E-retail revolution

ONDC could transform e-commerce in India

The ambitious Open Network for Digital Commerce (ONDC), which has been launched in five pilot cities, could completely transform e-commerce in India. Like the Unified Payments Interface (UPI), the ONDC is developing an open digital network with an architecture designed to let all types of e-retail apps and platforms “talk” to each other in the same way that the UPI allows every payment app to seamlessly transfer funds. The ONDC has many implications for the digital ecosystem and its data flow. While it could flatten access for buyers and sellers, there could also be concern about data management and data protection in this system. Besides, as and when the ONDC is running at scale, there would be a logical case for removing many of the current restrictions imposed on overseas groups running e-marketplaces.

At this instant, Amazon and Flipkart control well over 60 per cent market share in India’s e-retail ecosystem. However, a customer using the Amazon app cannot see products or services listed on Flipkart, and vice-versa. Nor can the Zomato app show restaurants listed on Swiggy. The ONDC would link all such platforms and, therefore, expand the choices and the ease of comparison for e-shoppers. It would make it easier for 12 million small retailers — kirana stores — and 42 million small and medium businesses to showcase their wares and, maybe, ease their logistical issues. The stated purposes of the ONDC include improving the competitiveness of new sellers and curbing the dominance of current e-market leaders. In this regard an advisory council was established in July 2021, and the ONDC has been registered as a non-profit company similar to the National Payments Corporation of India, which runs the UPI. The ONDC has published a strategy paper, which outlines the problems and challenges it will try to address and this offers some detail on architecture. However, this paper doesn’t spell out the specifics of privacy and security safeguards for data.

If the ONDC works as advertised, it would be managing huge volumes of very sensitive personal and commercial data, and data security will be absolutely crucial. The sections on data privacy are broadly worded and need urgent elaboration, especially in the context of data protection legislation, which is still pending. The strategy document says transaction data will reside only with the buyer and seller applications, and will not be visible to the ONDC itself. The ONDC will not be storing or viewing transaction data. Data policies will be “consent-based and bound by the limitation of purpose”. The ONDC will ensure the data security of transactions and safeguard the personally identifiable information of users and the “seller data critical to trade”, which will be protected from third-party access. Exactly how the ONDC ensures this level of security will be critical to the network’s credibility and, hence, the uptake of this system.

Will market leaders, which have spent billions of dollars on developing proprietary apps, smart logistics management, and cost-effective warehousing solutions, be happy to link to the ONDC, which would be voluntary? If the ONDC does achieve scale, there would also be a strong case for easing the curbs on overseas retail firms, because they prevent them from becoming multi-brand stores rather than just marketplaces. If all this works, the ONDC would indeed be revolutionary. It would not only enable small businesses access wider markets, but a higher scale of operations would also make logistics more efficient. A significant reduction in logistics costs would increase overall efficiency in the economy.