Open Network for Digital Commerce (ONDC)

May 20, 2023

In India, a network called ONDC is aiming to revolutionize the digital commerce landscape. ONDC (Open Network for Digital Commerce) employs a network-centric approach to democratize digital commerce and make it more accessible and inclusive. With its goal to transform the digital commerce ecosystem in India, ONDC is poised to break new ground.

The ONDC Network: Transforming Digital Commerce

ONDC is an interoperable network that seeks to break down silos in digital commerce.
It is based on the BeckN protocol and enables platforms of varying configurations to connect and operate seamlessly.
By moving away from a platform-centric approach, ONDC eliminates the need for buyers and sellers to use the same application, thereby promoting discoverability of local digital stores across industries.
It employs a network-centric approach, which allows for greater freedom of choice for buyers and reduces the skewed bargaining power of platforms.
With over 29,000 sellers currently live on the network, ONDC aims to make goods and services equitably accessible to all participants in the ecosystem, regardless of their size.

ONDC’s Inclusive Governance Approach

The ONDC entity is a non-profit organization established in accordance with Section 8 of the Companies Act 2013.
It is responsible for the management and operation of the ONDC Network, as well as the establishment of guidelines and standards for network participants through the ONDC Network Policy and the ONDC Network Participant Agreement.
In contrast to previous governance models, ONDC takes a more representative and multistakeholder approach to prioritize the evolving needs of its users.

Sustainable Funding Model for ONDC

Initially promoted by the Quality Council of India and Protean e-Gov Technologies Limited, the ONDC entity has raised significant funding, including investments from private and public sector banks, depositories, and other financial institutions.
Although the initial funding was acquired through the allocation of shares, ONDC has the objective of establishing a self-sufficient financial model.
One potential revenue stream could involve charging a small fee from platforms to fund ongoing and expansion-related activities independently, learning from the limitations of previous models like UPI.

Government Endorsement and User Council

The Department for Promotion of Industry and Internal Trade (DPIIT), under the Union Ministry of Commerce and Industry, has endorsed ONDC.
Though it is not involved in funding, DPIIT plays a crucial role in promoting ONDC through light-touch governmental oversight.
The board of ONDC consists of individuals representing banks, government entities, and independent members from the industry and civil society.
Additionally, a User Council comprising representatives from Network Participants and civil society will provide regular guidance on various aspects of the network’s functioning and governance.

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