Frequently Asked Questions

1. What is a 'Loan Service Provider'?

A Loan Service Provider (LSP) is an entity like a marketplace, with high interface and relationship with merchant/individual customers. LSP's customers can avail financing from multiple lenders through Open Credit Enablement Network (OCEN) APIs. They play the vital role of helping borrowers discover, compare and obtain credit from lenders providing the lowest cost of capital.

2. What roles do the LSP play?

  • Helping their customers get the best loan offers

  • Helping them make easy choices by explaining the product details, cost breakdown and more

  • Provide them with custom financial products in collaboration with lenders

  • Improve their financial well being (which in turn helps keep the credit marketplace healthy).

3. What is the business model of an LSP?

As an agent of the borrowers, LSPs charge the borrower as compared to the current model where LSPs are paid a bounty or commission by lenders. They can charge value added fees to help their customers obtain loans, a subscription fee for credit advisory and more. More business models are emerging as we engage with LSPs.

Overall, this increases ecosystem alignment (the LSP acts with the borrowers' interests in mind by trying to source the lower cost of credit), transparency (all ecosystem partners are clear about compensation) and lenders benefit from lower costs of acquisition while focusing on creating products that best fit their target market.

4. Will LSPs be regulated?

They will undergo a light certification by a CredAll empanelled certification agency to ensure tight integration with APIs that ensure seamless customer experience and security.

5. Can a LSP be a lender?

Yes, a LSP can be a lender or vice versa. 

6. Will an LSP have to tie up with each lender individually?

No, with OCEN, the hassle of individual custom integrations goes away and in one go, an LSP is able to connect with multiple prospective lenders.

7. What kind of credit products are these APIs for?

These APIs can be used for multiple financial products such as invoice financing, PO financing, CapEx financing, personal loans and more.

8. Can LSPs share their data with the lenders through these APIs?

Yes, LSPs can share their platform data with the lenders to help in better determination of creditworthiness of a customer. Examples are 'throughput of orders' of a merchant and their customer rating on the platform.

9. How is OCEN different from an LSP?

OCEN is an open source protocol for credit. LSP is an entity that uses the protocol to connect its customers with lenders seamlessly for financing?

10. How is Sahay different from OCEN?

Sahay is a reference LSP implementation on top of OCEN, just like BHIM is for UPI

11. When is this infrastructure expected to be ready and operational? 

 

Pilots will be underway in a few weeks.

12. Who are the market players engaged in becoming LSPs today?

 

There are a mix of top lending marketplaces, Kirana tech, e-commerce, social networking, payment gateway companies engaged for this today.

 

13. How will this complement Account Aggregators?

 

OCEN complements Account Aggregators(AA) by surfacing the borrower for the lender. The lender subsequently fetches data from AA to access high provenance data of the same borrower for underwriting.

 

14. Will there be a cost associated with using these APIs?

 

OCEN is a public good and in the effort to be inclusive we will endeavour to keep the costs of using the APIs reasonable. There will be 2 types of costs.

 

For entities interested in becoming an LSP or a Lender, there will be a certification fee upon integrating APIs. The certification is important to ensure a neat and tight integration so that user experience and security are not compromised.

A CredAll membership fee.

The details of these costs will be available shortly.

15. What are the implications for existing FinTechs in the business of lending?

 

Existing FinTechs realise the value of a standardised protocol and how it helps them reduce operational hassles of integrations and maintenance with multiple lenders. Beyond saving operational costs, they see it as a great opportunity to expand their current portfolio of products and reach to more varied borrower segments.

16. Are these APIs just for business loans?

No, they are standardised APIs that can be utilised for multiple business as well as consumer loans.

17. Who owns OCEN?

No market player owns OCEN APIs. It is a digital public good.

18. How do I become a LSP?

Click here to learn how to become a LSP.

19. What are the roles of different players in Cash flow based lending?

There are many key, distinct players in Cash flow based lending value chain. They bring one or more of the following to the table to contribute:

1. Data

2. Distribution

3. Capital

4. Technology

Collaboration of all these players is critical to provide a seamless digital, lending experience for borrowers.

The Lenders bring in capital and credit product experience to collaborate with LSPs.

They interact with Credit Bureaus as part of their underwriting process.

Players like Payments Service Providers and Account Aggregators plug in critical digital public infrastructure.

Loan Service Providers provide the low cost distribution and bring in tacit know-how of the customers they serve. They utilise this connect with the 'pulse of the customer' for creating tailored credit products in collaboration with lenders. They can further enable provision of quality customer data, like 'business activity' data (e.g. platform ratings) to the lenders and even facilitate cash flow entrapment if they have a continuous cash flow interaction.

Technology Service Providers enable lenders as well as LSPs utilise the OCEN APIs along with other components of India Stack. They help them in technical implementations and ease of adoption.

Underwriting Modellers help in assessment of various raw data signals that can be captured through digital trails and help lenders make sense of the data.

 

Write to us if you see something that wasn't answered: hrushi@ispirt.in