The Open Network for Digital Commerce, India's ambitious government-backed protocol for democratising digital commerce, is making its most significant expansion yet. After gaining traction in food delivery, grocery, and mobility, ONDC has released its financial services protocol specifications, paving the way for insurance policies, mutual fund investments, and small-ticket credit products to be bought and sold through any ONDC-connected application. The first live transactions in the financial services vertical are expected by June 2026.
How ONDC Financial Services Will Work
The ONDC model separates the buyer-side application from the seller-side application through an open protocol. In the context of financial services, this means that a consumer using any ONDC-enabled app could browse, compare, and purchase a health insurance policy from any insurer on the network, or invest in a mutual fund from any asset management company, without needing to download the insurer's or AMC's specific app. The protocol handles discovery, ordering, fulfilment, and post-transaction support through standardised APIs.
For insurance, the initial rollout will cover health insurance and motor insurance, two categories with high consumer search volume and relatively standardised product structures. Insurers including ICICI Lombard, HDFC Ergo, Star Health, and Bajaj Allianz have joined as seller-side participants in the pilot. The protocol supports real-time premium quotation, KYC verification via DigiLocker and Aadhaar, digital policy issuance, and claims initiation.
Mutual Funds on ONDC
The mutual fund integration follows a similar unbundled model. Asset management companies will list their schemes on the ONDC network, and any buyer-side application, whether it is a banking app, a fintech wallet, or a standalone investment platform, can surface those schemes to its users. The critical difference from the existing distribution model is that ONDC potentially eliminates the platform lock-in that currently characterises mutual fund distribution. An investor would not need to use a specific platform to access a specific AMC's funds.
SEBI has issued complementary guidelines clarifying how trail commissions, investor protection norms, and KYC requirements apply within the ONDC framework. Registrar and transfer agents including CAMS and KFintech are integrating with the ONDC protocol to enable seamless transaction processing. The initial rollout will cover direct-plan equity and debt mutual funds, with systematic investment plan functionality planned for the second phase.
The Credit Layer
Perhaps the most impactful vertical is credit. ONDC's financial services protocol includes specifications for personal loans, MSME loans, and buy-now-pay-later products. Lenders can publish their loan offers on the network, and any buyer-side application can present these offers to eligible users. The Account Aggregator framework plugs into this flow, allowing borrowers to share verified financial data with lenders for instant credit assessment. This creates an open credit marketplace where borrowers can compare offers from multiple lenders without submitting applications to each one individually.
Implications for Consumers
If ONDC's financial services vertical achieves the adoption it is targeting, the implications for consumers are substantial. Price transparency should improve, as competing products from multiple providers will be visible on a single interface. Distribution costs could decline, particularly in insurance where intermediary commissions constitute a significant portion of the premium. Access to financial products in smaller cities and towns should expand, as any local app connected to ONDC can become a distribution point for the entire range of financial services on the network.
The challenges are equally significant. Financial products are inherently more complex than ordering food or groceries. Ensuring that consumers receive adequate disclosure, understand what they are buying, and have access to grievance resolution within the ONDC framework will require careful implementation. The regulatory bodies, including RBI for credit, SEBI for mutual funds, and IRDAI for insurance, will need to coordinate closely with ONDC to ensure that consumer protection standards are not diluted in the pursuit of distribution efficiency.
For now, consumers should watch for ONDC-enabled financial services appearing on apps they already use. The ability to compare insurance premiums or mutual fund expense ratios across providers without visiting multiple platforms could meaningfully improve financial decision-making.
Source
ONDC Protocol Specifications v2.0, DPIIT Announcement