The objective of ONDC is to facilitate the growth of micro, small, and medium enterprises (MSMEs) and small traders by creating fresh prospects for them to thrive locally.

The ONDC comprises protocols that are constructed on open network systems.

• The objective is to ensure that MSMEs have an equal chance to participate in the digital commerce arena.
• Digital transactions' increase will lead to the disintegration of credit and supply chain.
• To maintain data security, the majority of information within the open data framework will undergo anonymization.

India's government has initiated the groundbreaking Open Network for Digital Commerce (ONDC) to revolutionize e-commerce. The interoperable network has commenced its beta testing phase in Bengaluru, catering to small-scale retailers, and will disassemble the present exclusive network of digital commerce, promoting fair competition.

The ONDC, which was initiated by the DPIIT under the Ministry of Commerce, presents a chance for all to join its network due to both business incentives and compulsion. T Koshy, the CEO of ONDC, led the EY Convene Digital Roundtable on September 27th, 2022, stating that the network's preparedness in IT and business influence will result in significant digital transformation.

‍Wider reach

By creating new opportunities for micro, small, and medium enterprises, as well as small traders, to establish a hyper-local online presence, the open network strives to combat digital monopolies. The ONDC's goal is to revolutionize ecommerce by addressing the prevalent issue of the walled garden model of platforms, which perpetuates a few large entities and domains, as well as practices that harm the broader economy. Despite the vast array of products available in India, only a fraction of them are currently accessible online.

The primary elements of the network that is managed by the community are applications for both buyers and sellers, as well as logistics providers. When describing the network in more detail, Koshy emphasized that ONDC is not a platform, but rather a set of protocols that facilitates the exchange of products and services. There is no central platform; instead, it allows various platforms to communicate with one another. Anyone with goods or services to sell can offer them on the open network, which can be accessed by any intelligent purchasing platform. It is not limited to B2C and will include B2B, which could have an even greater impact.

Currently, the dynamic between retailers and wholesalers centers around two key elements: merchandise and financial trust. This limits the retailers' potential, as they must constantly prove their creditworthiness to every wholesaler they work with. However, with the adoption of digital transactions, retailers can gain easier access to credit and expand their options for wholesalers, while wholesalers can also benefit in return.

‍Uniformity in approach

The establishment of uniformity in approach is a crucial process that the ONDC will undertake to ensure that all participants agree on interaction protocols. With approximately 12-13 entities already in the advanced stages of integration, and an additional 10-15 buyers actively engaging with the network, this step is necessary.

With the vast reach of ONDC and a large anticipated number of attendees, it is crucial to have clearly defined rules of participation.

Previously, OEMs have joined forces to oppose monopolies that offer steep discounts on popular products. ONDC's appeal lies in its wider range of products and lower intermediary costs compared to current marketplaces. Additionally, some sellers may not find the current payment conditions favorable. The introduction of ONDC may also lead to a decrease in the premiums charged by large aggregators, who benefit from their exclusive data and captive buyers or sellers. ONDC's system costs are expected to be lower due to its lack of proprietary protocols and reliance on a closed ecosystem. This cost reduction will benefit both buyers and sellers.

‍Secure interactions

As the number of participants increases, ensuring secure interactions becomes increasingly crucial. Unfortunately, in ONDC, intermediaries hold significant control over data, resulting in only a small amount of data reaching the end points.

All ONDC participants must comply with KYC regulations, and complete protocol testing is compulsory. Each network member must sign an agreement with ONDC, committing to upholding current and future policies. Non-compliance may result in penalties and suspensions.

The shift from physical to digital in the capital markets around 20 years ago saw similar scenarios play out. In the past, trading and investment activities were predominantly carried out in physical stock exchanges. However, the emergence of digital platforms enabled investors and traders to carry out their transactions online, leading to a significant transformation in the capital markets.

Just like in the current scenario with cryptocurrencies, the transition to digital capital markets created various challenges, including regulatory and compliance issues, which had to be addressed. In response, regulators had to come up with new regulations to govern digital trading activities and ensure that all players adhered to the rules.

One of the key challenges faced in the transition to digital was the creation of a robust dispute resolution mechanism. The digital nature of the transactions meant that traditional dispute resolution mechanisms could not be used. Instead, regulators had to develop online dispute resolution mechanisms that were effective in handling disputes that arise in digital transactions.

As part of the current shift towards cryptocurrencies, a similar online dispute resolution mechanism is being developed. This mechanism will be evidence-based and trackable, ensuring that disputes are resolved fairly and efficiently. This system will make compliance easier and more accessible for all parties involved in the cryptocurrency market, contributing to the overall growth and development of the industry.