ONDC: The Future of E-Commerce in India

ONDC, or Open Network for Digital Commerce, is a government-backed initiative that aims to create an open and interoperable e-commerce ecosystem in India. This open network establishes a direct connection between buyers and sellers while eliminating intermediaries.

ONDC is not an application, an intermediary, or software, but a set of specifications designed to foster open interchange and connections between shoppers, technology platforms, and retailers1.

Why ONDC?

India has a huge potential for e-commerce, with more than 12 million sellers earning their livelihood by selling or reselling products and services. However, only 15,000 of these sellers (0.125% of the total) have enabled e-commerce2.

E‑retail has been out of reach for the majority of sellers, especially from small towns and rural areas. ONDC recognises the unique opportunity to increase e‑retail penetration from the existing 4.3% to its maximum potential in India2.

ONDC is also aligned with the vision of creating a Digital India, where technology is leveraged to empower citizens and transform the economy. India has been a world leader in demonstrating the successful adoption of digital infrastructures at the population scale, such as UPI, AADHAAR, and more.

ONDC is yet another tech-based initiative to transform the way e-commerce functions in the country by enabling e-commerce through an open protocol based on open-source specifications2,3.

How ONDC Works?

ONDC works by creating a network of participants who can interact with each other using a common protocol. The participants include:

  • Sellers: Anyone who wants to sell products or services online can join the network and list their offerings on any domain of their choice. Sellers can also access various services such as logistics, payments, credit, etc. from the network.
  • Buyers: Anyone who wants to buy products or services online can join the network and browse through a wide assortment of products across categories and domains. Buyers can also enjoy a seamless shopping experience and a unified checkout process.
  • Technology Service Providers: Anyone who provides technology solutions such as applications, platforms, tools, etc. for e-commerce can join the network and offer their products and services to the participants. Technology service providers can also benefit from the rapid adoption and scalability of their solutions.
  • Gateway: A gateway is a special participant who connects buyers and sellers on the network and facilitates the transactions. A gateway can be a buyer application, a seller application, or a third-party application that provides both buyer and seller functionalities.

The following diagram illustrates how ONDC works:

+-------------------+       +-------------------+
|                   |       |                   |
|   Buyer Network   |       |   Seller Network  |
|   Participant     |       |   Participant     |
|                   |       |                   |
+-------------------+       +-------------------+
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
+-------------------+       +-------------------+
|                   |       |                   |
|      Gateway      |       |      Gateway      |
|                   |       |                   |
+-------------------+       +-------------------+
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
        |                           |
+-------------------+       +-------------------+
|                   |       |                   |
| Technology Service|       | Technology Service|
| Provider          |       | Provider          |
|                   |       |                   |
+-------------------+       +-------------------+

What are the Benefits of ONDC?

ONDC offers various benefits to the participants, such as:

  • Inclusivity: ONDC enables anyone to sell and buy from each other online across categories and domains, regardless of their size, location, or type of business. ONDC creates an inclusive ecosystem for e-commerce that empowers small and medium enterprises, rural entrepreneurs, women entrepreneurs, artisans, and self-help groups.
  • Interoperability: ONDC allows participants to interact with each other using a common protocol that is independent of any specific platform. ONDC ensures that participants can switch between different platforms and applications without losing their data, identity, or reputation.
  • Innovation: ONDC encourages innovation and competition in the e-commerce sector by providing a level playing field for all participants. ONDC fosters the growth of startups and tech companies by facilitating scalable and cost-effective e-commerce solutions. ONDC also enables the integration of various services such as logistics, payments, credit, etc. from the network.
  • Transparency: ONDC promotes transparency and trust in the e-commerce transactions by eliminating intermediaries and ensuring direct communication between buyers and sellers. ONDC also enables the participants to access and share data and information in a secure and privacy-preserving manner.

What is the Status of ONDC?

ONDC was launched in June 2021 by the Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry. ONDC was incorporated as a Section 8 company in December 2021, with the Quality Council of India and Protean eGov Technologies Limited as founding members.

The other institutions that have invested in ONDC include BSE Investments Limited, NSE Investments Limited, Kotak Mahindra Bank Limited, Axis Bank Limited, HDFC Bank Limited, National Bank for Agriculture and Rural Development (NABARD), Bank of Baroda, CSC e-Governance Services India Limited, UCO Bank, Central Depository Services (India) Limited, Punjab National Bank, National Securities Depositories Limited (NSDL), Bank of India, IDFC First Bank Limited, Small Industries Development Bank of India (SIDBI), State Bank of India, ICICI Bank Limited, RBL IndusInd Bank, Canara bank, Federal Bank, Union Bank, Bank of Maharashtra, Indian Bank, IDBI Bank Ltd2.

ONDC is governed by a board of directors, comprising representatives from the founding members, the shareholders, the government, and independent directors. The board is advised by an advisory council, consisting of eminent personalities from various fields such as technology, finance, commerce, etc.

The advisory council members include Adil Zainulbhai, Anil Agrawal, Anjali Bansal, Anurag Jain, Arvind Gupta, Dilip Asbe, Jaxay Shah, Kumar Rajgopalan, Nandan M. Nilekani, Praveen Khandelwal, R S Sharma, Sanjiv, and Suresh Sethi2.

ONDC is currently in the process of developing and testing the specifications and protocols for the open network. ONDC has also initiated the national roll-out plan, which involves the following steps:

  • Domain Selection: ONDC has identified 10 domains that are live on the network, such as food and beverage, grocery, fashion and footwear, home and kitchen, electronics, beauty and personal care, mobility, financial services, services, and education. ONDC plans to add more domains in the future, based on the demand and feasibility.
  • City Selection: ONDC has selected 543 cities across India, where the network will be operational. ONDC has categorized the cities into four tiers, based on the population and e-commerce potential. The city selection is done in consultation with the stakeholders, such as sellers, buyers, tech companies, etc.
  • Network Participant Selection: ONDC has invited applications from various entities who want to join the network as participants. ONDC has defined the eligibility criteria and the roles and responsibilities for each type of participant. ONDC has also developed a self-assessment tool for the applicants to evaluate their readiness and suitability for the network.
  • Network Participant Onboarding: ONDC has developed a standard process for onboarding the selected network participants. The process involves the following steps:
    • Registration: The network participants have to register on the ONDC portal and provide their basic details, such as name, contact, domain, role, etc.
    • Verification: The network participants have to verify their identity and credentials, such as PAN, GST, bank account, etc. ONDC has partnered with various agencies, such as UIDAI, GSTN, NPCI, etc. to facilitate the verification process.
    • Certification: The network participants have to undergo a certification process, where they have to demonstrate their compliance with the ONDC specifications and protocols. ONDC has developed a certification tool, which tests the network participants on various parameters, such as functionality, performance, security, etc.
    • Activation: The network participants have to activate their accounts on the ONDC network and start interacting with other participants. ONDC has developed a dashboard, which provides the network participants with various features, such as profile management, transaction management, data management, etc.

How to Join ONDC?

If you are interested in joining ONDC as a network participant, you can visit the official website of ONDC (4) and follow the steps below:

  • Step 1: Click on the “How to Join” button on the homepage and select your role (seller, buyer, tech company, or gateway).
  • Step 2: Read the eligibility criteria and the roles and responsibilities for your role and check if you meet the requirements.
  • Step 3: Fill the application form and provide your details, such as name, contact, domain, role, etc.
  • Step 4: Submit your application and wait for the verification process. You will receive an email confirmation once your application is verified.
  • Step 5: Download the certification tool from the ONDC portal and install it on your device. Follow the instructions and complete the certification process. You will receive a certificate of compliance once you pass the certification test.
  • Step 6: Log in to your account on the ONDC network and activate your profile. You can now start interacting with other network participants and enjoy the benefits of ONDC.

Conclusion

ONDC is a revolutionary initiative that aims to democratize e-commerce in India by creating an open and interoperable network of participants. ONDC enables anyone to sell and buy from each other online across categories and domains, without any intermediaries.

ONDC also fosters innovation and competition in the e-commerce sector by providing a level playing field for all participants. ONDC is expected to boost the growth and development of the e-commerce industry and contribute to the vision of Digital India.

If you want to learn more about ONDC, you can visit the official website (https://ondc.org/) or follow the social media handles of ONDC (https://twitter.com/ONDC_Official).

: https://ondc.in/ : https://ondc.in/wp-content/uploads/2021/12/ONDC-Whitepaper.pdf : https://twitter.com/ondc_in : https://www.livemint.com/news/india/ondc-to-be-a-game-changer-for-e-commerce-in-india-11639603879517.html : https://www.financialexpress.com/industry/sme/ondc-explained-how-govts-new-e-commerce-initiative-will-impact-online-sellers-buyers-platforms/2379510/

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