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The Open Credit Enablement Network (OCEN) is making waves in the Indian fintech sector, promising to transform the credit landscape in the country. This article, originally published on Tiger Feathers, provides a comprehensive overview of OCEN and its potential impact on distributors and retailers.

OCEN: A New Paradigm for Credit in India

OCEN, pronounced “o-ken”, stands for Open Credit Enablement Network. It aims to create an open network to facilitate the flow of credit, involving lenders, borrowers, credit bureaus, underwriters, tech companies, and a new entity called Loan Service Providers (LSPs). OCEN reimagines the lending ecosystem, enabling any service provider interfacing with customers to also play the role of a credit provider.

The network is ‘open’ because all the rules governing its functions are transparent. OCEN specifies a set of public APIs, and any company can adopt these APIs to participate in the network as a lender or LSP. This standardization eliminates the need for costly, complex bilateral tech integrations, thus streamlining the lending process.

The Role of LSPs

LSPs are entities that facilitate loans for borrowers. They are not agents of the lender but are designed to be agents of the borrower, helping them find the best credit products to suit their needs. LSPs are envisioned to help borrowers decode and navigate loan offers put forth by lenders. They are the marketplace or platform that helps the lender by opening up its captive pool of users.

The Impact on Distributors and Retailers

For distributors and retailers, OCEN opens up new opportunities for credit access. By becoming LSPs, platforms like Swiggy or Zomato can help their restaurant partners (or regular users) get access to credit through the OCEN rails. This effectively turns these platforms into credit marketplaces, enhancing their value proposition.

The Benefits of OCEN

OCEN offers numerous benefits to its key stakeholders. Borrowers get access to credit products on their favorite apps, potentially at lower interest rates due to reduced customer acquisition costs for lenders. They can avail of highly customized credit products tailored to their activities and requirements.

Lenders can reduce operational costs by leveraging the customer pools aggregated by LSPs. They can expand their markets by offering products to customers that may have been too expensive to reach or too difficult to underwrite previously.

For Loan Service Providers, they can improve their customer satisfaction by more holistically solving the needs of their customers. They increase the stickiness of their apps by providing ’embedded finance’ within their existing product or service flows.

The Role of Account Aggregators

Account Aggregators (AAs) play a crucial role in the OCEN framework. They facilitate the transfer of user data from the entities that house this data to the entities that want to use this data, only on obtaining user consent. This standardized, machine-readable data provided by AAs simplifies the process of ingesting and processing borrower data, making it cheaper, quicker, and easier than ever before.

Conclusion

OCEN represents a significant step forward in financial inclusion in India. By standardizing the building blocks of the credit cycle, OCEN activates various service providers to become fintech-enabled credit marketplaces. This revolution in the lending landscape promises to bring credit access to a wider segment of the population, driving economic growth and prosperity.

This blog is based on the article “OCEN: A Conversation” by Rahul Sanghi and Aaryaman.Vir.