The rapid evolution of the digital landscape in India has brought revolutionary changes to financial services. Central to these innovations are three significant frameworks: ULI (Unified Lending Interface), OCEN (Open Credit Enablement Network), and ONDC (Open Network for Digital Commerce). These frameworks aim to streamline and democratize lending and commerce, enabling greater participation and improving access to credit. However, the multiplicity of credit channels also presents its own challenges.

Let us begin by understanding what ULI, OCEN, and ONDC are: 

What is Unified Lending Interface?

ULI, or the Unified Lending Interface, is a platform introduced by the RBI that is designed to create an integrated ecosystem where various financial institutions and lenders can collaborate on a shared platform. It enables the seamless and consent-based flow of digital information, including land records from various states, directly from multiple data service providers to lenders. This will significantly reduce the time required for credit appraisal.

The ULI system is built with standardized and common APIs (Application Programming Interfaces) that follow a “plug and play” model. This ensures easy digital access to information from diverse sources, making the lending process more efficient and accessible for both lenders and borrowers.

The core idea behind ULI is to break the silos that exist in lending, where each bank or lender operates within its own closed environment. By standardizing interfaces, ULI ensures that any lender, be it a traditional bank or a fintech, can compete on a level playing field, giving consumers a wider array of loan options. For borrowers, this results in faster loan approvals and possibly more favourable terms.

Similar to how UPI revolutionized payments, ULI will serve as a driving force for financial inclusion and lending, particularly benefiting smaller and rural borrowers.

What is Open Credit Enablement Network?

OCEN, or the Open Credit Enablement Network, acts as a digital bridge between lenders and borrowers with the goal of normalising access to credit, especially for MSMEs. Developed by iSpirit, OCEN connects Loan Service Providers (LSPs) with traditional lenders, such as banks and NBFCs, using standardized APIs. This integration enables smoother loan origination, underwriting, and servicing, making credit more accessible for small businesses and individuals alike.

Through OCEN, non-lending platforms like e-commerce sites or service providers can serve as channels for distributing credit. The system aggregates data from various sources, building a comprehensive credit profile and allowing lenders to offer customized credit products. This shift allows MSMEs to leverage their revenue streams and financial performance to secure funding, making credit more accessible for those lacking conventional forms of security.

By leveraging digital public infrastructure like Aadhaar-based e-KYC and UPI, OCEN simplifies the lending process, reduces operational costs, and significantly enhances financial inclusion. 

What is Open Network for Digital Commerce?

ONDC, or Open Network for Digital Commerce, is a government initiative designed to level the playing field in e-commerce by enabling micro small and medium enterprises (MSMEs) to compete alongside larger players. Rather than confining sellers to specific platforms, ONDC creates a decentralized network where sellers, logistics providers, and payment services can interact freely, giving MSMEs more control and a broader reach.

In addition to facilitating digital commerce, ONDC is beginning to integrate credit services into its ecosystem. By onboarding NBFCs, ONDC aims to offer credit options to both buyers and sellers, thereby easing access to formal lending. This integration means that sellers on the platform can gain immediate access to working capital, leveraging their sales history to secure credit. For buyers, options like ‘buy now, pay later’ can be seamlessly incorporated into their shopping experience.

This credit inclusion is particularly beneficial for smaller businesses and individuals that traditional banks often overlook. By embedding lending services directly into the transaction process, ONDC ensures that credit becomes more accessible, helping sellers to scale their businesses and buyers to afford purchases with greater flexibility. Ultimately, ONDC’s foray into lending has the potential to increase financial inclusion, boost sales, and further democratize the e-commerce landscape.

Part II of this blog will draw parallels between ULI, ONDC and OCEN, uncovering their overlaps and shared mission to simplify access to credit. By breaking down their synergies, the next part will reveal how these frameworks complement each other to create a smoother, more accessible digital lending experience for everyone. It will also tackle the challenges faced by the users. 

Stay tuned to discover how these platforms can simplify your lending journey!