Open Network for Digital Commerce: Banks Spot an Opportunity
Deepak Sharma, President and Chief Digital Officer of Kotak Mahindra Bank, believes that a large network like ONDC gives banks the opportunity to participate in projects that will add value to the economy in the future.
ONDC is a public good entity, Sharma said. “There is a huge underlying opportunity for funding from multiple perspectives, with merchant services being one of them. learning for all stakeholders,” said Sharma.
A private bank executive, who spoke on condition of anonymity, said banks could get multiple funding opportunities from the platform. This could include promoting existing products or introducing personalized credit lines for businesses on the platform. There are plenty of use cases to explore, this lender said.
When UPI was introduced many people said it wouldn’t fly, but it did, the person quoted above said. It is too early to comment on the future of the platform but it is a good initiative, added the interested party.
According to Vivek Iyer, Partner and Head of Financial Services Risk Consulting at Grant Thornton Bharat, in addition to obtaining buyer and seller data, the platform can enable banks to tap into markets that do not are not covered by branches. More transaction data will be available on these MSMEs, which will help to make more accurate credit assessments, he added.
In addition, a number of “fintech packages such as insurtech, working capital management and other financial and risk management innovations can be delivered to these players through partnerships and alliances with this ONDC initiative,” Iyer said. A second order effect for banks will be the increased use of digital payment mechanisms such as net banking, UPI, cards based on the value of transactions, Iyer added.
ONDC is a big project on paper but its execution is a challenge, said a consultant, who spoke on condition of anonymity. How and when that will take shape, only time will tell, this person said.
Banks are investing in it because if it takes off and becomes as successful as UPI, they’ll get first mover advantage, the person quoted above said. However, even if that fails, the money they have invested is not substantial, this person said.