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IR Smartclass: ABC of ONDC

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Shiv Joshi
Shiv Joshi
An editor with over 20 years of experience across industry verticals and content formats from tabloids to magazines, he is the Deputy Group Managing Editor at Images Group.

An explainer on ONDC, the transformative initiative from a business point of view

ONDC is gaining momentum with every passing day. In January 2023, when it was made widely available to a larger cross-section of consumers, there were about 800 merchants and it only operated in grocery and food. Today, ONDC has 2.37 lakh sellers/service providers across 510 cities operating across a spectrum of nine categories including food & beverage, grocery, fashion & footwear,  home & kitchen, electronics, beauty & personal care, mobility and financial services.

Here’s an explainer on the transformative initiative from a business point of view.

What is ONDC?

ONDC stands for Open Network for Digital Commerce. It is an open network fostering free and transparent trade between players connected to the system.

It is not an application, platform, intermediary, or software.

Who started it?

It is an initiative by the Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce, Government of India launched with the aim of democratising digital commerce in India.

ONDC was incorporated on 31 December 2021. It is a section 8 company, which means that it exists not for profit, but for furthering technology or a cause.

The initiative was launched under the leadership of Nandan Nilekani co-founder and non-executive chairman of Infosys, known as the architect of digital India. He is the man behind giving India UPI and now ONDC, which is touted as the UPI of commerce.

It is headed by T Koshy, who has held several executive positions over his expansive career where he has served as the Executive Director of the National Securities Depository Limited (NSDL) and a partner at EY.

Tell me more…

It is designed to connect all players of a local commerce ecosystem from sellers to buyers and everyone in between, fostering collaborative and secure transactions.

At its core, ONDC aims to address the challenges faced by traditional online marketplaces, such as trust issues, high transaction fees, and limited interoperability.

It seeks to help local businesses across segments, such as mobility, grocery, food order and delivery, hotel booking and travel to reach and engage more people through a network-enabled application.

Why was ONDC started?

E-commerce in the country was dominated by a handful of players and those who wanted to be a part of the online game, had to play by their rules. Every such player and platform had its own rules which restricted their reach.

ONDC seeks to change that by making even the smallest of businesses discoverable to consumers.

What is ONDC from a tech perspective?

“ONDC is a set of specifications designed to foster open interchange and connections between shoppers, technology platforms, and retailers to create an inclusive ecosystem to include all the sellers in the unorganised markets as well,” explained Vandhna Babu, Principal Analyst – Research at NASSCOM in a blog post.

Simply put, ONDC is an open-source network that harnesses the potential of blockchain technology and the Beckn protocol.

What is the Beckn protocol?

A first in the world, Beckn protocol is the backbone of ONDC. It is developed Nandan Nilekani, Pramod Varma and Sujith Nair.

Beckn Protocol (or Beckn in short) enables the creation of open, peer-to-peer decentralized networks for pan-sector economic transactions.

It can be implemented by platforms, organizations and governments to create integrated digital networks across diverse sectors of e-commerce, mobility, energy, manufacturing and more.

No matter what the nature of one’s business is, the commercial offering of the transaction is stripped down to its core elements – discovery, order booking, payment, delivery, and fulfilment. Then, by treating each of these elements as micro-transactions, Beckn allows any or all of them to be carried out by a variety of Beckn-enabled enterprises.

How can a business start selling through ONDC?

ONDC identifies four types of players: Buyer Network Participant, Seller Network Participant, Technology Service Provider and Gateway.

To start on the ONDC a company must choose which role it will play on the network. The website has detailed steps to help a company identify where it fits.

In July 2023, ONDC launched the ONDC Academy to educate all participants about the network. Through e-learning modules, those interested can get guidance on the nuances of transacting on the network and the best practices for a successful e-commerce journey with fewer setbacks.

It is free for all participants and comes with an assessment and certification powered by NSE Academy Limited.

How can consumers discover businesses?

Since ONDC is a protocol, it does not have its application or app. Consumers can download a buyer app associated with the ONDC network and search for desired products.

The buyer apps currently enabled on the network are Paytm, Mystore, Craftsvilla, Spice Money, Pincode, Magicpin, Yatri, Yatri Sathi, Namma Yatri and Yaary.

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