10 Reasons Why OCEN is India’s Future of Financial Transactions

OCEN sparked much interest in the financial world after the global economy was put on a ventilator during the pandemic.

It was first introduced as a part of IndiaStack by Infosys CEO Nandan Nilekani in 2020 and is still a hot topic today. Simply defined, OCEN (open credit enabled network) is an application that intends to bring together loan service providers and lenders to provide MSMEs with easy finance.

All stakeholders anticipate its launch with bated breath, as it intends to bring profitability, ease, and comfort to the digital lending industry. This post will look at why OCEN India is being lauded as the future of financial transactions.

What Exactly is OCEN?

Only 11% of India’s 63 million MSMEs (Micro Small and Medium Enterprises) have access to formal credit. The rest must turn to non-banking financial companies (NBFCs) or money lenders to obtain money at a hefty interest rate. OCEN will be a digital platform that will solve this problem.

It will provide MSMEs with inexpensive credit and that too quickly. It will also provide lenders with the borrower’s consent-based verified public and private information.

Lenders will give the borrower a customised loan based on this data. OCEN is an infrastructure protocol that will connect borrowers and lenders via legitimate data exchange, which will be consent-based, safe, and secure.

Factors that Make OCEN an Integral Part of Future Financial Transactions

OCEN will change the way India’s digital lending industry operates. At the touch of a button, it will make customer data and loans available to lenders and borrowers, respectively.

The factors that make OCEN the future of financial transactions are as follows:

1. Huge market

India’s economy is now worth $5 trillion, and MSMEs account for 30% of the country’s GDP. However, the latter has a credit deficit of Rs. 20-25 trillion, despite demand of Rs 37 trillion.

OCEN strives to bridge this gap by leveraging technology to bring in the necessary funds for cash-strapped MSMEs. Its goal is to bring together lenders, loan service providers, and account aggregators to provide MSMEs with easily accessible finance.

2. Cost-effective

OCEN will reduce operational costs for lenders and loan service providers. For example, the cost of obtaining a bank loan is 6.30 per cent of the amount borrowed.

This cost includes documentation, shipping, and processing fees, among other things. In addition, thanks to OCEN, the entire lending cycle, from verification and loan approval to disbursement, will be done online.

As a result, lenders will save money on administrative costs and will be able to extend loans to a wider range of borrowers.

3. Low-cost client acquisition

Identifying new borrowers will be simple because the loan service providers (LSPs) will also be marketplace and eCommerce platforms. LSPs will connect lenders with customers in this case and vice versa. This will cut down on time and money lenders spend on client acquisition.

4. Tailored solutions

MSMEs have distinct financing demands than high-ticket customers. Lenders would be able to offer borrowers personalised loans thanks to the seamless flow of consent-based data between LSPs and lenders.

Amazon Pay is an excellent example of how this can be done. Amazon is an eCommerce behemoth with access to its consumers’ transaction histories.

Customers can now get a loan for their purchases through the company’s bank partnerships. Once OCEN is fully operational, you can expect even meal delivery businesses to enter this market.

5. It is fast

The entire OCEN ecosystem is based on speed, with everyone being quick but not furious. Previously, MSMEs found it challenging to obtain a loan from the conventional credit market; today, various lenders on the LSPs platform will compete for their attention.

Moreover, because the entire credit process will be computerised, they will be able to obtain funds more quickly.

6. It is convenient

Digital lenders currently process loan applications in 5 to 7 days. They will be able to do it faster with OCEN. The loan applications would be authorised in real-time due to the seamless flow of information between all stakeholders. It will make things easier for both lenders and borrowers.

7. Increased revenue

By 2023, India’s digital lending business will be worth $350 million. Its market share is predicted to increase to 48% in 2023, up from 23% in 2018.

OCEN is meant to address current loan processing issues like verification, data interchange, and other aspects of the lending cycle; lenders should anticipate seeing a fivefold increase in revenue.

8. 24×7 availability

In addition to lenders, OCEN will assist the unbanked population, which the formal credit market has overlooked. Borrowers no longer need to wait several days for loan or credit approvals.

Instead, they will be able to request a loan from their mobile phone at any time of day and receive fast approval.

9. Financial inclusion

OCEN will provide new opportunities for lenders and borrowers in India. It will make tailored loans easily accessible to a significant unbanked population.

This will also lead to the financial inclusion of the unbanked, bringing a total of 1 billion people into the credit market. As a result, the Indian economy will benefit, which is still recovering from the pandemic.

10. It is secure

Most importantly, customer data will only be shared with stakeholders with the approval of the former. The consumer will determine how much data to disclose and, if necessary, revoke consent.

It is no surprise that OCEN is the most eagerly awaited application among lenders and lending service providers. It will allow them to analyse customer data quickly and offer unique credit solutions to lenders. It is an app that will benefit all stakeholders, including MSMEs.

Contact Finezza today if you are a lender or a loan service provider looking to enhance your current loan management software. We, at Finezza, provide world-class loan cycle management technologies to assist you in providing the best possible service to your consumers.

What Exactly is OCEN?