ONDC - Changing Indian e-commerce the UPI way

8 October 2022

#technology#ondc#e-commerce

ONDC - Changing Indian E-commerce the UPI Way

The Open Network for Digital Commerce (ONDC) is an initiative that aims to transform India’s e-commerce ecosystem by creating an open, interoperable network. The platform is designed to democratize digital commerce and break away from the traditional, platform-based models, such as Amazon or Flipkart. It envisions a future where local commerce in various sectors, including mobility, groceries, food delivery, hotels, and travel bookings, can thrive on a common network. This ambitious project is spearheaded by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.

Dhanaay aims to highlight the importance of such platforms and raise awareness among businesses and consumers about the game-changing impact of ONDC. Here’s a deep dive into the features and potential of this initiative:

Key Features of ONDC

An UPI for E-commerce: Much like how the Unified Payments Interface (UPI) transformed digital payments in India, ONDC seeks to democratize e-commerce by moving from a platform-based model to an open-network model. The platform empowers merchants by allowing them to maintain control over their data and build a credit history, giving them the opportunity to reach consumers without the constraints of big e-commerce giants.
Leveling the Playing Field: ONDC is designed to create a level playing field for various e-commerce platforms, large and small. Major players like Amazon and Flipkart as well as offline traders who have been dissatisfied with the monopolistic practices of these platforms will benefit. It aims to reduce the dominance of big players and foster more competition in the e-commerce space.
Digital Transparency and Empowerment: ONDC enables both buyers and sellers to be digitally transparent, facilitating a trustworthy network. Merchants will be empowered, and consumers will break away from silos, creating a more collaborative, efficient, and scalable e-commerce model.
Open Network Built on Open Standards: ONDC uses an open-sourced methodology with various network protocols, independent of any single platform. It seeks to digitize the entire value chain, standardize operations, and promote inclusion of suppliers, enhancing logistics efficiency and delivering better value for customers.
Privacy and Confidentiality: A critical aspect of ONDC is data privacy. The platform ensures that transaction-level data from participants is not shared with ONDC, safeguarding confidentiality. It focuses on publishing aggregate metrics on network performance without compromising privacy.
Beckn Protocol: ONDC runs on the Beckn protocol, a technology framework that ensures smooth operation of the network’s policies, trust systems, and grievance redressal mechanisms. It aims to optimize inventory management, delivery costs, and improve the overall efficiency of business operations.

Challenges and Concerns

Despite its promising potential, there are several challenges that ONDC faces:

Liability and Consumer Protection: There are concerns regarding the liability of network participants, especially when it comes to consumer protection. E-commerce regulations and rules might need to be rethought to ensure fairness in this new network.
Third-Party Network Policies: ONDC will have to contend with third-party network policies that could impact interoperability and coordination across different service providers.
Network Disruption: ONDC has to address network disruptions and ensure its reliability by introducing a guaranteed framework for smooth operation, something that could limit potential downtime or failures.
Pricing and Business Model: ONDC does not focus on cutting prices using shareholders' money but instead emphasizes innovative value addition to products. This could offer a more sustainable model in the long run, as opposed to undercutting prices to grab market share.
Data Usage and Interoperability: ONDC has limitations on data usage to protect privacy, but this could also affect the interoperability between different platforms and disrupt seamless integration.

Online Dispute Resolution (ODR) and Consumer Empowerment

Another key feature of ONDC is its approach to resolving disputes:

Online Dispute Resolution (ODR): ONDC has set up a third-party agency to handle disputes between buyers and sellers. Consumers can track the status of their complaints, and all complaint data is recorded and made publicly available through the platform's monthly reports.
Consumer Court Access: If issues are not resolved on the platform, consumers have the option to take complaints to consumer courts.

Industry Adoption and Growth

ONDC has seen significant adoption and growing interest from various players in the e-commerce and logistics sectors:

Major Brands Join the Platform: Big names like Flipkart, Amazon, Ekart, and Dunzo have integrated with ONDC, and companies such as Paytm, PhonePe, Google Shopping, and Shopify have also shown interest.
Promoting Local and Niche Products: The platform has worked to promote products linked with Khadi and those initiated by Scheduled Tribes, giving them a national-level recognition and helping small businesses reach a larger audience.

Conclusion

ONDC is poised to revolutionize India’s e-commerce landscape by offering an open and inclusive platform that promotes fair competition, consumer protection, and business innovation. The platform’s approach, inspired by UPI's success in digital payments, promises to create a more level playing field for sellers of all sizes, while giving consumers better options and control over their purchases.

With its increasing adoption by major industry players and growing public interest, ONDC is shaping up to be a powerful catalyst for the next generation of digital commerce in India.