What Is ONDC? An Explainer On The New Tech Revolution of India

Digital revolutions are the essence of modernization. After the grand success of UPI (Unified Payment Interface), India is all set to welcome a novel tech revolution. And that is none other than ONDC. Sounds familiar? Never mind if it is not! Because even though this project was announced in 2020 it came into the limelight only in 2022. So what is ONDC? Why are the countrymen calling ONDC a tech revolution?

You will get to know all about it in this article!

(A) What is the ONDC India concept?

The acronym ONDC stands for “Open Network Digital Commerce” in India. The Ministry of Commerce and Industry launched it in 2021 to create an open digital commerce ecosystem in the country. It is an autonomous open network ecosystem. It will act as a catalyst by supplementing the e-commerce facilities for buyers and sellers.

You can imagine it as a network that will allow you to access famous e-commerce platforms in one place. Through it, you can access the services of popular apps like Amazon, Delhivery, Zomato, Swiggy, Nykaa, Paytm, PhonePe, etc.

(B) Aim of ONDC

The government of India created ONDC to democratize e-commerce by eliminating the need for central intermediaries like Amazon or Oyo. Do you know that delivery giants like Amazon and Flipkart hold a humongous market share i.e. over 70% of Indian e-commerce trade? Due to this, small merchants and local stores across the country face tough competition. With ONDC, local merchants will gain access to processes and technologies that e-commerce giants use. 

The main aim of Project ONDC is to establish a network-based open protocol for various e-commerce segments –

• Mobility
• Grocery & Food Orders
• Delivery
• Hotel Bookings
• Travel agencies

The prime objective of ONDC is to establish a collaboration between logistic firms and sellers. So that they can deliver the products to customers. It aims to tap millions of small businesses and MSMEs that lack technological expertise. So how is it going to work? We have explained it in the next section.

(C) Working Strategy of ONGC

Some of the key working strategies of ONDC are-

1. Standardized protocols

The ONDC is creating a set of digital standards and protocols. So that the Indian e-commerce platform can connect and transact with each other seamlessly. Also, it will help to create an interoperable digital commerce ecosystem without the need for intermediaries.

2. Developing an API gateway

The ONDC is creating an API gateway that will allow e-commerce platforms to handle multiple tasks seamlessly. Such as processing numerous concurrent API calls, traffic management, Cross-Origin Resource Sharing, etc. This gateway will act as a single entry point for all e-commerce transactions in India. Thus, it will help create a more efficient and streamlined digital commerce ecosystem.

3. Establishing standards and protocols

The ONDC is creating a set of digital standards and protocols that all e-commerce platforms in India can use to connect and transact with each other seamlessly. These standards and protocols will help create an interoperable digital commerce ecosystem, where businesses can transact with each other directly without the need for intermediaries or third-party aggregators.

4. Promoting open access

The ONDC is designed to be an open platform that is accessible to all players in the e-commerce sector, regardless of their size or market share. This will help create a more level playing field and promote competition, innovation, and growth in the sector.

(D) Companies listed on the ONDC network

There are certain companies that are already operating on the ONDC network-

(E) How to use ONDC as a user?

You need to follow the steps given below to use ONDC-

Step 1: Log in to the ONDC network

You can use ONDC via the app of the companies that are listed on the ONDC network. The names of such companies are mentioned in the above table. For instance, let’s consider “PayTM.” Open Paytm and type “ONDC” in the search bar. Then, you will see numerous options in it that range from groceries, food stores, and home decor to cleaning essentials. You can order food and essential items just like you do in Zomato/Swiggy and Flipkart/Amazon respectively.

Step 2: Collection of details

The ONDC platform collects the location of the buyer as well as the seller. While window shopping you will see a list of sellers & logistics based on your location. Out of them, you can select the one and move forward to the delivery options.

Step 3: Delivery

“Who exactly fulfills the orders placed through ONDC?” This is the most anticipated query of the folks. Well, the ONDC search results show multiple delivery options for the orders viz-

· Sellers– The produce sellers can deliver the products by themselves.

· Delivery agents– In case the seller doesn’t provide the delivery service, the delivery agents are hired to fulfill the orders placed through ONDC.

You can select either of the two mentioned above and confirm your order.

(Note: ONDC is a decentralized platform that enables peer-to-peer transactions, which means that orders placed through ONDC are not fulfilled by a central authority or intermediary. Instead, orders are fulfilled by the parties involved in the transaction. For example, if you buy a product from a seller who accepts ONDC as a form of payment, the seller will fulfill the order by delivering the product to you in exchange for ONDC tokens. If not, then you need to hire delivery agents/ delivery companies for the same.)

Step 4: Payment

This is the last step where you confirm your order by making the payment. ONDC coins are the preferred mode of payment in ONDC. What are ONDC tokens? We have described it in the next section.

(F) ONDC Tokens

The ONDC token is the primary unit of exchange in this e-commerce network. The transactions between buyers and sellers can be done only through ONDC tokens. As a user, you can use ONDC to make and receive payments, store digital assets, and participate in decentralized applications built on the ONDC blockchain.

Here are the steps to use these tokens-

Step 1: Create an ONDC wallet

To use ONDC, you need to create an ONDC wallet. You can download the wallet from the official website and follow the instructions to create a new wallet. Once you have created a wallet, you will receive a public address and a private key that you can use to access your wallet.

Step 2: Fund your wallet

After creating an ONDC wallet, you need to fund it with ONDC tokens. You can buy these tokens from cryptocurrency exchanges that support ONDC or from other users who are willing to sell their tokens.

Step 3: Use ONDC for payments

Once you have the tokens in your wallet, you can use them to make payments to other users who accept it as a form of payment. You can send the tokens to other users by entering their public addresses in your ONDC wallet and specifying the number of tokens you want to send.

Step 4: Store digital assets

this platform also allows you to store digital assets such as digital certificates, loyalty points, and other types of digital assets. You can store these digital assets in your ONDC wallet and access them whenever you need them.

(G) Features of ONDC

The ONDC initiative is being hailed as a tech revolution in India. Because it has the potential to transform the country’s e-commerce sector. It will positively impact our economy by creating a more open and interoperable digital commerce ecosystem. 

Here are some of the key features of ONGC-

1. Interoperability

It aims to create an interoperable e-commerce ecosystem in India with its e-commerce standardization. This will allow different e-commerce platforms to connect and transact with each other. Thus, it will create a single, unified digital market in India.

2. Reduced transaction costs

As you know, this project aims to eliminate intermediaries and third-party aggregators from the e-commerce value chain. Being a decentralized platform, it will fasten direct peer-to-peer transactions. It will lead to lower transaction costs for businesses and consumers alike. This could make digital commerce more accessible to a wider range of people and businesses.

3. Improved transparency and trust

ONDC is going to have strict protocols for online transactions. This could help reduce instances of fraud and misrepresentation and increase trust among buyers and sellers. It is built on blockchain-based protocol. Thus, it confers transparency, security, and immutability to the transactions on the platform.

4. Potential for job creation and economic growth

It has the potential to attract more investment, drive innovation, and spur job creation in the e-commerce segment. This could help support the growth of the digital economy in India and contribute to the country’s overall economic development.

With all these features, we can say that it is highly beneficial for us. But implementing it is not that easy. Why? You may ask. Because it is facing innumerable challenges right now. 

(H) Challenges

Planning a project and implementing a project are two different things. Because the former is fictional while the latter is reality. The implementation of ONDC is the elephant in the room. Meaning it is full of challenges and hurdles. Let’s look at some of the major challenges of it-

1. Resistance from established players

Established players in the e-commerce sector might be resistant to adopting the new standards and protocols proposed by the project. This could be because they have already invested heavily in their own proprietary systems or because they see the new system as a threat to their dominance in the market.

2. Technical challenges

Developing a common set of standards and protocols for the entire e-commerce ecosystem in India is not a cakewalk. It will require significant technical expertise and resources to ensure the scalability, reliability, and security of the system. Therefore, it is difficult to analyze whether it can integrate seamlessly with existing systems or not.

3. Lack of awareness

Many businesses, especially small and medium-sized enterprises, may not be aware of the potential benefits of this project. They may not know how to access and use the new system. Ensuring that there is sufficient awareness and education about the initiative will be crucial to its success.

4. Regulatory issues

The initiative will need to navigate various regulatory issues, including data privacy and security concerns. Also, it will need to comply with existing laws and regulations. So, promoting innovation and competition will require careful planning and execution.

5. Funding and sustainability

Developing and maintaining the ONDC system will require significant financial and human resources. Therefore, the initiative must be funded adequately to make it sustainable and successful.

Despite all these challenges, this initiative has the potential to create significant benefits for the Indian e-commerce sector. Addressing these challenges will require a collaborative effort from businesses, policymakers, and other stakeholders. But the potential benefits of the initiative make it a worthwhile endeavor.

(I) Impact of ONDC on the Indian Economy

Open Network Digital Commerce has the potential to transform the way businesses operate in India. Here are some potential impacts of this project on our economy-

1. Increased competition

Open network digital commerce platforms will allow more businesses to enter the market and compete with established players. This will create a more competitive market, which can benefit consumers by driving down prices and increasing product variety.

2. Boost in e-commerce adoption

As more businesses enter the market, more consumers will be exposed to e-commerce and online shopping. This will lead to an increase in e-commerce adoption in India, which has already been growing rapidly in recent years.

3. Empowering small and medium-sized businesses

It will allow small and medium-sized businesses to reach a wider audience and compete with larger players. This will likely result in a more diverse and vibrant business ecosystem.

4. Streamlined supply chains

Digital commerce platforms can provide real-time information on inventory levels and demand. Thus, it will allow businesses to better manage their supply chains. This can lead to more efficient operations and reduced costs.

5. Increased financial inclusion

Open network digital commerce platforms can provide access to financial services for individuals who may not have had access before. This can lead to increased financial inclusion and economic growth. You can expect higher revenue for businesses, greater choice and convenience for consumers, and overall economic growth for the country.

(J) ONDC Latest Update (24th May, 2023)

ONDC has achieved a grand one-year milestone after completing 1 year of operation. It expanded over 236 cities of India. Now, it has approximately 36,000 sellers and over 45 network participants. It has scaled its operations in more than 8 categories. According to the Ministry of Commerce, ONDC is flourishing with weekly 13K+ retail orders (avg.) and 36k+ mobility rides per day. The significant number of sellers in the ONDC platform is the evidence of its success.