The EU’s Single Digital Market initiative aims to create a seamless digital marketplace across member states. It focuses on removing barriers to cross-border e-commerce, harmonizing regulations, and facilitating a level playing field for businesses. China has implemented a national e-commerce platform that provides access to various e-commerce services and infrastructure for businesses and consumers. It aims to streamline operations, enhance transparency, and promote growth in the e-commerce sector.
Department for Promotion of Industry and Internal Trade (DPIIT), under the Government of India, has established the Open Network for Digital Commerce (ONDC), a non-profit private entity as a Section 8 company, with a similar aim to foster a transparent and inclusive e-commerce ecosystem in India. The ONDC aims to establish an open and interoperable framework for digital commerce in India. It envisions providing equal opportunities to all stakeholders, including small and medium-sized enterprises (SMEs), startups, and local vendors, to compete with larger e-commerce platforms. This initiative holds great potential to transform the e-commerce business landscape not only in India but also serves as an inspiration for similar initiatives in other countries. Let us explore the significance of ONDC and its impact on the digital economy.
India has achieved the status of being the most rapidly expanding economy globally. According to the ‘India e-Conomy Report,’ digital services have become indispensable for more than 700 million internet users in India, with 350 million utilizing digital payments and 220 million participating in online shopping. B2C and B2B e-commerce transactions have thrived, with B2C GMV projected to reach $380 billion and eB2B GMV to reach $120 billion by 2030.
Around 120 million Kiranas (hyperlocal neighborhood provision stores), which comprise 80% of India’s retail sector, are digitally excluded. India has an estimated 42.5 million MSMEs lagging in adoption of digital strategies. The open network concept extends beyond retail and can revolutionize B2C and B2B transactions in domains like wholesale, mobility, food delivery, logistics, travel, and urban services, transforming the exchange of goods and services. ONDC establishes a robust governance framework to monitor and regulate digital commerce activities. This framework ensures compliance with legal and ethical standards, protects consumer interests, and fosters trust in the digital commerce ecosystem.
The Open Network transcends the existing platform-centric model, which requires both the buyer and seller to be part of the same platform/application for transactions. This concept of “store of value” to implement isolated platform driven e-commerce ecosystem, is now going to be parallelly influenced by the unrestricted and extremely scalable “flow of value” concept. It would efficiently grow the market by promoting open and seamless integration standards or set of specifications among various e-commerce stakeholders (i.e., buyers and sellers). ONDC will bring together fragmented platforms (network participants) and promote wider participation, particularly among small and medium enterprises, including hyperlocal merchants (Kiranas), from various regions across the country.
ONDC is not a super aggregator or a hosting platform. It serves as a network that connects location-aware, local digital commerce stores across industries through network-enabled apps. Within ONDC, a network participant has the flexibility to assume the roles of both a buyer and a seller, providing increased choices for buyers, sellers, and other participants. For instance, a marketplace that includes retailers can act as a seller in the retail domain and as a buyer in the logistics domain for digital retail transactions.
Existing digital commerce platforms can choose to join ONDC voluntarily, while the onboarding of sellers and buyers and order management remains the responsibility of network-enabled apps. ONDC would ensure that the data generated or exchanged during digital transactions is securely accessible to all the stakeholders. By allowing access to anonymized transaction data, the initiative enables better insights, market analysis, and strategic decision-making for businesses and policymakers.
ONDC will implement a transparent and inclusive policy framework to promote sustainable practices on the network. It will collaborate with network participants to develop rules and codes of conduct for activities performed within the network. These policies will cover various areas such as implementation, registration, transactions, payments, and data transmission. It aims to make these policies machine-readable and enforceable for improved compliance and transparency. Additionally, it will act as a facilitator for dispute resolution, following fair and transparent practices based on guidelines from NITI Aayog and RBI for the financial sector.
The technology components of ONDC encompass various network elements like registry, gateway, buyer, and seller applications, as well as adapter interfaces. Adaptor interfaces are open APIs based on the Beckn protocol, enabling information exchange for transactions using standardized ONDC certified interfaces. The gateway ensures the discoverability of sellers based on location, availability, and customer preferences. Open registries maintain participant lists and network policies. Buyer and seller side applications facilitate end-users and service providers to transact on the ONDC network. Detailed documentation on these components is available at www.ondc.org.
The success of ONDC, being a decentralized network, relies on the active participation and adoption of various network participants, including merchants and buyers, on both sides of the network. It must invest in expanding this adoption of ecosystem through market-led initiatives i.e., onboarding both large and small marketplaces and technology service providers. It will also need to conduct a robust Information, Education, and Communication (IEC) campaign to encourage businesses across value chains to join ONDC.
Conclusion:
The Open Network for Digital Commerce (ONDC) is a game-changer in the Indian e-commerce landscape, promoting fair competition, transparency, and innovation. It serves as a shining example of how a government can drive positive changes in the digital commerce ecosystem. As these national level initiatives evolve and become collaborative with each other, they would expand into borderless global digital commerce ecosystem and ultimately empower businesses and consumers worldwide.
