As companies from Google to Paytm partner with ONDC, can it become the next UPI?

The vast opportunity being offered by the government-backed e-commerce platform has found early adopters in FMCG giant HUL and makers of audio wearables Boat

By Fazal Rahim Forbes India Staff

Published: Dec 5, 2023 01:26:44 PM IST

Updated: Dec 5, 2023 01:30:41 PM IST

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ONDC is developing a vast digital infrastructure to develop a comprehensive platform that is easy to navigate. Image: Shutterstock

From Aadhar to UPI, India’s digital transformation journey has come a long way in a very short period of time. When UPI was launched in 2016, there were doubts about its feasibility and whether the Indian masses were ready for digital payments. But today, UPI has penetrated deep into the masses, with over 11.24 billion transactions, worth Rs 17.4 lakh crore, this November.

Building on the success stories of Aadhar and UPI, is the Open Network for Digital Commerce (ONDC), an initiative of the Department for Promotion of Industry and Internal Trade of the Ministry of Commerce and Industry. It is built to be a facilitator rather than an operator, with minimalistic governance. Its vision is to bring big e-commerce players to small entrepreneurs and MSMEs on a single platform.

An event to launch the ‘Build for Bharat’ initiative by the Open Network for Digital Commerce (ONDC), on December 4 in New Delhi, saw industry leaders such as Bikram Singh Bedi, managing director of Google Cloud India, Suresh Sethi, MD and CEO, Protean eGov Technologies, Vijay Shekhar Sharma, founder of Paytm, and Aman Gupta, co-founder of Boat, speak on the prospects of ONDC. The inaugurating speech at the event was delivered by T Koshy, MD and CEO, ONDC. Build for Bharat intends to tap into India’s technological and entrepreneurial potential, and expects more than 200,000 startups, companies and colleges to participate.

Speaking at the event, the people behind ONDC said they believe the platform’s potential to be similar to UPI’s in democratising and decentralising the e-commerce space in India. “The idea is not about cornering any company; it is about collaboration and participation. Collectively, we will be able to change the way business takes place, whether it is in the supply chain of B2C, B2B, logistics or warehousing,” said Koshy.

He said that the thought behind the platform is to provide a level playing field for all big and small businesses. The platform aims to bring not just the big e-commerce companies of different sectors onto a single platform but also to empower small manufacturers and entrepreneurs who cannot compete with large manufacturers and e-commerce companies.

Koshy said he is in talks with a few leading consumer companies planning to be a part of ONDC. Earlier this year, after a pilot project, Hindustan Unilever Limited onboarded ONDC on a large scale, with a target to help 1.3 million kirana owners in India. Many big e-commerce players, like Amazon and Flipkart, have maintained their distance from ONDC. Koshy hopes that all the big players will eventually join the platform as it gains momentum among the masses.

ONDC is developing a vast digital infrastructure to develop a comprehensive platform that is easy to navigate. It has partnered with Google Cloud, which developed an open-source accelerator for ONDC to integrate buyers and sellers on the platform earlier this year. Google Cloud has employed generative artificial intelligence (AI) technology to ease cataloguing for small sellers.

Bedi, of Google Cloud India, said, “Google Cloud is committed to empowering India's entrepreneurial energy and technical capabilities. What we are building here collaboratively, the entire ecosystem, is really making sure that digitisation and commerce in India are now fulfilling their potential in the true sense.” Google Cloud is part of ONDC’s Build for Bharat initiative, and will provide access to its technology and generative AI to promising startups. It will also provide Google Cloud credits of up to $100,000 to eligible startups.

Also read: ONDC is India's next big bet after UPI

Different sectors, such as FMCG, last-mile delivery companies, and payment companies, are seeing a lot of space and opportunities for them to grow in the ONDC network. Paytm has been involved with ONDC since its inception. “As Paytm, we will bring a minimum of 10 million merchants on the ONDC platform, and I believe there is a need and an opportunity for it,” said Sharma of Paytm. He said it is going to create a whole industry built for ONDC and built on ONDC. “The involvement of Paytm in ONDC since its early stages reflects our aspirations to become the platform's leading payment partner, which has the potential to become the leading e-commerce player in the country… For the first two to three years, all the partners have to remember that you are not just building for your customers; you are also building for the network.”

Boat, the makers of audio wearables, has also joined ONDC with hopes of dominating the emerging e-commerce space. Talking about the company’s adoption of e-commerce and UPI in the early phase, company CEO Gupta said he does not want to miss the opportunity like his competitors did when e-commerce arrived in India. “I have full faith that ONDC might be the next UPI. And if that happens, we should not be the losers,” he said.

Delivery companies too are joining ONDC, which sees an opportunity to fulfil last-mile delivery requirements. Sethi of Protean eGov Technologies, said, “We are seeing a whole thrust now being put on distribution companies to enable the last-mile network. This is not just unbundling the network; it will start a new industry that can enable and innovate, and they will get the power of collective resources to succeed.”

ONDC is still in its early phase and has many challenges to overcome to succeed in the e-commerce space. One big challenge will be to create a sense of trust among sellers and buyers. “We need to create an atmosphere on the platform where somebody is ensuring that transactions will go through, for the seller to get the money and for the buyer to get the goods,” said Sethi.