SUMMARY
The report noted that UPI was an entirely digital process, while in ONDC only buyer-seller matchmaking happens online, increasing the chance of a dispute
ONDC also has many subjective variables such as reliability of seller and quality of products, something which UPI didn’t have to deal with: Report
The report added that ONDC’s value proposition should be strong enough for customers to consider to switch
According to a recent report by equity research firm Jefferies, the Open Network for Digital Commerce (ONDC) is facing implementation challenges. The report added that compared to ONDC, Unified Payments Interface (UPI) faced far simpler issues during its implementation across the country.
The report noted that the primary function of the UPI ecosystem, which concerns itself with financial data, was to enable a secure transfer of financial data between stakeholders including banks and customers. However, there is no such direct transfer of goods and services in ONDC, which is related to the transfer of goods and services.
Further, ONDC has many subjective variables that UPI didn’t. For example, ONDC has to look for the quality of a product, the reliability of the seller and the buyer, the delivery speed, and so on.
Also, UPI did not include any interaction with the physical world as the entire workflow for UPI was completely digital, something that is not the case with ONDC. In ONDC, only the buyer-seller matchmaking happens online, while the rest of the workflow is offline, increasing the chances of a dispute.
The report noted, “The incremental convenience that UPI offered was a compelling reason for adoption. That may not be the case with ONDC. The current service levels by Amazon/Flipkart are satisfactory for most users, to say the least… ONDC’s value proposition should be strong enough for customers to switch.”
That being said, ONDC itself does not think it is out to challenge Amazon and Flipkart.
Talking with Inc42, ONDC CBO Shireesh Joshi said, “We are not here to challenge Flipkart, Amazon. We are essentially ecommerce enablers helping the small retailers leverage the digitisation of commerce through our network.”
According to Joshi, India’s ecommerce penetration stands at around 4-5% and as such, ONDC will work to bring millions of retailers online and increase the same.
He added that as the ecommerce penetration in India increases, the bigger players such as Flipkart and Amazon will be the ones that benefit the most.
“The goal is to take the 4-5% ecommerce penetration to population scale. Nothing is designed for altering the marketing shares of the existing 4-5%. Ecommerce majors also stand to benefit from being part of ONDC and have business risk if they stay out of it,” said Joshi.
Joshi added that the network is already in talks with 200 companies to onboard them on the network.
Launched in April 2022, ONDC is a government-backed initiative, looking to tap into India’s ecommerce market. According to an Inc42 report, India’s ecommerce market opportunity will stand at $400 Bn by 2030.
The initiative, running on a pilot basis in five cities, has been expanded to 13 other Indian cities and is expected to cover 100 cities by the end of 2022.
