ONDC Paving Way For Digital Payment Revolution

SUMMARY

According to DPIIT, ONDC aspires to capture 25% of India’s digital commerce market by 2025

ONDC is able to support many payment methods, including the Unified Payment Interface (UPI), wallets, as well as card-based transactions

According to Deloitte, the adoption of ONDC could unlock new revenue streams, with financial services expecting a 30% growth in digital ransaction volumes over the next five years.

India’s digital ecosystem is going through a dynamic shift with the introduction of the Open Network for Digital Commerce (ONDC). This seminal initiative that is led by the Indian government seeks to liberalise the digital ecosystem and open a field for businesses across the country. ONDC is expected to redefine the payment landscape, by allowing seamless transactions across multiple ecommerce platforms.

According to the Department for Promotion of Industry and Internal Trade (DPIIT), ONDC aspires to capture 25% of India’s digital commerce market by 2025, highlighting a notable milestone in India’s journey towards a more digital economy. As the dependency of digital payments have become an integral part of India’s economy, ONDC has appeared to be an agitator for change, promising advanced interoperability, reduced costs and greater innovation.

The ONDC Model: A Paradigm Shift In Digital Commerce

From a holistic point of view, ONDC allows users to transact across several ecommerce platforms without being restricted to one particular ecosystem. A decentralised approach like this, eliminates the monopoly of dominant players and opens the market to over 300 Mn buyers and sellers, showcasing healthy competition and providing more opportunities for small businesses.

The suggestions for the payment industry are profound. ONDC is able to support many payment methods, including the Unified Payment Interface (UPI), wallets, as well as card-based transactions. Considering UPI’s recent performance – more than 10 Bn transactions were recorded in August 2024 itself – this integration with ONDC is expected to amplify the adoption of digital payments. This not only makes the transaction easier, but also provides users with a flexible and inclusive payment experience.

ONDC’s Transformative Impact On Digital Payments

Enhanced Payment Integration

The major advantage of ONDC is its ability to combine payments across diverse platforms, making digital payments more accessible and reliable while creating a consistent user experience.
Successful integrations include ONDC’s collaboration with UPI, enabling seamless peer-to-peer and merchant transactions.
According to a PwC report, the adoption of ONDC has led to a 30-40% reduction in transaction costs for merchants compared to traditional platforms. Popular digital wallets have also collaborated with ONDC, enabling users to access the network’s services through their wallet apps.

This integration enhances user experience by combining the convenience of digital wallets with the diverse marketplace of ONDC, promoting financial inclusion and simplifying digital commerce. This significant saving is attributed to the open framework and competitive pricing encouraged by the decentralised ecosystem. Such integrations are not just transforming the payment landscape but are also providing a road-map for cost-efficient and scalable digital commerce solutions.

Improved Consumer And Merchant Experiences

ONDC’s open framework fosters cost efficiency and innovation. According to Bain & Company, merchants using Buy Now Pay Later (BNPL) services integrated with ONDC saw a 57% increase in basket conversion rates and a 38% rise in customer loyalty, driven by flexible repayment options and enhanced purchasing power.

Similarly, a Zensar Technologies report highlights a 20% reduction in transaction processing costs for Tier II city merchants leveraging ONDC’s streamlined payment systems. Mastercard further notes that 46% of shoppers prefer BNPL for budget management, especially among younger, tech-savy consumers.

These innovations reduce costs, expand market reach, and enhance experiences for both merchants and consumers.

Scalability for Digital Payments

ONDC is addressing rural adoption challenges through targeted pilots and partnerships. For instance, its collaboration with NABARD aims to integrate agri businesses into the network by leveraging existing ecommerce tools and localised solutions.

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A pilot in Bengaluru demonstrated increased merchant participation, showing that localised efforts significantly enhance adoption rates.

Revenue growth projections for payment providers leveraging ONDC are promising. According to Deloitte, the adoption of ONDC could unlock new revenue streams, with financial services expecting a 30% growth in digital transaction volumes over the next five years.

This expansion not only scales digital commerce but also accelerates financial inclusion in underserved regions.

ONDC: A Collaborative Approach to Innovation

ONDC has forged impactful partnerships with key players in the banking and fintech sectors, driving financial inclusion and technological innovation. Collaborations with institutions like HDFC Bank, IDFC First Bank, and Karnataka Bank have enabled the provision of GST-based invoice loans and unsecured personal loans to small merchants, enhancing credit access in underserved regions.

Fintech firms such as DMI Finance and Aditya Birla Finance have utilized ONDC’s open platform to develop innovative lending solutions, including algorithmic loan sanctioning and micro-loans tailored for rural markets.

For example, through its integration with Account Aggregators (AA), ONDC allows lenders to access comprehensive borrower economic profiles, facilitating faster and more reliable credit assessments. These partnerships not only streamline digital lending but also foster the creation of customised financial products that address the unique needs of diverse customer segments.

Such collaborations highlight ONDC’s role as a catalyst for fintech innovation, enabling the creation of cutting-edge solutions while expanding financial services across India.

Why ONDC Matters for the Payment Industry?

By allowing easy access to digital payments, the network reduces the dependency and dominance of traditional ecommerce platforms and introduces a competitive landscape that benefits both, consumers and businesses alike. For several payment providers, ONDC is seen to be an opportunity to scale their operations, introduce effective solutions and expand into new markets.

As this platform scales, it will support other technologies such as tokenization, contactless payments and cloud-based solutions.

The rise of UPI is seen to be a blueprint for ONDC’s potential in the payment ecosystem. Post the pandemic, UPI has become the backbone of India’s digital payment ecosystem, being able to process billions of transactions monthly.

The integration of ONDC with UPI and other payment channels is expected to catalyse this success on a wider scale, highlighting what digital payments can actually achieve.

Looking Ahead: The Future Of Payments In India

With India’s digital economy growing rapidly, the role of ONDC in carving the payment industry cannot be exaggerated. By allowing seamless, interoperable transactions, the platform addresses the major challenges of accessibility, affordability and innovation in a heavily populated country like India.

The future of payments is digital, with the Indian market expected to reach $1 Tn by 2030. The message should be clear for businesses, financial institutions, and consumers; that ONDC is not just a network, it’s the layer of a new era in digital commerce.