Does India need a reimagined credit system?

13th October 2023

In India's financial landscape, a significant challenge persists: a staggering $530 billion credit gap for MSMEs, with just 14% having access to formal credit. India’s traditional credit system may possess lending potential but struggle with outreach. Traditional lenders follow complex, costly processes with high-interest rates and credit score reliance. Moreover, many small businesses operate on cash purchases but extend credit to customers, exacerbating the need for timely small loans which are hard to avail with traditional credit disbursement.

In this intricate financial maze, OCEN, the Open Credit Enablement Network which is built on top of India Stack, emerges as a transformative force, offering inclusivity, efficiency, and innovation. This article explores OCEN's potential, comparing it to traditional credit systems. We'll uncover the key differences that could reshape India's financial landscape, shedding light on how OCEN can leapfrog over traditional credit disbursal institutions to bridge this credit divide.

Role of OCEN in India’s Modern Finance

In a country as diverse and populous as India, addressing the pressing issue of limited credit access becomes paramount, especially in a scenario where only about 5% of Indians have adopted credit cards. To truly serve the majority of the population, it's essential to streamline and reduce customer acquisition costs, a challenge that OCEN seeks to tackle head-on. The significance of eradicating manual lending processes cannot be overstated, as it not only expedites loan disbursal but also significantly lowers operational costs, ultimately benefiting borrowers. Furthermore, OCEN's approach to decreasing the ticket size of loans empowers borrowers, allowing them to access funds as needed, while the flexibility to set repayment dates adds a layer of convenience and financial control.

Among OCEN's most compelling features is its ability to include sachet loans, effectively reaching digitally far-flung areas, and ensuring financial presence even in remote corners of the nation. This move toward a friction-free lending environment is a transformative approach in India's credit landscape. It not only promises inclusivity but also heralds a new era in which the vast population of India can access loans seamlessly and on attractive terms.

OCEN vs. Traditional Credit Ecosystems: A Comparative Analysis

Let's dissect the metamorphic power of OCEN as it augments traditional credit ecosystems. Explore the key differences in this comparative analysis, and discover how OCEN is reshaping India's lending landscape:


OCEN Aspect OCEN Traditional Credit Ecosystems
1. Customer Acquisition Cost OCEN streamlines the process and reduces customer acquisition costs for lenders through digital acquisition & use of alternate data for underwriting. Its standardized protocol simplifies digital journeys, making credit more accessible. Traditional credit ecosystems often involve high customer acquisition costs, resulting in elevated interest rates and processing fees for borrowers
2. Data Collection and Verification OCEN’s standardized framework simplifies data collection and verification, ensuring lenders have the insights they need for accurate decision-making. Lending to MSMEs demands clear data on turnover, and account statements which is possible with OCEN’s rich data signals. In traditional systems, collecting and verifying essential data was a major challenge for lenders, potentially leading to delays and less accurate assessments, especially for the new-to-credit borrower segment.
3. Timeliness OCEN's streamlined approach addresses the challenge of timely access to credit. Borrowers can access credit when they need it, avoiding delays that could lead to more expensive financing options or underfinancing. In traditional credit ecosystems, insufficient or unclear data could lead to lengthy assessment processes, impacting the timeliness of loan disbursement and affecting borrowers' financial health.
4. Role of Digital Platforms (LSPs) LSPs can originate and enable credit on their platforms through OCEN, augmenting their product offerings. Their support for OCEN APIs enables them to partner with multiple lenders without significant incremental integration efforts. In traditional systems, digital platforms have had a high barrier to entry for offering financial services through each lending partner's integrations, limiting their role in credit origination.
5. Account Aggregators Account Aggregators simplify data sharing securely and digitally, reducing paperwork, and saving time for borrowers; eliminating data manipulation risks for lenders In traditional systems, borrowers often had to navigate paperwork and manual processes for data sharing, leading to inefficiencies and potential risks.
6. Role of Technology Service Providers Technology Service Providers (TSPs) work closely with lenders and platforms to integrate OCEN seamlessly, playing a pivotal role in onboarding and tailoring credit programs. In traditional systems, the role of TSPs in facilitating digital lending and integration was not as pronounced.
7. Role of Lenders In OCEN, lenders can open their financial infrastructure to multiple digital platforms, expanding their reach and access to borrowers. Traditional lenders continue to operate within their existing networks, with limited integration into digital platforms.
8. Role of Borrowers Borrowers, whether MSMEs or individuals benefit from secure and digital credit options available through LSP platforms connected to OCEN. Borrowers in traditional systems may have limited access to secure and digital credit options, especially through digital platforms.
9. Automation OCEN offers a streamlined lending process through APIs, from application to approval and disbursement, reducing complexity and enhancing efficiency. Traditional credit ecosystems may involve more complex and manual processes, potentially leading to delays and inefficiencies.
10. Financial Inclusivity OCEN's standardized protocol promotes inclusivity by making credit more accessible to a wider range of borrowers, including those in remote areas. Traditional credit ecosystems have limitations in reaching underserved or remote populations, creating gaps in credit access.


In this exploration, we've evaluated OCEN's emergence as a dynamic solution to perennial challenges faced by both lenders and borrowers. By streamlining customer acquisition costs, simplifying data collection and verification, and ensuring timely access to credit, OCEN has demonstrated its potential to revolutionize the financial landscape.

The status quo, characterized by high costs, intricate processes, and limited outreach, is being altered by OCEN's efficiency and accessibility. With Account Aggregators, Technology Service Providers, lenders, and borrowers converging under OCEN's standardized protocol, the possibilities for financial inclusion and innovation are boundless. As we peer into the future, it's clear that OCEN is the harbinger of a new era in digital finance making financial services more accessible, efficient, and inclusive.

About Perfios: Perfios Software Solutions is India’s largest SaaS-based B2B fintech software company enabling 900+ FIs to take informed decisions in real-time. Headquartered in mumbai, India, Perfios specializes in real-time credit decisioning, analytics, onboarding automation, due diligence, monitoring, litigation automation, and more.

Perfios’ core data platform has been built to aggregate and analyze both structured and unstructured data and provide vertical solutions combining both consented and public data for the BFSI space catering to their stringent Scale Performance, Security, and other SLA requirements.

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