ONDC likely to start levying small user charges on each transaction

The government-backed Open Network for Digital Commerce (ONDC) is likely to start levying user charges in the current financial year. Though the quantum of the charges has not been decided, it is likely to be small and levied on each transaction.

The charges may have to be paid by either the seller, or the buyer, or both.

“We will evaluate the network growth and decide the right time. We have not decided how to structure it,” T Koshy, ONDC’s Managing Director and CEO told Business Standard in an interview.

An initiative of the Union government’s Department for Promotion of Industry and Internal Trade, ONDC is a non-profit company. It is an open network to facilitate exchange of goods and services through an electronic network, creating more visibility for products and services, increasing revenues for the sellers, and multiplying options for the buyers. Buyers and sellers transact irrespective of the application they use.

Its goals are also to onboard small, local sellers who have never been on a digital platform.

As of now, ONDC has no revenue model. But its costs are low, because it is just the network provider.  

“We are a Section 8 company, performing the role of a digital infrastructure provider. There is no central system or a platform that we need to maintain. Thirdly, demand generation is a collaborative effort among the buyer app, seller app, sellers and ONDC. All these keep our cost to be minimalistic,” Koshy said.

Like the Unified Payments Interface, or UPI, ONDC is similar to a utility. But even utilities have a cost, as does UPI. And someone has to bear that cost.

The reason why ONDC would consider user charges is only to meet the costs and it will evaluate when the market might be ready for these charges.

The network is already fully operational across India, with the digital infrastructure completed and rolled out to businesses and the public at large. More than 500,000 sellers have been onboarded, of which more than 70 per cent are small or medium-sized sellers.

In May, ONDC facilitated around 9 million transactions, up sharply from 1.5 million in May 2023. Last month, ONDC said as many as 125 startups, high-growth businesses, and unicorns such as Zerodha, EaseMyTrip, and Cars24 had shown preliminary commitment to onboard the network.

The journey

Beginning: Incorporated in December 2021 as a non-profit company

Founding members: Quality Council of India and Protean eGov Technologies

Early investors: Top public and private sector banks, among them SBI, PNB, HDFC Bank, BoB, ICICI Bank

Investors: 28

Sellers: Over 500,000; 70% of them SMEs

Transactions: 9 million in May 2024, up from 1.5 million in May 2023

Goal: Creating more visibility for products and services