ONDC reaches ~1 crore transactions per month – UPI Moment in Digital Commerce? – Industry News

By HDFC Asset Management Company Limited

ONDC (Open Network for Digital Commerce, a non-profit organization initiated by the government) crossed 99 lakh transactions in June 2024. ONDC stands for Digital Public Infrastructure (DPI), a concept that has received significant attention in the Union Budget 2024-25. A recent report by the G20 India Task Force on Digital Public Infrastructure suggested that India has achieved financialization in 9 years, which would have probably taken 50 years, thanks to DPIs like UPI, Aadhaar, etc. Adoption of ONDC can act as a market equalizer, facilitating the flow of trade in the country. Growing adoption of DPI can ensure increased productivity of land, labour and capital and bodes well for the economy.

ONDC is a digital commerce service in India. It creates an open network by separating the different parts of a digital transaction. ONDC maintains a protocol like UPI that allows different platforms to work together without having to directly connect their systems. If two platforms follow the ONDC protocol, they can interoperate with each other. All these platforms form the ONDC network. Just as UPI allows banks and payment platforms to transfer money regardless of the recipient’s system, ONDC protocol allows buyers and sellers to trade goods or services on any platform.

ONDC protocols would standardize operations. In this way, small businesses could use any ONDC-compliant applications instead of being subject to specific platform-centric policies. This would provide small businesses with multiple options to be discoverable on the network, conduct business, and encourage easy adoption.

ONDC is expected to make e-commerce more inclusive and accessible to consumers. Consumers can discover any vendor, product or service using any compatible app or platform, thereby increasing freedom of choice. ONDC will promote the inclusion of local suppliers, drive logistics efficiency and lead to increased value.

ONDC, launched in January 2022, has rapidly expanded its reach across domains like grocery, fashion, beauty and more. ONDC is currently used in 607 cities and has over 6.14 Lakh merchants and service providers on its network. Reaching 1 crore transactions in a month from 1000 in January 2023 is a significant achievement. In comparison, UPI crossed 1 crore transactions in June 2017 and today with >1000 crore transactions per month, it is the dominant mode of remittance.

According to the economic study, ONDC can boast of successes in the following areas:

The chain offers restaurants financial benefits by reducing the burden of high fees charged by aggregators. In the fourth quarter of fiscal 2024, orders grew by 18%, and the chain has more than 95,000 restaurants in 347 cities.

Grocery orders grew by 52% in Q4FY24, driven by a network of 12,585 merchants across 665 cities. Leading players like Paytm and Otipy are investing in advanced digital storefronts and QR code technology.

Around 5,700 FPOs joined the network and collectively completed over 23,000 transactions in Q4 FY2024.

It also highlighted several digitally empowered inclusive stories like empowerment of over 10 lakh women in 76 SHGs supporting rural employment, various small businesses registering high growth and Namma Yatri platform eliminating commission and improving drivers’ earnings. In the Budget last week, the Hon’ble Finance Minister announced DPI in the area of ​​agriculture which will include digital crop survey for 6 crore farmers in 400 districts. She also invited the private sector to develop digital public infrastructure in key areas of credit, e-commerce, education, health, law and justice, logistics, MSME, service delivery and urban governance. This is a follow-up to the final report of India’s G20 Task Force on Digital Public Infrastructure
Infrastructure, which suggested that DPI enables nations to accelerate economic development in an inclusive and competitive manner, leveraging cutting-edge technology, good governance and markets to achieve outcomes such as health and financial inclusion, human development, access to jobs and employment, and improved public services.

Indian public policy has witnessed the benefits of well-designed and implemented digital public infrastructures such as Aadhaar and UPI. Building on this success, the increased focus on DPI across sectors is a positive step that can deliver higher efficiency in India. ONDC, with its open architecture, has the potential to democratize digital trade, making it more accessible to a wider range of buyers and sellers. This approach not only promotes inclusiveness but also mitigates the risk of single points of failure in domestic trade. Increasing adoption of DPI can provide increased productivity of land, labor and capital and bodes well for the economy.

(Article author: HDFC Asset Management Company Limited)

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