Open Network for Digital Commerce (ONDC) is a network based on an open protocol. It will make it possible for any network-enabled application to find and use local commerce in areas like mobility, grocery, food order and delivery, hotel booking, and travel, among others.
The goal of the platform is to open up new business opportunities, stop digital monopolies, and help micro, small, and medium-sized businesses and small traders get online. It is a project of the Ministry of Commerce and Industry’s Department for Promotion of Industry and Internal Trade (DPIIT). ONDC wishes to transform e-commerce in the same way that India’s digital payments system was transformed by the Unified Payments Interface (UPI).
India wants to level the playing field for e-commerce businesses and give millions of small businesses and traders in the country easier access to digital markets. Since ONDC won’t use a platform-centric model, the Indian government hopes it will open up the country’s online market to all buyers and sellers, no matter how big they are. This way, millions of small retailers and mom-and-pop (Kirana) stores will have an equal chance to sell their goods.
ONDC has been put into action in five cities: Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore. It is now in its pilot phase. Even though retail and restaurants are the main focus of operations and real-time transactions at the moment, the open network will grow to include other areas like travel and mobility. Based on the pilot project and after the network is stable, ONDC will be expanded to 100 cities in India by October 2022.
How does ONDC work?
The ONDC will offer everyone in the market, including consumers, the very same opportunities. It is a neutral platform that, like the UPI, will set protocols for cataloguing, matching vendors, and finding prices.
This means that buyers and sellers can do business on ONDC even if they aren’t part of any particular e-commerce portal. For example, if a seller is registered on platform A and a buyer is registered on platform B, the buyer can still buy products from seller X without registering on platform A. This is possible because the ONDC network connects all the platforms.
What does open-source mean?
To make a process or software “open source” indicates that everyone is free to use, share, and change the technology or code that is used in the process. For example, the iOS operating system is closed source, which means that it can’t be legally changed or used. However, the Android operating system is open-source, which means that smartphone makers like Samsung, Nokia, Xiaomi, etc. can change it to work with their own hardware.
ONDC wants to promote open networks that are built using open-source methods, open specifications, and open network protocols, and that don’t depend on any one specific platform.
What is the significance?
ONDC is expected to digitise the whole value chain, standardise operations, make it easier for suppliers to be involved, improve logistics, and give consumers more value.
Once the ONDC is implemented and required, which is expected to happen by October 2022, all e-commerce companies in India, no matter what brand, will have to use the same processes, like how Android-based phones work. Smaller online stores and newcomers would benefit from this because it would make it easier to find, connect, and include everyone. It will give suppliers and customers more power by breaking the monopoly of big platforms. This will spur innovation and change businesses in retail, food, and transportation.
Businesses should benefit from clear rules, low investment costs, and lower costs of starting a business. Time-to-market and time-to-scale are also expected to be cut down by a large amount.
Large e-commerce companies have complained because they have already spent a lot of money on research and development (R&D) and putting their own processes and technologies into use. Statista predicts that India’s e-commerce market will be worth US$200 billion by 2027, which means that the government probably thinks it’s big enough for all kinds of business competitors to join in.
Now, the US-based tech giant Google is rumoured to want to join the ONDC network to expand its search and payment services in India. Paytm and PhonePe, two of Google Pay’s competitors, have already joined the network and are now looking for ways to add it to their own platforms.
