From kiranas to KYC: How ONDC may rewrite India's MF playbook

A few fintechs teamed up with ONDC to build a low-cost, alternative route to MF distribution for the masses

- Neil Borate & Jash Kriplani

A small set of fintechs and ONDC (Open Network for Digital Commerce) have come up with an audacious plan to revolutionize investing in mutual funds for India's masses. The initial pipeline has been built out and is operational.

The full plan, still at the discussion stage among fintechs, mutual funds and ONDC, is breathtaking in its scope since it would involve a change to SEBI's (Securities and Exchange Board of India) regulations on the distribution of mutual funds. At the heart of this plan is the system created by a fintech company called Cybrilla.

Cybrilla, which has a license from SEBI as a RTA, has built a system where the distributor and mutual fund can directly interface, bypassing legacy platforms. According to a fintech executive familiar with the matter, this brings down the cost per transaction from the current ₹2-7 range to just ₹0.75. Eight mutual funds have entered the ONDC system, including the large players.

New route
"Think of us as a digital branch of the mutual funds. We will be time-stamping the transactions at the back-end, and with the help of our APIs, which are now plugged into the ONDC ecosystem, we will enable the last-mile distributor to connect with mutual funds directly," said Anchal Jajodia, co-founder of Cybrilla. APIs are application programming interfaces, and KYC is know your customer.

API enables two separate software programmes to talk to each other. "ONDC, like UPI, creates a standardized language for all participants; what is technically called a protocol. As a result, different apps and platforms can work together smoothly, like speaking the same language in a digital marketplace," explains Hrushikesh Mehta, senior vice president - financial services, ONDC.

ONDC was launched by the Department for Promotion of Industry and Internal Trade, which is under the commerce ministry, in 2022.