ONDC — Decoding the new digital kid on the block

The digitisation of commerce and transaction process in the last couple of years, including the unprecedented times of the Covid-19 pandemic, has to be one of the most celebrated chapters of new-age India’s growth story. This transition comes on the back of simplifying, facilitating and democratising the payment systems in India.

Taking a cue from this phenomenon, the Government of India has launched Open Network for Digital Commerce or ONDC. ONDC is the new offering in the digitisation block that aims to do more than its peers and predecessors with its aim to empower the community of buyers and sellers.

ONDC is a normaliser of sorts, that when implemented in its entirety will give an equal playing field to MSME to compete with established players in the retail and services segments. When the pandemic hit, it was the small businesses and merchants that bore the maximum brunt of the disruption. While they are prudent to adapt and show resilience, one must not rest on these laurels. If anything, these trying times have taught us to be nimble and innovative.

ONDC, an initiative by the Department for Promotion of Industry and Internal Trade (DPIIT), Government of India, is one such future-looking solution. It is a timely step towards creating a sustainable business and entrepreneurship environment at the micro level, a decisive benefactor of Aatmanirbhar Bharat.

While an enabler, ONDC is a first-of-kind initiative in a diversified country such as India where informal channels run galore. It needs a calibrated approach to unleash the potentials it offers and tackle the initial headwinds.

While the vast network that ONDC caters to or will cater to is its strength, therein lies the challenge as well. ONDC is a complex ecosystem to implement, unlike UPI, ONDC at the present is a more nuanced ecosystem. The success of this new initiative depends on its scalability in including new as well as established players. The understanding of digital services and accessibility at the micro-level remains a pain point. The platform aims to give more choices and opportunities to both buyers and sellers, however, doesn’t quite connect the technology backing these sides.

Moreover, there is the crucial factor of enriching experience and addressing concerns that the established players are attuned to by now. Given all these concerns, it might take some time for the open network to gain its desired momentum and show market gains.

At the onset, digital and financial literacy has to be prioritised as the pilot program starts rolling in. This will ensure a basic understanding of the platform and the e-commerce functionality for many micro-level entrepreneurs. While the authorities are conducting such sessions, given the mass of India’s formal and informal sectors, private players and entities can step proactively.

The premise of ONDC is to enhance the hyperlocal concept for both buyers and sellers. It is thus important to provide a localised buying experience and avoid conversion disputes in these cases. Apart from the buyer and seller-side applications, ONDC can offer a backend technology to create a connection between these platforms. With the abundance of options it provides, it runs the risk of being a sophisticated master aggregator unless there is an improvement buyer’s experience. Fintech companies with expertise in e-commerce and digital transactions can step in and bridge this potential gap.

ONDC as an open-source network is also meant for the business viability of an enterprise. The gains made online should also reflect in the business’s offline performance for its wholesome growth in the retail sector. It is important to develop omnichannel enterprise-focused software products to tap the growing demand for providing customised software solutions that allow unifying and synchronising online and offline businesses. This will not only bring parity for such platforms but also incentivise more small-micro businesses to join in.

Finally, trust is the core of any online or digital platform. On account of being an open-source platform, ONDC promises of creating transparency, but can it ensure accountability in the entire value chain? It has taken almost a decade for the country to trust and adapt to digital transformation and hence any new entrant has to keep up with these expectations and cannot afford to wither. With a massive network and gamut of services, maintaining quality will be a daunting task that has to be done nonetheless. While the government is framing e-commerce policy/policies, it also needs to look into setting guidelines for user experience and a standard set of protocols for all businesses taking part in this platform. Even, data security and cost absorption are some issues that need redressal before the network stabilises.

The consultation paper on ONDC states that the network aims to build an open, interoperable network on which buyers and sellers can transact without needing to be present on the same platform. The framework of this network does not rely on a centralised controller for operations and information flow. It is important to maintain this status -quo when the implementation of the program is on a fast track.

The expansion and growth of UPI transactions have breathed new confidence into India’s financial sector and ONDC is well-placed to build on that sentiment. It is thus imperative that checks and balances are put in place at this initial pilot phase to make ONDC a truly democratising platform that can usher the Indian economy to the next phase of growth.