ONDC or Open Network for Digital Commerce is a framework for digital commerce. Provided by the government as Digital Public Infrastructure, it is platform-agnostic and seeks to increase the penetration of digital commerce in the country and bring retail brick-and-mortar stores into the formal economy.
It is an ecosystem provider with a set of rules, architecture, and data models, all of which have the single motive of decentralizing and democratizing the network with multiple participants to empower both buyers and sellers while spurring competition.
As provided in the official presentation of ONDC, its goal is to increase the penetration of e-commerce in India, which is considerably lower than that of the US, China, and Indonesia along with empowering the sellers and merchants to decide their own terms and conditions in a transaction within the value chain.
Understanding ONDC- Meaning
Open Network for Digital Commerce, or ONDC is a platform-agnostic network for digital commerce. It is inspired by the ‘Beckn protocol’, which seeks to build decentralized networks and allows users to build elements in a network using its universal schema.
Under the purview of DPIIT (Department of Promotion of Industry and Internal Trade), Ministry of Commerce, ONDC was launched by the Quality Council of India as a not-for-profit company under Section 8 of the Companies Act, 2013.
Protean (formerly NSDL e-governance infrastructure) joined the network as a co-founder for its incorporation.
It functions in a plug-and-play model, and allows anybody to join the network as-
- A Buyer side Application (Buyer app)
- A Seller side Application (Seller app)
- A Gateway
- A Network Participant-Buyer node (NP-BN)
- A Network Participant-Inventory Seller Node (NP-ISN)
- A Network Participant-Marketplace Seller Node (NP-MSN)
All these together are considered Network Participants (NPs) and are guided by the ONDC Network Policy (ONP), which consists of rules NPs must follow.
While there are several businesses working as Technology Service Providers (TSPs) by providing software services to Network Participants (NPs), their relationship is the result of private agreements and TSPs are not considered Network Participants.
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How does ONDC work?
ONDC provides open and interoperable specifications for platforms. It allows both buyers and sellers to use any platform they desire for discovery and transactions without having to deal with the policies of any single platform.
The architecture designed is such that it ensures efficient price discovery across platforms.
If a company desires to be a part of the network, they can integrate their platform with the framework while adhering to the rules and stipulations of the system and they’re ready to go.
It minimizes the dependence of retailers and buyers upon any single platform and ensures that even the smallest players have the opportunity to be a part of the digital commerce ecosystem.
How orders on ONDC work
A buyer usually searches for a product/service on their app (also called ‘buyer app’).
The search query is then sent to the Gateway. It multicasts the search request from the buyer side app and sends the request to the seller apps on the network based on the preferences of the user (customer/buyer).
The user is then shown all the available options from the seller’s side according to the criteria set by them.
Once the order is placed on the buyer app, the order request is sent to the seller app through the gateway.
Once accepted, the intimation is transmitted back through the same route and is reflected in the buyer’s app.
The order is delivered through a logistics partner.
How to order food from ONDC
There are several buyer apps that allow consumers to order food through ONDC. To illustrate how the order placing would work, we shall take the example of one such buyer app- Paytm (assuming the user has the app installed in the phone and has an existing account with KYC).
Step 1: Open the Paytm application on your smartphone.
Step 2: Search ‘ONDC’ in the search bar shown in the app.
Step 3: You will be shown an icon with the text ‘ONDC-Food’.
Step 4: Select your location or click on ‘auto-detect current location’.
Step 5: Then choose the restaurant or dish of your choice.
Step 6: Once selected, add the dishes you want to order to your cart.
Step 7: Then switch to your cart and select the delivery address.
Step 8: Once the address is entered and the location pinned on the map, you will move on to the payment stage wherein you can choose your payment method.
Step 9: You can also pay for your order using your linked card, your Paytm wallet, or UPI (Unified Payments Interface).
Step 10: After successfully making the payment, you will receive your order details and real-time updates of your order in the Paytm app.
Apart from food, you can order groceries, buy clothing articles, furniture, or even agricultural products through ONDC depending upon the products or services being offered on the buyer apps.
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Open Network for Digital Commerce (ONDC) Features
There are several features of Open Network Digital Commerce (ONDC) that function as its unique characteristics-
1. Interoperability.
ONDC is an open network that is inspired by the Beckn protocol. It allows buyers, sellers, and logistics service providers to freely interact with each other without platform constraints.
2. Increases competition.
Buyers and Sellers can choose from multiple buyer apps, seller apps, and logistics service providers for each transaction, in turn increasing the competition amongst businesses.
3. Discounts and Offers.
ONDC offers discounts and incentives to participants on the network, which helps reduce the prices for end-consumers and increases the transactions on the network.
4. Pan-Network Gift Card.
It offers a pan-network gift card for corporate gifting which has a transaction limit upto INR 10,000 and can be used to buy any product available on the network.
5. Financial Services.
Users would soon be able to get personal loans, GST-based loans, insurance products, and other financial services on the network which would make it a one-stop solution for both the consumers and businesses functioning as buyers and sellers.
Which apps are available on ONDC?
There are currently 10 Buyer Apps, 35 Seller Apps, and 10 Logistics Apps live on the network, while several other apps are in the advanced stage of testing.
Some of the most popular buyer, seller, and logistics apps include:
Buyer apps
- Paytm
- Craftsvilla
- Magicpin
- Namma Yatri
- Pincode by PhonePe
- Mystore
- Meesho
Seller apps
- GOFRUGAL
- Snapdeal
- Bizom
- Growth Falcons
- eSamudaay
- SellerApp
Logistics Apps
- eKart
- Dunzo
- Delhivery
- DTDC
- ShipRocket
- Shadowfax
In which cities is ONDC available?
The network started its beta-testing in Bengaluru on 30 September, 2022.
As of 7th November 2023, it was Alpha Live in 488 cities and Beta Live in 7 cities.
The 7 cities it is Beta Live in consist of-
- Delhi (including the neighbouring cities of Noida, Faridabad, and Gurugram)
- Mumbai
- Bengaluru
- Chennai
- Meerut
- Kolkata
- Hyderabad
How does ONDC affect traditional e-commerce?
The traditional e-commerce system functioned with a single organization handling each and every process ranging from inventory management and logistics, to seller onboarding and marketing for the end-consumers.
Thus, it was platform-centric and a single entity had a say on all the terms and conditions.
With the buyers and sellers getting disassociated from a single platform, it allows buyer-side participants and seller-side participants to offer customized products to their consumers. Apart from opening new avenues for innovation, it also becomes mandatory for buyer-side participants and seller-side participants to sign agreements with several service providers to streamline the processes which were hitherto under a single platform’s ambit.
Thus, it allows new businesses to enter the value chain at minimized costs compared to earlier.
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How does ONDC affect consumers?
With the ONDC breaking apart the monopoly of single entities doing everything in-house, consumers can choose to be associated with buyer-side apps which offer better terms and conditions to them.
Possibly, there could even exist buyer-side apps in each and every niche instead of a gigantic marketplace with various types of products; thus offering better discovery of products.
As noticed recently, when the ONDC network was used in the food delivery ecosystem, it decreased the cost for consumers, offering cheaper products.
How does ONDC affect sellers?
The ONDC Network allows small sellers and retail stores better visibility and accessibility in comparison to traditional e-commerce wherein humongous warehouses with less turnaround time were given priority.
This helps in bringing the informal stores and small sellers into the formal network through digitalisation without high costs of investment.
It also aims to bring more businesses from smaller towns and rural areas under the ambit of digital commerce, thus ensuring inclusive development.
The network also allows sellers to choose a platform that gives them better offers without the worry of visibility.
Conclusion
The ONDC Network would not only provide a level-playing field for all participants but also keep a check on the centralisation of processes which may lead to monopolistic practices to the detriment of consumers.
ONDC thus fillips competition and ensures that the growth of the e-commerce industry is inclusive.
With the inclusion of financial services and cab booking on the network, it holds the potential to become the one-stop solution for both individuals and businesses.
Further, the integration of ONDC with other open networks (like OCEN) and offerings of the India Stack (like Account Aggregators) can herald a paradigm shift in the e-commerce industry with multiple linkages with other sectors of the economy which have hitherto more or less functioned in silos.
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FAQs
1. What is Beckn Protocol?
Beckon Protocol is a set of rules, specifications, and mechanisms which allow digital participants to adopt a universal schema specifically designed to minimize centralisation. It was incorporated in 2019 and has been used in several projects including Kochi Open Mobility and ONDC, among others.
2. Are buyer apps and seller apps connected with each other?
No, the buyer apps and seller apps are not connected with each other.
3. How can you join the ONDC?
You can join the ONDC Network either as a-
- A Buyer side Application (Buyer app)
- A Seller side Application (Seller app)
- A Gateway
- A Network Participant-Buyer node (NP-BN)
- A Network Participant-Inventory Seller Node (NP-ISN)
- A Network Participant-Marketplace Seller Node (NP-MSN)
To join the network as either of those, one must fill out a Network Participant Profile Form provided on ONDC’s website. Apart from that, the participant must ensure they fulfil the prerequisites mentioned for the role.
4. Is it needed for a buyer network participant to sign a legal agreement with a seller network participant?
No, buyer network participants and seller network participants do not have any legal agreement with each other. They’re only connected through the ONDC framework and have persistent legal agreements with their respective customers.
5. What’s the role of a Gateway in ONDC?
A Gateway within the ONDC framework is a technology partner that ensures that all the sellers are visible to the buyers by sending the search requests from the buyer side participants to the seller side participants.
6. Is ONDC for profit?
No, ONDC was incorporated as a not-for-profit company under Section 8 of the Companies Act, 2013 by the Quality Council of India in December 2021.
7. What is ONDC in banking?
ONDC will soon be rolling out financial services on the network which also includes banking products like unsecured personal loans and GST-based Business Loans.
8. What does ONDC do?
ONDC provides a framework for digital commerce to empower small businesses and increase competition by increasing linkages in the value chain of the e-commerce industry.
9. Is ONDC an app?
No, ONDC is not an app but a network that allows several apps like Paytm, Dunzo, eSamudaay, etc. to come together and work in synergy for transactions on the network.
