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Will ONDC be the Next UPI? Exploring the Potential and Possibilities

By May 15, 2023July 19th, 2023No Comments
Will ONDC be the next UPI?

In recent weeks, there has been an incessant buzz around ONDC’s reasonable pricing. Netizens are going gaga seeing the price differences between food apps like Zomato and Swiggy against that of ONDC. What is ONDC you might ask? Simply put, it stands for Open Network for Digital Commerce backed by the Government of India. It allows different kinds of businesses to be a part of the network and sell their services to end consumers without any third-party interference. Be it restaurants, groceries, home décor, cleaning essentials, fashion, beauty, and so on, all players can come under the same network of ONDC. 

The open network for the e-commerce model was presented by DPIIT – Department of Promotion of Industry and Internal Trade, a unit of the Ministry of Commerce. In September 2022, Bengaluru was the first city chosen for the pilot project. As of January 2023, the daily transactions were 50, which has now seen a major jump to a whopping 25,000 transactions a day. The number of retail merchants on ONDC also rose to 35,000 from 800 in January of this year. ONDC has successfully expanded its footprint from 85 cities to more than 230 cities as of the first week of May. ONDC works on an open-sourced method as a network of interconnected e-marketplaces, connecting sellers, including brands, to list and sell their products directly to customers minus any middle agents. Unlike popular applications, ONDC doesn’t work as an app, but ONDC can be accessed via other apps and platforms, like Paytm, Mystore, Craftsvilla, Spice Money, Meesho, Magicpin, and Pincode. 

How does it work?

A buyer has to open the app to search for the particular product in question. The app displays nearby local stores and retailers based on the customer’s then-current location. Once the store is selected, one can explore the prices and place an order. When you order a product or service from the ONDC platform via an app like Paytm, the platform takes a small commission, and then the order is handed over to the specific business. 

Paytm’s ONDC adoption has seen immense traction among users ordering food. Typically, a user types in ONDC in the search bar of Paytm; and you see a variety of options ranging from cleaning, groceries, essentials, and furniture to the food store. In the case of ordering food from a restaurant, ONDC Food is the option to go for, and then check out the cuisine that you wish to order and place the order. Similar to other food delivery platforms, several restaurants are on the offering. It is to be noted that, since ONDC is relatively new, many restaurants/brands have yet to board the ONDC ship.

Benefits for sellers  

ONDC helps sellers and other local businesses compete with e-commerce giants such as Flipkart and Amazon. The network makes them easily discoverable online to numerous customers, resulting in increased reach. Through ONDC, both buyers and sellers don’t necessarily have to be on the same app to carry out a transaction. Furthermore, ONDC-compatible applications can be used by sellers without being governed by the specific policies of an e-commerce platform.

ONDC holds the promise of transforming the e-commerce landscape in India by creating a fair game for all players to coexist and benefit. With ONDC, consumers, sellers, and logistics service providers will have access to limitless visibility and discovery opportunities.

Additionally, as the seller’s access key to go anywhere on the network, ONDC plans on reducing the seller’s and e-commerce platform’s costs. By bridging the gap between content and commerce, ONDC can shift the advertising model from impressions to transactions to reduce customer acquisition costs. 

What is the future of ONDC?

“Democratising Digital Commerce in India” a report by Mckinsey highlights the possibility of ONDC revolutionizing the digital commerce landscape in India. ONDC can, by providing a level playing field for small & medium businesses, unlock economic value in India’s digital consumption to $340 billion by 2023, which currently stood at $65 billion in 2020.

The report states that the number of transactions carried out digitally among Indian consumers will considerably increase from 450-500 million by 2030. A virtuous cycle of growth will ensue due to the democratization of e-commerce, which will allow more businesses to participate in the digital economy. Overall, the ONDC may prove to be a game-changer for the Indian digital economy, giving consumers the authority to have more choices and better prices, and making India a global leader in digital technology.

ONDC to connect the e-commerce ecosystem

ONDC will develop the e-commerce ecosystem from an operator-driven platform-centric model to a facilitator-driven interoperable decentralised network. All consumers and sellers will be entitled to equal opportunities on the platform. With no need for large investments, barriers to sellers’ entry into digital marketplaces will be eliminated. As value creation will not be locked in large platforms, the representation of local start-ups in e-commerce could increase.

With more sellers on the digital platform, ONDC will present consumers with the freedom of choice with varied options to buy across a range of price points. Matching demand with the nearest available supply, ONDC will also enable consumers to choose their preferred local businesses. Digitising the entire value chain, ONDC would not only standardise operations but also ultimately promote local supplier inclusion, curb digital monopoly, drive logistical efficiencies, and enhance consumer value. Several participants are already on the ONDC network. What will take it to the next level is offering a seamless, instant, and convenient experience to improve conversion on the network.

In the next 5 years, ONDC plans to sign up 900 million buyers and 1.2 million sellers to generate a GMV of $48 billion. The GMV for the e-tail sector in India was $38 billion in 2020. It is projected to reach $140 billion in 2025 and $350 billion in 2030.

If it goes in the right direction, ONDC can be the next successful case study of the Indian government, akin to UPI’s success and adaptation. As ONDC extends access to customer data, businesses will be empowered to derive analytically actionable understandings for selling their products across multiple digital platforms. Eventually, ONDC could go global, following UPI’s shining example. By predicting an advanced standardisation framework for the global e-commerce ecosystem to adopt, ONDC can ensure consistency across an online store, notwithstanding the presence of a large volume of sellers (domestic or cross-border).

Authored by Richa

For more information, please reach out to the Marketing Team.