by Jay Patel
Imagine a first-time online seller, overwhelmed by the complexities of onboarding across multiple e-commerce platforms, managing inventories individually, and reconciling disparate sets of data. This daunting scenario, faced by countless entrepreneurs, called for a streamlined, unified approach to digital commerce. Enter the Open Network for Digital Commerce (ONDC), a transformative initiative that addressed these challenges head-on. By establishing a standardized, platform-agnostic framework, ONDC revolutionized the way sellers engage with the digital marketplace, simplifying operations and fostering inclusivity. It’s a game-changer, ensuring that no seller is left behind in the rapidly evolving digital economy.
The Open Network for Digital Commerce (ONDC) is a groundbreaking initiative by the Indian government aimed at democratizing and promoting an open network for all aspects of the exchange of goods and services in the e-commerce sector. It is designed to be the UPI for the Indian e-commerce ecosystem, operating on an open-sourced approach with open standards and protocols that are platform-independent. This initiative facilitates the establishment of location-aware, local digital commerce businesses across industries, making any network-enabled program discoverable and engageable. ONDC is a testament to India’s commitment to creating a more open and inclusive model of e-commerce, supporting micro, small, and medium enterprises (MSMEs) and small traders to enter the digital commerce space more equitably. Increased digital transactions under ONDC are expected to unbundle credit and supply chains, providing equal opportunities to all market players. For more details on how ONDC operates and its impact, you can visit the official site of ONDC
India’s burgeoning e-commerce landscape is significantly influenced by the rise of digital payments, supported by digital payment reforms such as the Unified Payment Interface (UPI) and RuPay. The remarkable growth of UPI, processing 7.3 billion transactions valued at Rs. 12.11 trillion (US$ 146.51 billion) as of October 2022, underscores the rapid expansion of India’s digital payments ecosystem. This growth, coupled with increasing internet penetration and rising incomes, paves the way for the e-commerce sector’s significant expansion. ONDC aims to further catalyze this growth by providing a more democratized platform for the exchange of goods and services, moving beyond the platform-centric digital commerce model to a more expansive network for buyers and sellers.
The technological and policy interventions, including ONDC, reflect a strategic approach towards fostering a more equitable and inclusive digital commerce environment in India, potentially setting a global benchmark for open digital commerce networks.
How did it start?
Initiated by the Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India, ONDC was established as a non-profit Section 8 company in December 2021. Its inception was supported by initial investments from the Quality Council of India and Protean eGov Technologies Limited, among others, reflecting a collaborative effort between government entities and the private sector to foster an inclusive digital commerce ecosystem. Notable financial institutions and banks, such as Kotak Mahindra Bank, Axis Bank, HDFC Bank, and State Bank of India, also contributed, signifying widespread institutional support for the initiative.
A pivotal moment in ONDC’s journey was its pilot phase, launched on 29 April 2022 in cities like New Delhi, Bengaluru, Bhopal, Shillong, and Coimbatore. The first transaction on ONDC was notably facilitated by a Bengaluru-based company, marking the operational beginning of this ambitious project. Further expansions and integrations, such as with the National Bank for Agriculture and Rural Development (NABARD) for the agriculture domain and various state government schemes like Uttar Pradesh’s One District One Product (ODOP), showcased ONDC’s broad potential impact across multiple sectors.
ONDC’s technology framework is designed on open protocols, ensuring interoperability across different digital platforms and services. This open-source methodology allows for a more equitable participation of sellers, especially from smaller towns and rural areas, by eliminating the platform-centric barriers existing in the current digital commerce model.
The initiation of the Open Network for Digital Commerce (ONDC) involved strategic collaborations between the Indian government and key private players in the e-commerce and tech industries, aiming to create a more inclusive and competitive digital commerce ecosystem in India.
Amazon, one of the major e-commerce giants, made a significant move by joining the ONDC initiative. The company announced its intention to integrate its logistics network and SmartCommerce platform with ONDC. This collaboration was notable because it represented Amazon’s support for an initiative that aims to democratize online shopping and reduce the dominance of major e-commerce platforms, including Amazon itself. This partnership underscores the aligned visions of Amazon and ONDC in digitally empowering small businesses and enhancing consumer choice across India (TechCrunch).
Furthermore, Shiprocket, a leading logistics and e-commerce shipping solution provider, has been instrumental in the ONDC’s early success. By aligning with ONDC, Shiprocket has empowered small and medium-sized enterprises (SMEs) to expand their reach and streamline delivery operations. This collaboration leverages Shiprocket’s vast courier partner network and technology infrastructure to facilitate e-commerce accessibility for businesses nationwide (CXO Today).
Paytm, a major digital payment platform in India, has also played a crucial role in ONDC’s development. By integrating with ONDC, Paytm has strengthened its logistics capabilities, ensuring efficient and timely delivery of a wide range of products. This collaboration has enabled Paytm to offer a seamless shopping experience to its extensive user base, further promoting mobile commerce in India (CXO Today).
Where does it reach?
As of the latest updates, ONDC has successfully rolled out pilot phases across multiple cities, demonstrating its operational feasibility and effectiveness. The initiative started with pilot launches in cities like Bengaluru, Delhi, Bhopal, Shillong, and Coimbatore, with Bengaluru-based Woolly Farms making the first transaction via Paytm on the ONDC network, marking a milestone in the network’s operational history.
The expansion of ONDC has been notable, with plans to cover 100 cities and subsequently the entire nation. ONDC is set to revolutionize e-commerce across various sectors, including Food & Beverage, Grocery, Fashion & Footwear, Home & Kitchen, Electronics, Beauty & Personal Care, and Mobility. This broad spectrum ensures that a wide range of products and services are accessible to consumers, offering businesses in these domains an expansive platform for digital commerce.
The collaborative efforts with private and public players have been a cornerstone of ONDC’s strategy. The involvement of Amazon, which integrated its logistics network with ONDC, and the participation of leading digital payment platforms like Paytm, are testaments to the broad-based support and confidence in the ONDC’s objectives. The initiative is not just about facilitating transactions but also about building an ecosystem that supports small and medium-sized businesses to thrive in the digital economy (TechCrunch).
Current statistics highlight the growing traction of ONDC, with significant transaction volumes being recorded. For instance, during Diwali week of 2023, ONDC recorded nearly 1.2 million transactions across more than 600 cities, showcasing the wide-reaching impact and acceptance of the platform.
Where it is going?
This scale of operations indicates a promising future for ONDC, with plans to bring 30 crore shoppers and 3 crore sellers onto the network by 2024, a significant leap towards achieving digital inclusivity in commerce.
Technology enhancement is another critical area of focus. With the adoption of AI and blockchain technologies, ONDC aims to offer a more secure, transparent, and efficient platform for digital transactions. These technologies are expected to play a crucial role in fraud prevention, transaction verification, and creating a seamless consumer experience. Moreover, leveraging such advanced technologies could provide ONDC with a competitive edge in the global digital commerce space.
The leadership team behind ONDC comprises individuals with vast experience in technology, e-commerce, and governance. T Koshy serves as the MD and CEO of ONDC, bringing extensive expertise to steer the initiative towards its envisioned goals. The board of directors includes representatives from founding members, shareholders, and government nominees, reflecting a collaborative effort between the private sector and the government. Notable figures include Jaxay Shah (Chairman, QCI), Suresh Sethi (MD & CEO, Protean eGov Technologies), and government nominees from the Ministry of MSME and the Ministry of Commerce & Industry, among others (ONDC | Open Network for Digital Commerce).
A significant near-term milestone for ONDC is to complete the national rollout, making the network accessible across India. This expansion will not only increase the platform’s user base but also test the scalability and robustness of the network under diverse market conditions.
The layered network approach:
The ONDC network’s structure is built on three core layers to facilitate open and interoperable e-commerce transactions.
- 1. Protocol Layer: This foundational layer, developed using Beckn protocols, enables the core phases of e-commerce interactions: Discovery, Ordering, Fulfilment, and Post-fulfilment. It’s designed to establish a common language for communication between diverse platforms, encouraging decentralization and interoperability.
- 2. Network Layer: This layer supports the exchange of category-specific information and services such as Grievance Management and Financial Settlements. It includes network resources like Open Data, Network Policies, Registry, and Gateway, playing a pivotal role in the execution of services across the ONDC network.
3. App Layer: This user-facing layer comprises buyer and seller applications that interact with the ONDC network, providing buyer-side and seller-side functionalities.
The Open Network for Digital Commerce aims to address market inefficiencies caused by closed, non-interoperable e-commerce platforms by enabling a more inclusive digital commerce environment. The ONDC’s framework aspires to correct the limitations that consumers face, such as restricted choices and aims to increase India’s e-commerce penetration beyond the current 6%.
How to join?
ONDC offers various roles for participants, aiming to cater to diverse needs within the digital commerce ecosystem. These roles include:
Buyer Network Participant: Entities that want to create a platform for customers to discover and purchase products/services.
Seller Network Participant: Businesses looking to sell products/services through the ONDC network.
Gateway: Services that facilitate transactions and communications between buyers and sellers.
Technology Service Provider: Entities providing technological solutions and services to enable efficient operations on the ONDC network.
Each role has specific responsibilities and requirements, tailored to enhance the ecosystem’s inclusivity and functionality. For a detailed understanding of each role and how to join, visiting the ONDC Participant Portal is recommended.
