Open Network for Digital Commerce

EN EXPLAINS

The retail revolution of India has undoubtedly been led by the thriving e-commerce industry of the country. The rising number of internet users has made India one of the fastest growing ecommerce markets in the world. With 560 million internet users, India has become the secondlargest country globally in terms of internet users, surpassing the United States. The Indian ecommerce industry has been on an uphill advancement path. Impelled by increasing smartphone infiltration, the introduction of 4G networks and growing consumer wealth, the Indian e-commerce market is anticipated to grow to $200 billion by 2026. India has taken the path of building public digital infrastructure for serving her citizens. UPI, Jan Dhan, Aadhar, CoWin and ULIP are a few examples of this approach. The Open Network for Digital Commerce (ONDC) is a similar initiative of the Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. The network is poised to create a facilitative model to revolutionise digital commerce, giving greater thrust to penetration of retail ecommerce in India.

What is ONDC?

With the vision to create an organisation with a startup mindset supported by the Government, Open Network for Digital Commerce (ONDC) was incorporated as a non-profit, Section-8 company on December 31, 2021. The company was incubated at the Quality Council of India (QCI), an autonomous organisation with DPIIT, where the founding work for the project was initiated in a mission mode. QCI was joined by Protean as the co-founder for incorporation of ONDC. Many public and private banks and financial institutions have contributed equity to ONDC till now

 Objectives

ONDC has three major objectives:

1.      Democratisation and decentralisation of e-Commerce: ONDC will democratise ecommerce and enable millions of small traders to take advantage of opportunities thrown up by ecommerce. ONDC has been designed to promote local languages, products, and cultural heritage, and create opportunities for small businesses. Small artisans and workers can offer better quality through ONDC and also earn better without having to pay commission for their products. ONDC will foster healthy competition, benefit consumers and contribute to the overall growth of the digital commerce ecosystem in India.

2.      Inclusivity and access for sellers, especially small and medium enterprises as well as local businesses: ONDC will unlock doors of opportunities in an inclusive manner for both big and small businesses, benefitting the entire value chain of commerce. It will provide a much larger market for sellers, without any preferred or priority sellers, ensuring equitable and fair treatment for all stakeholders. ONDC will foster economies of scale, competition, and better pricing and quality, ultimately benefiting consumers.

3.      Increased choices and independency for consumers: ONDC is customer-centric, keeping in line with the vision "customer is the king". It will empower consumers by offering more choice. ONDC, with its concept of using interfaces between various platforms, will open up more options for buyers, enhance price discovery and market opportunities for sellers, and also empower consumers to make informed choices. This will result in more competition in the market and will not be limited through algorithms. Consumers can potentially discover any seller, product or service by using any compatible application or platform, thus increasing freedom of choice for consumers. It will enable the consumers to match demand with the nearest available supply. This would also give consumers the liberty to choose their preferred local businesses. Thus, ONDC would standardise operations, promote inclusion of local suppliers, drive efficiencies in logistics and lead to enhancement of value for consumers.

Beta Testing: ONDC started its beta testing with consumers in Bengaluru, Karnataka in September 2022. The network was made available to consumers in 16 locations across the city. To begin with, consumers could place their orders in two domains - groceries and restaurants through buyer apps participating on the ONDC network.

Understanding ONDC Currently, digital markets are closed and platform-centric wherein buyers and sellers need to be on the same platform to carry out a transaction. The current model of e-commerce stifles innovation, creates significant barriers to entry for new players, and creates a gap between online demand and the local retail ecosystem. As a result participation in ecommerce is well below its potential and has a tremendous opportunity to grow manifold. ONDC, on the other hand, does not require that buyer and seller must use the same platform/application to do a business transaction. Instead, it is a network-centric model where, so long as platforms/ applications are connected to this open network, buyers and sellers can transact irrespective of the platforms/applications they use. It is like the "UPI of ecommerce". The goal is to render a start-up mindset commissioned by a management with a cutting-edge concept, extensive knowledge of commerce, comfort with state-ofthe-art technology, and a positive scope to facilitate development. The purpose of the start-up is to strengthen the network by utilising and developing enabling technology and encouraging wide-scale voluntary cooperation by ecosystem players. ONDC is aimed at promoting open networks for all aspects of exchange of goods and services over digital or electronic networks. It is based on opensourced methodology, using open specifications and open network protocols independent of any specific platform. These open protocols are used for establishing public digital infrastructure in the form of open registries and open network gateways to enable exchange of information between providers and consumers. Providers and consumers are able to use any compatible application of their choice for exchange of information and carrying out transactions over ONDC. Thus, ONDC goes beyond the current platform-centric digital commerce model where the buyer and seller have to use the same platform or application to be digitally visible and do a business transaction. ONDC protocols would standardise operations like cataloguing, inventory management, order management and order fulfilment. Thus, small businesses would be able to use any ONDC compatible applications instead of being governed by specific platform-centric policies. This will provide multiple options to small businesses to be discoverable over network and conduct business. It would also encourage easy adoption of digital means by those currently not on digital commerce networks. ONDC aims to provide a winwin solution for both buyers and sellers. ONDC will enable speedy, efficient, and real-time settlement of transactions, catering to hyperlocal and global needs simultaneously. ONDC is expected to make eCommerce more inclusive and accessible for consumers. Consumers can potentially discover any seller, product or service by using any compatible application or platform, thus increasing freedom of choice for consumers. It will enable the consumers to match demand with the nearest available supply. This would also give consumers the liberty to choose their preferred local businesses. Thus, ONDC would standardise operations, promote inclusion of local suppliers, drive efficiencies in logistics and lead to enhancement of value for consumers. ONDC identifies four types of players - Buyer Network Participant, Seller Network Participant, Technology Service Provider and Gateway. In an unbundled network, there needs to be a seamless interaction between all participants to facilitate end-to-end ecommerce transactions.

Compiled by: Annesha Banerjee & Anuja Bhardwajan Source: PIB/DPIIT/ongc.org/ Invest India