ONDC: India's Ecommerce Platform

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What is ONDC?

ONDC (Open Network for Digital Commerce) is an initiative by Indian government to increase penetration of ecommerce by increasing participation of various stakeholders in the ecosystem. This aims to bring a level playing field in ecommerce for everyone so that even the smallest player can benefit from ecommerce in a fair way. ONDC is expected to have similar success as UPI in India. Already more 200 entities have already joined the ONDC platform.

Four Pillars of ONDC

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ONDC has four primary pillars on which it runs:

1. ONDC Buyer App - eg. Paytm Mall

2. ONDC Seller App - eg. any local grocery store

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3. Gateway - which routes requests between buyer and seller app

4. Registry - a lookup database where buyer and seller register

As an ecommerce business owner, you can play role on both seller and buyer app sides. Registry is managed by ONDC currently. Also becoming a Gateway has some restrictions.

Rich Ecommerce Spec:

ONDC is a rich set of ecommerce transaction spec which encompasses following:

1. Discovery of products from remotest corner of the country

2. Enabling ecommerce demand generation from the biggest consumer platforms in India

3. Connecting logistics enablers with the buyer and supply platforms

4. Facilitating settlement specs between trading parties

5. Enabling a better credit mechanism for the SMEs in ecommerce

ONDC's Impact on Ecommerce

ONDC is going to have profound impact on ecommerce in India. Here are some pointers in that direction:

1. ONDC aims to democratize and decentralize ecommerce. So everyone can define their own policies and everyone can be part of it.

2. Some of the biggest names in ecommerce and even some who are not in ecommerce currently are thinking of becoming part of it. These may include Flipkart, Google, Airtel etc. This means demand generation will take next leap.

3. Since ONDC is open to everyone, a small seller or a neighborhood grocery store can also participate in it. This means supply generation will take next leap.

4. Each seller and buyer participant will have a central reputation ledger which is going to be accessible to everyone and will be transparent. This means quality of commerce will take next leap.

5. UPI will be inherently be part of the ecommerce in ONDC. This means payment experience and UPI will take next leap.

Payment Settlement

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One of the most critical pieces of ONDC is settlement between buyer and seller app. Lets see how is ONDC proposing it:

1. Either of the buyer or seller app can collect payment from customer. If seller app is collecting payment, they need to share UPI or PG link to the buyer app through API

2. Both buyer and seller app have to agree who will collect before creating an order otherwise the order will fail

3. Whoever collects the payment has to share a reference Tx id of the payment to the other party as "Proof of Payment"

4. Settlement window (when to pay other party) is pre-agreed along with settlement trigger like payment is after delivery or before

5. A refund pool can be maintained by either party to manage customer refunds and this withholding amount is also pre-agreed which goes to the pool

ONDC has buyer app, seller app and logistics app as part of their ecosystem. Currently the settlement between buyer and seller is envisaged to be done offline (non-ONDC).

The settlement above can be automated easily if a payment app is also under the ambit of ONDC. It is quite possible UPI will play a big role in this given NPCI is also part of ONDC. Let's see how this unfolds.

Digital commerce in India is going through a transformation led by ONDC. It's exciting time ahead for everyone in ecommerce. Keep yourself tuned here.