ONDC bridging the gap and expanding markets for inclusive e-commerce access, says Nandan Nilekani

So the fact that they are going to be systematically creating a set of cohorts who will work on this, I think this time around it will happen much faster. I am very optimistic that in the next couple of years you will see a lot of really great companies coming out of this.

Nilekani: Obviously, that is required, but I think they have actually done an amazing job of spreading the message and getting all kinds of actors onto it- seller apps, buyer apps, delivery apps. So I think it's a good thing. But as I said, things sometimes take time.

FASTag is a good example, FASTag is the tag on which you pay the toll was conceived in 2010. It took many years for it to roll out. Today we are finding that apart from the fact that it's used in 1,365 toll booths, it's also used for parking charges. They're going to be now hundreds of places and startups are now using it for parking and there are many other use cases.

So sometimes these things take long, but I think in this case, it's far more systematic. The awareness is very high, ONDC has done a great job in spreading the message. Antler has done a great job in putting a package together for founders. So I think it's going to be much faster.

Nilekani: If you look at ONDC and the Beckn protocol, there was a famous economist called Ronald Coase who came out with the Ronald H. Coase's Law as to why do firms exist, and firms exist because you can't have everything as a transaction between two people and therefore you create firms to reduce interaction costs or costs of transactions and so on. Therefore, you ended up in the 20th century with large firms which consolidated whether it was big firms that had all the land or big organised retail and so on.

But in today's world where digital capability is democratic, everybody has a phone in their pocket and you have networks, you can actually create large firms not necessarily by creating one physical firm but by virtually unifying many small firms, which is what when we say micro to mega, that's what we mean. And I think India is naturally suited for that.

Even when you have organised retail and ecommerce, you are still going to have 80 percent of the things sold through small retailers, everyone will own two, three trucks and so on or when you come to distributed energy, you'll have thousands of vehicles on the road, all of which have an energy source and energy consumption device on the car. So what you now need is the ability to use protocols, a common language for all of them to talk to each other.

So you can take all these disparate micro actors, bring them together into a virtual hole. And that's what this does. So I think it's suited for our situation, because India doesn't have land to build a huge mall on the outskirts where people drive. That's not going to happen here. So there always will be a small guy, he will have a small shop, you can order from there, he will have it delivered to your house. It's happening today, people are ordering on WhatsApp and getting it delivered. But if you can create a better protocol for streamlining this, you will have huge amounts of value.

Sharma: We have a colleague Sushmit who I want to credit for some of the work we started doing here. I think we started to think about this late last year, actually. So it's been about 10 months, or maybe almost a year. And intellectually this is very interesting. As I mentioned earlier in my presentation, one way to look at it is, take venture risk on new ideas, a lot of them may fail. That's okay, that's our job.

This one is particularly interesting for all the reasons that were discussed, because as a protocol, Beckn is designed for dynamic location discovery and matching of resources that are dynamic. ONDC, of course, is the biggest, most visible part of it, but we think that as a protocol itself, the applications could be in so many other areas.

So that gave us a sense that this could be broader than just commerce. But within commerce, one of the nice things here is and of course, the value chain of how a dollar or rupee whatever you want to take flows from a buyer to a seller, it's not fully clear today. But the beauty of it is, this is commerce. This is transaction, this is dhandha.

So a lot of the criticisms that you sometimes see in other models outside of commerce — people are like how will you monetise, how will you scale — I think those concerns will not exist here. If we create a user experience that is working for both sides, there is tremendous value to be shared.

And then it also occurred to us, which is important to clarify, this is not about being anti-Amazon or Flipkart, that was very important to realise, this is not something which we think will kill the large incumbents. I think it's a new construct, which could also create opportunities for both large companies and small companies. So the unbundling is what we felt quite excited by. And then the next thing which is what we discussed, can we do our part to build talent density and get this started, be a small spark and then can we do it in a structured way, which is what the package that Rajiv went through.

Srivatsa: For us the way the whole infrastructure sitting underneath, the protocol layer sitting on top, and then the application layer coming, sometimes some of these don't take off. And we have fascination for Web3 also. But of course, some of the people who got into that ecosystem were not the most ethical people globally. And because of that you see the ripple effect of something negative happening when the wrong founders, get into what actually has a really strong benefit of being decentralised.

So we want to do our bit to be able to get the right set of people to be working on something here. And the revolution always starts with someone who's a luminary, who's sort of raising up their hand and building the core underlying infrastructure, as well as the protocol layer, because that's not where usually venture risk happens because there's a public private partnership that's required, but it's the really the business application layer and the talent layer, which is where someone like us can add any kind of even a small value, and that's really what we're trying to do. And we do hope that it takes off because making progress inevitable is at the end of the day, the reason why Nitin and me are doing this. And if we can do that across the ecosystem, I think that's, that'd be a phenomenal impact.

Sharma: I just want to add one thing which keeps coming up in our internal conversations, and maybe this is also for the founders. If you ask us what our assessment of the Indian ecosystem right now is, we will say that founder quality and pedigree is impressive. The quality of ideas is still incremental in most cases, and this is not a criticism, it's just a reflection.

We have compared to 10 years ago, 15 years ago, much more experienced, competent founders who have gone through cycles, but there are few disruptive, bold, massive new ideas and that's what changes the world.

We certainly feel this is, in India at least, the most impressive idea. Of course, we can think about AI in a more general sense and that is also very interesting. But this is the biggest. Another interesting angle is, as generative AI develops, can there be some interesting changes to how a seller goes online in the entire workflow? And what could happen if that comes together with ONDC?

Nilekani: I think it is about expanding the market. It's about, if you don't do these things, you will have only 5-6 percent of the people in e-commerce. But if you want the whole country to be on e-commerce, you want everyone to be ordering something in his own language, with voice instruction, from a local kirana store. If you want to reduce costs, because this will also help in reducing intimidation cost, because transactions will just flow through the system, then you need to do this, it's all about expanding.

Because if you want to create a digital economy, you have to create a digital economy for everybody. It's not about some guys buying smartphones and all. It is about everybody participating. So that's what this does. So it is going to expand the market for everyone. So everyone will benefit. But more and more people will come into the digital e-commerce world. Many transactions that are happening informally, through bilateral sort of transactions will now flow through this.

Then a very important thing is that a byproduct of that will be the digital capital it will create. So if I am a small vendor and I am on ONDC and I sell, then I have the details of what I have sold electronically because that data is there, how much money I received, then I can take that data and monetise it to get a loan. So all this formalisation of e-commerce of commerce in the country enabled with digital is going to happen. So I think it's not about A versus B, it's really about dramatically expanding the market.

Nilekani: Well, when you say population scale is how do you build digital infrastructure for 1.4 billion people that is what population scale means. Now, how do you do that? You have to do things so that you have the distribution infrastructure to reach everybody. Now, if you take Aadhaar we had 35,000 enrollment stations, we did 50 enrollments per day. So across the ecosystem of enrollment stations, we had 1.5 million enrollments a day, which is why we could get to a billion people in seven years. So that's about population scale.

Similarly, you think about UPI, today, we have 350 million people who are paying with UPI, but tomorrow with Indian language capability, voice recognition, with a feature phone, with UPI Lite, suddenly, you will go to 400- 500 million people using it.

I think also credit to the mobile industry. I think our mobile industry has always shown that if you really produce a very cheap network, whether it's voice initially or now for data, 700 million people are going to use it to see. So population scale simply means something that the entire population can get access to.

So architecturally, it has to be at scale, it has to be very low cost, it has to be very low transaction amounts, because people can't afford big amounts. It has to be sachet sized and it has to be done interoperability so everybody can participate.

Nilekani: We are already saying again, I don't want to steal Koshy’s thunder, but they already have 1,000s of transactions happening on ONDC. Namma Yatri, which has been a sleeper success is doing 80,000 transactions a day, that's non-trivial. I mean, 80,000 transactions in Bangalore, is as big as anybody else and they've done it without spending millions on marketing. It's just by word of mouth.

The auto-rickshaw driver has become the biggest salesman because he's getting the full benefit. So new market models are emerging. So I think many of the ideas here will have that kind of virality of growth because they're fundamentally so much more powerful than what exists. So I am pretty confident that it will happen fairly fast.

Srivatsa: I have a very founder view to it. When we started Urban Ladder 11 years back, we said absolutely no discounts, and the brand was built on getting the right customer into the platform and buying the furniture. Of course, today, Urban Ladder is of course a different company but I think the founders who use that, understand that something is really basic, and you need to incentivise. But outside of that, if there is at least an understanding of that there is a particular level that the buyer has reached in terms of understanding of a platform or a seller, you should generally avoid it. Because that requires a lot of money to flow in through someone.

Now kick-starting something e-commerce would have never started if Flipkart or Amazon didn't offer those discounts, you wouldn't have had, but the moment those points at the cost of someone's capital have been reached, I think you should absolutely go and do it the right way.

And today, we believe that given the last year of whatever has happened, there is a point and a seminal point in the ONDC network where you need very good solutions. You need someone to take care of great logistics service. Otherwise, if I buy something there and it's not serviced properly, then I am not going to get a great experience, then I won't come back. So I think it has gone beyond that today.

As long as I am getting the product I want, getting the service I want, and able to understand whom to buy from, that basic one-on-one buyer experience isn't the same for the seller, for me to put there, manage inventory, get right visibility, if I am able to do all of that, people will come across different categories, not just food, and grocery, which are here and now, which is how things usually start, but you can do it across fashion.

Now the innovation layer has to be built, right, whether that is voice, whether that's digitising a bunch of products in a store, a lot of those innovations will come. I do believe that there is a huge potential for it to take off without having to do all of what e-commerce had to do when it started.

Nilekani: I think one of the reasons for the rapid takeoff is the behavior change already happened. You are already used to buying online or ordering an auto or a can and also, you can just transfer that behavior change onto these platforms, or in some sense this is a second-generation way of making e-commerce happen.

Nilekani: First of all, genuinely innovative ideas, which make a difference to customers, I mean, ultimately, it's about creating value. But I think, in general, all business is a marathon, not a sprint. It's about playing for the long haul, and building great companies. So that's what I hope will happen out here.

Sharma: I think Manoj is in the audience somewhere so as most people in the audience recognised by now, the general framework for ONDC and similarly, maybe another application on BeckN will be a seller side a buyer side, seller app buyer app, and then infrastructure in between and, and what Plotch is, is we believe right now, one of the first movers, a leader in this space of creating those building blocks that those fictions shovels, node management.

So seller apps, and buyer apps will need to have nodes. Now the infrastructure is open source and it's certainly meant to be that way. But large organisations will probably still be helped by a party in the middle that helps them understand node infrastructure, node payments, and specific things like reconciliations. So that is what Plotch is doing.

So some founders here may have been an ecommerce earlier and some may not be. Some of you may have been mobility, some not but I think that's a good example of a team that has built and really understood the commerce stack for many years with Craftsvilla and now before we found them, they had taken a jump into the ONDC infrastructure. They were already building this so we are very proud and, and optimistic about them.

Sharma: Yes, it is public.

Nilekani: I think in some sense, if you look at all the DPIs, we have built, the one which is probably the most portable across the world is actually BeckN and ONDC. Because, one, it's really a market thing. It doesn't require government. Anybody can pick it up. The second thing is that it is a felt need everywhere else. Everybody wants to reorganise their resources, using this kind of infrastructure and I believe again, I know they will talk about it in the panel, but there is a lot of global interest in this architecture.

Nilekani: Absolutely. See, look at it. What are the various things? One is mobility is coming they have just launched in multiple cities so mobility is happening. Food is happening in a big way. Goods are happening, hyperlocal is happening, we have Paytm, their PIN code is there. So I think you are seeing more and more people willing to bet on this and then of course all the startups that Antler supports it is just a matter of time.