ONDC: What Is Its Significance For Indian eCommerce?

Updated: June 8

The Indian eCommerce industry is one of the biggest in the world. The country’s online retail market stands at $38 billion and is expected to grow to $200 billion by 2026. But India’s eCommerce ecosystem still has many challenges, especially in terms of making payments. Complex payment gateways and limited payment methods are common problems for shoppers and sellers. However, the new Open Network for Digital Commerce (ONDC) could change that.

ONDC - A New Approach

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What is ONDC?

ONDC is a network for digital commerce in India. It’s built on the National Payments Corporation of India’s (NPCI) payment systems, and it will enable online retailers to accept payments from customers using their debit and credit cards. ONDC is open source, which means that the software behind it can be accessed by anyone who wants to build applications or services on top of it—including companies outside of India.

The ONDC is a new initiative that seeks to create an eCommerce infrastructure in India. It will affect how goods are transported, stored, and sold in India. The future of eCommerce in India rests on an ambitious project called the One Nation, One Digital Commerce Campaign (ONDC). It is a nationwide initiative that aims to digitize offline retailers across India. Led by NITI Aayog, the Advisory Board of ONDC is headed by Amitabh Kant, CEO of NITI Aayog. The Board includes key representatives from Google, Amazon, PhonePe and Walmart-owned Flipkart.

The future of eCommerce in India rests on an ambitious project called the One Nation, One Digital Commerce Campaign (ONDC). It is a nationwide initiative that aims to digitize offline retailers across India. Led by NITI Aayog, the Advisory Board of ONDC is headed by Amitabh Kant, CEO of NITI Aayog. The Board includes key representatives from Google, Amazon, PhonePe and Walmart-owned Flipkart.

Why is ONDC needed?

The ONDC is a network that will allow ecommerce players to connect directly with banks for faster and easier payment flow. It is the latest initiative by the Government of India to help solve the problem of interoperability between ecommerce companies and banks.

The UPI (Unified Payments Interface) is currently used by all major online marketplaces in India, but there isn’t any way for them to do so seamlessly as yet. With ONDC, they can integrate their payment systems with UPI and make payments directly from their mobile phones, without having to go through an intermediary such as Paytm or PhonePe or other similar services.

 A country of 1.3 billion people can’t fit into Flipkart and Amazon alone – but we all have the same internet. Your payment data must be stored securely, work everywhere and make commerce easy across all apps, websites and banks. 

How ONDC will Benefit India?

  • ONDC will bring together industry leaders & policymakers to raise awareness of the benefits of doing business online in India and how e-commerce can make a difference for the nation.
  • One Nation, One Digital Commerce Campaign (ONDC) is the way forward to help Indian startups and entrepreneurs grow their businesses. By supporting them, five crore consumers and 30 crore citizens benefit from a larger market, increased scale and better products.
  • ONDC will connect thousands of sellers across India with millions of customers who are ready to buy. By working with all eCommerce players, the vision is to enable a single, seamless and secure e-commerce experience for buyers and sellers.
  • This new initiative will see the forging of an unlikely and potentially transformative partnership between India’s online retailers and all of its eCommerce startups.
  • Merchants can start accepting card payments immediately instead of waiting months for their bank-approved payment gateway integrations; 
  • ONDC is an umbrella brand for merchants, consumers and technology companies to get together and help India have a unified digital payments ecosystem.
  • Developers get access to an awesome set of tools they can use when building new features or products that integrate with eCommerce platforms like Shopify.
  • The e-commerce through Amazon and Flipkart on their websites, which are offering a wide range of products, have taken over the whole sector in terms of sales. ONDC aims to help every e-commerce seller realize their potential.
  • One Nation, One Digital Commerce Campaign will focus on creating awareness about online shopping, digital payment and other e-governance services through multiple communication channels.
  • Organizations of all stripes have vested interests in the outcome of this decision, which will promote innovation and economic growth.
  • Big businesses and small startups will both benefit from this important decision, which will spur progress and job growth in the private sector.
  • ONDC is a solution for publishers, advertisers, marketers, and consumers to get their brands out there. It offers businesses a solution for every aspect of their digital commerce ecosystem through real-time, transparent, and accurate transparency.

How Will ONDC Work?

How will ONDC work

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ONDC resides between the interfaces where buyers and sellers interact. As of now, Paytm is hosting the buyer side interface, while other players such as GoFrugal are hosting the seller side interface. If a buyer searches for an item on the Paytm app, where ONDC is live, the app will connect to the ONDC platform, and the seller interface will display the items listed by the sellers who have ONDC. 

Additionally, within the ONDC, there will be many other back-end partners, such as logistic service providers, ERP providers, ecommerce store hosting providers, etc. The ONDC Open Network for Digital Commerce will drive an open, neutral, efficient and globally applicable platform that is accessible to all consumers and merchants. The ONDC will be a network of merchants and banks. The name stands for Open Network for Digital Commerce, which is a mouthful but still makes sense.

The Open Network for Digital Commerce has a simple goal: give internet users access to a global network. It uses the same technology we’ve grown accustomed to using on Facebook, Tinder and WhatsApp — except it shows you how your money will be used.

The aim is to make it easier for consumers to order goods online and pay through their bank account or credit card. They’ll be able to check out faster, and there will be fewer steps in the process than in traditional eCommerce transactions today. This can make life much easier on both sides of the transaction: Customers don’t have to worry about typing in their personal information or waiting for checks or cashiers’ checks; sellers can accept payments more quickly than before

By offering it for  “Free” the government is putting all users, developers and companies on equal footing. The Open Network for Digital Commerce (ONDC) is launching this fall with the goal of giving internet users access to a truly global network. Once retailers have their first app or computer set up, they’ll be able to use it to sell their products directly to consumers without the need of platforms like Flipkart or Amazon.

UPI And ONDC Relation 

UPI is an India designed and developed digital platform. It employs the infrastructure of the National Payment Corporation of India (NPCI) and uses it as its backbone to enable interoperability among banks in the country. UPI is a part of the Open Network For Digital Commerce. The ONDC and UPI are similar in nature, as they both offer a common platform for facilitating digital payments. The difference lies in their function.

Where the UPI is a payment system, the ONDC is a payment network. It means that an individual who uses an online wallet or mobile wallet can make money transfers to others using his/her bank account by using this network. In contrast, with UPI, you just need to link your existing bank account with any of these apps and start sending money via them instantly.

This makes it easier for people who already have accounts with some banks but do not wish to open new ones just for transferring funds online seamlessly. Simply put, UPI is the next generation payment mechanism in India that will transform the way payments happen in India. NPCI is a non-profit company responsible for promoting retail payments.

Impact of ONDC on Small Retailers

Digital commerce is revolutionizing India’s retail industry. The use of mobile wallets and digital transactions (particularly for low-cost items and grocery delivery) is having an outsized effect on small retailers in India. Research shows that an open network for digital commerce has the potential to bring $ 35.03 billion to small retailers in India.

As a small retailer, you can now accept payments from customers anywhere in India. ONDC will enable you to accept multi-modal payments: credit cards, debit cards and digital wallets. We can now enable offline merchants to accept digital payments at scale – this means more consumers will be able to make purchases from their favorite retailers without having a bank account or even an internet connection.

What eCommerce firms can leverage ONDC?

Any ecommerce firm can avail the benefits of Open Network for Digital Commerce. However, one should note that ONDC is a payment system, not a payment gateway. Thus, all eCommerce players need to develop their own app for accepting payments via ONDC. A few apps are already available in the market like UPI for all banks (Axis Bank), BHIM UPI app from NPCI and Quickpay by ICICI bank to name a few. In future it can use QR code, phone number or tokenized UPI to make payment flow simpler.

Final Thoughts

India’s eCommerce industry will be served by its own network, the ONDC – a new payment network that will be created by the Reserve Bank of India to help in the growth of eCommerce in India. The ONDC will be the backbone of India’s eCommerce industry, serving as a platform for digital payments, commerce and transactions. It will also be a platform for digital data and content.

This means that Indian eCommerce firms can use the network to accept payments in real time across all platforms including smartphones and mobile wallets. The ONDC will help Indian eCommerce firms grow their businesses by allowing them to build new products and services while maintaining high levels of security that protect customers’ personal information.

The new network is expected to bring a whole set of new features and have a positive impact on the eCommerce industry. Hopefully, it will help solve some of the problems faced by small retailers during the COVID-19 crisis. However, we need more details about how it works and how much it will cost to use.

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Gursharan Singh

Co-founded WebSpero solutions about a decade ago. Having worked in web development- I realized the dream of transforming ideas sketched out on paper into fully functioning websites. Seeing how that affected the customers’ generation of leads and conversions, I wanted to delve deeper into the sphere of digital marketing. At Webspero Solutions, handling operations and heading the entire Digital Marketing Field – SEO, PPC, and Content are my core domains. And although we as a team have faced many challenges, we have come far learning along and excelling in this field and making a remarkable online reputation for our work. Having worked in building websites and understanding that sites are bare structures without quality content, the main focus was to branch into optimizing each website for search engines. Investing in original, quality content creation is essential to SEO success in the current search climate. Succeeding in this arena ensures the benefits of producing visitor-friendly content. Directing all our teams to zoom in on these factors has been a role that I have thoroughly enjoyed playing throughout these years.