An avid follower of all insurtech startups and a critical thinker, he has also contributed several papers in organization wide technical paper contests.
- Bank Reconciliation - November 29, 2022
- London Bridge Risk:A Protected Cell Company - January 2, 2022
- Side Pockets in (Re) Insurance investments - July 20, 2021
What is it:
OCEN stands for Open Credit Enablement Network. This is one of the frameworks developed in India by the iSpirit (Indian Software Product Industry Roundtable), a not-for-profit think tank, funded by several donors who have been industry entrepreneurs and stalwarts. iSpirit is based in Bangalore, India. It connects the lenders to the small and medium-sized industries and individuals who are proprietors or innovators in the market looking for credit. This framework has been recently touted as one of the most necessary for the credit lending market in India where it is often seen that credit is doled out to the large enterprises and the MSME sector (Micro, Small and Medium Industry sector) companies are left out hungry and therefore towards the path of slow death.
Why is it required:
The cost of credit has always been on the higher side. Moreover, the cost of lending credit is also high to the extent that it only makes sense to process applications of large borrowers with financial standing to back them up on papers. This makes the credit industry very lop-sided. What it means is that deserving borrowers are left dry and cannot scale up or invest much-needed funds in research. There is a dire need to have credit made available to those who very rightly deserve and need it the most. This is where OCEN comes in by making available a standard set of rules playbook and API’s available to Loan Service Providers (LSP’s) who can connect to any lender and advance the loans to the MSME sector.
How does it work:
There are several businesses in India that have high connections with their customers. This could mean identity verification of the customer who they connect with, their characteristics that can come in handy for underwriting, leveraging the connect in the complete disbursement cycle, manage any communications, or even assist in the adjudication of disputes and recollections in cases of defaults. Think about food vendors on the street side that you eat from every single day. The connection of these vendors with their customers is such that in some cases there are no personal details of the family that remain hidden from these vendors. Imagine the data points that can be collected from the vendor for customer verification, loan underwriting, disbursement, or collection purposes if the data is in a consumable format for the lender. That’s exactly what OCEN will enable. The OCEN will act as a marketplace that will bring multiple firms for the purpose of completing the required steps in the cycle of managing the loan. LSP’s in OCEN is similar to a loan aggregator which will let the MSME applicants choose from the best loan offer for their needs. An example could be that of service providers like Food delivery services provided by vendors like Uber Eats, Zomato, Swiggy, and the like. They can act as LSP’s in the OCEN network and use the API’s available, agreeing to play by the rulebook, to connect with any Bank. This way
- the bank gets a pre-verified set of customers, enough details for underwriting the loan,
- the vendor can provide credit services in its portfolio of offering thereby getting more connected with the customers, and
- the customers get an avenue for availing credit easily with the vendor they like connecting to.
How can Insurance sector leverage it:
There are several industry connections that the insurance sector makes when underwriting personal or commercial policies. There is a huge amount of underwriting data that is collected in the process and maintained. Commercial lines and Specialty lines underwriting requires even more data collection as the risk to insure is larger. With all this data being collected from the insured’s, there is obviously high data value that can be leveraged in offering another line of service, the credit service. Not just Insured’s, the insurers connect with their agents even more in detail and have a very tightly knit fabric with them. What that means is that there can be even more agencies that are set from the ground up, which can help the insurers get more business if there is a credit service in offering for the prospective agent from the insurer. The same credit service can be offered to existing high performing agents providing the much-needed funds in case they want to expand their presence or have more tools in their customer service toolbox. Ultimately, the beneficiary will be the customer and I guess that’s what all of us want.
References –
- https://www.financialexpress.com/industry/sme/open-credit-enablement-network-will-democratise-credit-nandan-nilekani/2032346/
- https://bfsi.economictimes.indiatimes.com/news/fintech/open-credit-enablement-network-to-disrupt-lending-infrastructure/77119687
- https://developers.ispirt.in/#/OCEN
- https://developers.ispirt.in/OCEN/OCEN.html