Digital commerce is at the cusp of a total transformation and this is being looked at by people in India, as well as across the world. If you really look at the way the internet has evolved and has reached this much level of sophistication across the world, its very nature and structure pose some challenges for the future. And this is something that is explained and experienced not just in India, but in different countries and economies, that are trying to address this in a different fashion. For instance, in China, there is a very serious concern about market concentration so they are going to exert more control in digital commerce whereas European Union has recently announced a public document, which looks at digital market access regulation that again talks in detail about the same set of challenges.

In India, the government has decided to take a different approach to digital commerce. Instead of a regulatory or a legal mandate, it is looking at a way of using technology and the marketplace with enabling policies. It believes that is a more fair and liberal and transparent mechanism, which ensures participation center and a broad cross-section of the industry stream.

In this context, T Koshy, MD, and CEO, ONDC talked about how the brand is helping to revolutionize the future of digital commerce at IReC 2022. 

Challenges that Lies Ahead

There are two challenges that have been documented in this space.

It is a challenge of contestability and the possibility of not-so-healthy or transparent business practices. So what is this issue of contestability? The very nature of digital commerce today, which is if you look around the world, you see a high amount of market concentration among few players. If you look at a global scenario, four Chinese companies together hold about 42 percent of the total digital commerce, and this is a kind of situation everywhere, not just in India. So it is not because of any kind of practices by any of these entities, but the very nature of the way the industry has progressed of a platform-centric approach, which uses proprietary technology to provide end-to-end services from seller interface to buyer interface. It is giving economies of scale and innovation but because they are structured in a way of proprietary technologies, it leads to the network effect. And it means that it'll lead to concentration and it'll restrict competition and innovation outside of this small club.

"And that is what we are trying to address. We demonstrated confidence in the financial payment system, and we did similar kinds of things in UPI. And now we are attempting a more complex situation of digital commerce. This transformation is about unbundling and interoperability. Unbundling means the building blocks of commerce, whether it is servicing of the sellers, whether it is logistics, whether it is warehousing, or buyer onboarding, everything can be unbundled and can be managed by special agencies, but when you unbundle, it is given to special agencies. There's a challenge to seamless commerce. So that is where interoperability becomes a critical element. So the interoperability and unbundling together provide a humongous amount of opportunities for specialization and innovation without compromising on the consumer experience," Koshy stated.

How is ONDC Helping?

Currently, there are many entities in our country that are providing consumer service in some field or the other, which has nothing to do with e-commerce like bankers, FinTech companies, and telcos. Bankers, FinTech, and many more companies have similar consumers, but if they all want to offer more products and services to the consumers, they have a challenge because they need to find out people who could provide similar products and services, and they are not there available in the open market. They're captive to certain platforms.

But now, the open protocol offered by ONDC makes it different. For instance, if a telco decides to provide commerce, they need to give frontend commerce to their clients and make that frontend ONDC protocol compliant, which means that these buyers are now available in the open network and that buyers will be able to interface with any sellers who are there.

Similarly, imagine a specialized or general platform that has the capability to service a segment of sellers, maybe small and medium enterprises or the people who provide artifacts or any smart enterprises who will be able to provide very specialized services to manage the business, including making their catalogs visible digitally, but if they make it visible digitally today, they have a limited people to look at it. And to make more people look at it is going to be a very expensive affair. But with ONDC protocol, if they make this catalog visible using compliant ONDC protocol, they are now visible to all the buyers.

"So now what we have is a common pool of buyers and the common pool of sellers and the seller platform, looking at the interest of the sellers to make sure that they are able to service their clients and establish their credibility, to be attractive to the buyer population. And the buyer agencies are going to look at and find out a very smart way of helping them to make the right buy, whether it is using AI or ML, or trying to find out patterns and trends, etc, and telling them this is a way I can help you to make the right buying decision and continuously innovate in doing that to attract people to them," Koshy asserted.

What's the Target for ONDC?

ONDC is not a centralized platform, which is launched by an entity, it's not like launching a banking system or a stock exchange or an e-commerce platform, it's enabling the network. That means multiple entities coming together and integrating. "So, we believe that our biggest responsibility is to evangelize this idea to a broad cross-section of entrepreneurs and enterprises to feel comfortable joining this network. We want to experience a challenge on the field because this cannot be seen tested on the ground, or in the labs. So that is giving us a way to document a playbook to help a lot of people. And on the other side, it also gives a lot of confidence to multiple enterprises and industries that this will work," he further said.

"We are enabling and establishing a protocol for multiple platforms to come together and interact within a common language. If you look at the e-commerce penetration, it is nothing but less than 10 percent. If we plan to go to 40-50 percent, it's possible only if we have a solution that matches the buyer-seller combination of diverse kinds," Koshy concluded.