will comparatively reduce the interest rate for the MSMEs. Even if the NBFCs continue as the primary system for the borrowers, the banks will benefit highly.
Besides getting better outreach and technical support, the NBFCs operate quite promptly and that will definitely help the banks to attract more consumers. The NBFCs are facing a liquidity shortage at present, and getting financial support from larger bodies like banks will help them serve better.
With the digital assistance of OCEN, the borrowers from rural areas can avail the loans too. Therefore, it will benefit both sides, the lenders as well as the customers.
The Bottomline
OCEN will stir up the whole financial ecosystem and problems for credit distribution will be handled much more securely. It is not that it will bring in more capital but it can ease the loan options access for the MSMEs.
With the assistance of Pirimid Fintech, you can easily upgrade your financial products as we are an expert in providing necessary solutions to banks, NBFCs, and other forms of lenders. You can easily incorporate the essence of OCEN by opting for the services of Pirimid Fintech. That will help you to function better as well as you can reach the targeted business owners effortlessly.