The rapidly expanding digital economy has been one of the major supporting pillars for the country in recent times. India has the world’s highest fintech adoption rate of 87% compared to the global average of 64%. Three of the world’s largest public digital platforms are from India: Aadhaar is the largest unique digital identity platform, Unified Payments Interface (UPI) is the largest digital payments ecosystem, and Co-Win is the largest vaccination platform.
This achievement has been made possible due to Aadhaar, which has enabled the growth of financial inclusion and digital payments, especially during the pandemic. The Yatra indicates that India’s low-cost, population-scale digitization has improved the ease of living for its citizens across all income categories. UPI has changed the dynamics of retail payment systems and is now being used across the country. Also, the e-commerce market in India doubled between 2017 and 2020. However, these are platform-centric models and have challenges and limitations. Therefore, it is important to expand the existing e-commerce market with the existing digital infrastructure.
The Government’s Digital India initiative, the vibrancy of the information technology sector and the urgency highlighted by the pandemic, is now an opportune time to establish and promote the expansion of digital commerce by digital enablement of a wide cross-section of businesses. The Open Network for Digital Commerce (ONDC) has the potential to bring about a disruptive change in this regard.
The idea of ONDC was conceived and discussed widely since April 2020, soon after the first wave of COVID, when ensuring essential supplies in containment zones was a challenge and the need was felt to change the current digital commerce approach Went. Scaling what works” to a new approach to “scale what works”.
ONDC is a first of its kind initiative globally, which aims to democratize digital commerce, shifting it from a platform-centric model (where buyers and sellers use the same platform or application to be digitally visible). and conduct business transactions) for an open network. It is based on open-sourced methodology, using open specifications and open network protocols, and is independent of any specific platform. ONDC is expected to digitize the entire value chain, standardize operations (such as cataloging, inventory management, order management and order fulfillment), promote the inclusion of suppliers, achieve efficiencies in logistics and add value to consumers.
The platform envisages equal opportunity partnership and is expected to make e-commerce more inclusive and accessible for consumers as they can potentially search for any seller, product or service using any compatible application/platform. thereby increasing their freedom of choice. This will enable the consumers to match the demand with the nearest available supply. This enables transactions of any denomination, thus making ONDC a truly ‘open network for democratic commerce’.
ONDC will enable small businesses to use any ONDC-compatible application instead of being governed by specific platform-focused policies. It will give small businesses multiple options to get what they need to be discoverable on the network and do business, without having to cut deep into the aggregator platform. It will also encourage easier adoption of digital mediums by those who are not currently on the digital commerce network.
It would be fair to say that India serves as a role model in the areas of both identification and payments. India has used a fintech stack in which an integrated, multi-layered set of public sector digital platforms combine to provide substantial benefits to the population by enhancing efficiency to promote financial inclusion and enhance financial stability. The framework balances consumer protection on the one hand and support for market innovation on the other. Compliance with the Information Technology Act, 2000, and the emerging Personal Data Protection Bill are the next important layers in the country’s financial technology stack, which the Advisory Council on ONDC proposes to support.
These digital platforms are also becoming an opportunity for a new type of global diplomacy. India’s identity and payment platform is being watched with interest across the globe. Recently, the Co-Win platform was offered by India to interested countries.
India’s experience in public digitization underscores the need for targeted government intervention to reduce friction and build a strong foundation for both the private and public sectors to create effective and sustainable solutions. The development of ONDC has been very relevant to Indian needs, designed to address a wide continuum of digital skills and specific local problems for a diverse society.
The initiative is uniquely Indian, as it meets the current reality of millions of small transactions, even as it provides access to technology and far-flung markets for Micro, Small and Medium Enterprises (MSMEs) both domestically and overseas. creates opportunities. Also, ONDC provides a technology platform to meet India’s aspirations of becoming a middle-income economy that is digitally savvy and wired. In conclusion, it provides an important global template for harnessing technology for a public good and on a population scale in an inclusive and equitable manner.
Nandan Nilekani and V. Ananth Nageswaran, respectively, are the Chairman and Co-Founder of Infosys and the Founder Chairman of UIDAI; and Chief Economic Adviser to the Government of India