What is ONDC – Open Network for Digital Commerce was formed on December 31, 2021. However, the initial pilot phase of this program was launched on April 29, 2022. The goal behind the introduction of this platform in India is to provide scalability and accessibility to the field. of electronic commerce.
What is ONDC
Before understanding how the government will implement this and what its benefits are, let us first clearly understand what ONDC is.
Until now, digital commerce in India is governed by the platform centric model. This mean that there are different platform available online through which a seller can sell their product and a buyer can buy it by registering on the same platform.
This mean that the buyer and seller must be on the same platforms for an online deal to occur.
The idea behind ONDC is to bring e commerce to the open network model instead of the platform-centric model. This will make e-commerce accessible to all types of buyer & seller.
The idea is to bring buyers & seller from different platform closer to each other approach without either having to register on the platform where the other exists.
It will allow buyers and sellers from different platforms to connect with each other, as long as both platforms are linked to the Open Network for Digital Commerce. This is similar to the role that UPI plays in terms of transactions. UPI is an apt example of the concept that the ONDC is working on.
This is because where UPI brought together banking partner & merchants/users, through a single unified platform connected via mobile number, ONDC revolves around a similar concept that will bring together buyers, sellers, aggregators of logistics providers, payment gateway and more. on a single platform, which will make buying & selling easier for everyone in the ecosystem.
Therefore, the ONDC network allows the buyer to connect with the seller and transact to close the deal, regardless of the applications he is using to buy or sell the products.
UPI and ONDC | What’s the Difference
Often during the ideation and development of the ONDC productS, we have heard people, companies & the media place ONDC and UPI systemS side by side. While both systems are based on a similar idea, which is to link people and make things easier in the Indian marketS, they are polar opposites in terms of functionality, complexity, scale, people, segments & markets involved, and more.
For example, the UPI systems was involved in the secure transfer of finances, whose main objective was to facilitate the transfer of funds and maintain the same security between banks, merchant and customers. However, when it comes to Open Network for Digital Commerce, the concept of ONDC does not imply a direct transfer of good and services, but is related to them.
In addition, the ONDC also has a list of subjective variables, which the UPI does not. For example, ONDC has to take care of the quality of the product that are sold, incorporate vendor and stores, facilitate communication between them, overlook the reliability of both seller and buyers, take care of the speed of delivery and more.
Also, when it comes to the UPI system, nothing relied on physical interaction, which is in stark contrast to the ONDC system, where the latter relies heavily on offline steps after the matchmaking is done online.
Why is ONDC needed
Currently, if a retailer or merchant wants to take their business online, there are only two options available to them.
The first option is to create your own website. This might require some technical support. Also, this is an expensive process as it involves a lot of extra charges like website creation and management costs, logistics charges, etc.
Also, even after the website is built and functional, the seller will have to spend a lot of money on advertising for their website in order to attract buyers.
The second option is to sell the products on aggregator platforms or so-called online marketplaces. Although this system seems quite convenient compared to creating a website, it has its own problems.
The two major players in this field i.e. Amazon and Flipkart are US based companies. They keep a large part of the profits in exchange for displaying and selling their products on their platform. Also, at times, there have been brand bias complaints where these platforms are said to show favoritism towards some brands.
Tracking the growth of the ONDC
The ONDC platform is nearing completion and the pilot has already started in a selected list of Indian cities. ONDC was tested in 6 cities in India including Bengaluru, Shillong, Lucknow and Coimbatore.
ONDC has emerged as a revolutionary product that will transform the Indian market in the coming times. However, due to the complex design of the product, it has already started to face numerous implementation challenges. Compared to the UPI system, ONDC is much more difficult to design and implement.
With schemes like digital India, e-commerce is certainly the future of the Indian market. This is also made clear by the fact that the Indian e-commerce industry is expected to grow from $46.20 billion in 2020 to $200 billion in 2026. Here, the ONDC can be easily identified as an idea of the new era that has a huge market ahead.