ONDC: India's Open Network for Digital Commerce — Democratising E-Commerce

The Beckn Protocol: The Backbone of ONDC

ONDC is built upon the Beckn Protocol, an open-source, decentralised transaction protocol developed by Nandan Nilekani, Pramod Varma, and Sujith Nair. Beckn operates on a core principle: no single entity owns the data. The protocol unbundles commerce into standardised API layers — discovery, order management, payment, and post-fulfilment — allowing disparate platforms to interact without being on the same application. ONDC adds a network extension layer on top of Beckn, which includes India-specific regulatory requirements, GST compliance, know-your-customer norms, and domain taxonomies (food, mobility, financial services, etc.).

The Four-Actor Network Model

The ONDC network operates through four distinct participants, each playing a specialised role:

• Buyer Apps (Buyer Network Participants): Applications where consumers discover and place orders — e.g., Paytm, PhonePe's Pincode, Meesho. The buyer need not know which platform the seller is on.
• Seller Apps (Seller Network Participants): Applications where sellers list their products — e.g., Vikra, GoFrugal, Digiit. These can be aggregator MSNs (Market Seller Nodes) or individual seller apps.
• Gateway: The network discovery layer. When a buyer searches on Paytm, the search request is multicast through the ONDC Gateway to all relevant seller apps across the network, filtered by location, availability, and other parameters.
• Registry: The central directory of all certified network participants, ensuring only verified, ONDC-compliant apps participate — analogous to how NPCI maintains the UPI registry.

Interoperability with India Stack

ONDC's architecture deliberately builds on existing DPI components rather than creating parallel infrastructure. Payments flow through UPI (no new payment system required). Identity verification uses Aadhaar e-KYC. Seller credentials link to GST registration numbers. This "plug-in" design dramatically reduces onboarding costs and ensures ONDC inherits the trust and scale already embedded in India's DPI stack. The interoperability QR code system provides a simple digital identity for kirana stores, enabling them to be discovered across all ONDC-compatible buyer applications.

The Platform Duopoly — Structural Concentration

The fundamental problem ONDC addresses is the concentration of India's digital commerce in two foreign-owned platforms: Amazon (US) and Flipkart (Walmart, US). This concentration creates a digital sovereignty problem — consumer data, seller pricing data, and India's retail intelligence are housed in foreign corporate servers. The platforms are accused of offering preferential treatment to their own private label products, manipulating search algorithms to suppress independent sellers, and using funded discounts (cross-subsidised from investor capital) to undercut local businesses. A Competition Commission of India (CCI) investigation found evidence of anti-competitive practices by both platforms in 2021–22.

Digital Literacy Gap and Seller Onboarding Challenges

While ONDC's stated mission is to bring kirana stores online, the reality is that many small retailers face significant digital literacy barriers. Digitising product catalogues, managing GST compliance through the platform, syncing real-time inventory, and handling returns and disputes requires technological capacity that most micro-enterprises lack. As of 2025, of India's 100 million MSMEs, only around 5 million sell digitally. Technology Service Providers (TSPs) and Seller Apps are working to simplify onboarding, but the learning curve remains steep.

Consumer Trust and Urban-Concentration of Adoption

ONDC adoption remains heavily concentrated in metro cities — Delhi, Bengaluru, and Mumbai. In Tier-2 and Tier-3 cities, consumers are largely unaware that their existing buyer apps (Paytm, PhonePe) now integrate ONDC. Consumer trust is a structural challenge: unlike Amazon or Flipkart, there is no single entity consumers can approach for grievance redressal. Under ONDC's distributed model, liability for delayed delivery or damaged products is unclear — responsibility is distributed across buyer app, seller app, and logistics provider, creating confusion about who the consumer can hold accountable.

Zero-Commission Sustainability and Financial Viability

ONDC operates on a zero-commission SaaS model — it does not charge transaction fees. This is philosophically sound as a public infrastructure model but raises serious questions about financial sustainability. ONDC depends on government grants, equity from public sector banks (SBI holds 7.84%, PNB has proposed 9.5%), and network participant fees. Without a durable revenue model, long-term operational viability is uncertain. Crucially, even if ONDC charges zero commission, Seller Apps and Buyer Apps built on top can — and do — charge their own fees, potentially reintroducing the intermediation costs ONDC was designed to eliminate.

Economic Implications: MSMEs, Formalisation & Market Structure

ONDC's most direct economic implication is market access democratisation for India's 63 million MSMEs, which collectively contribute approximately 30% of GDP (around $1 trillion in annual value, per McKinsey 2026). By reducing the cost of digital market entry — eliminating platform commissions, listing fees, and algorithmic disadvantages — ONDC has the potential to add $60–80 billion to India's economy by 2030. The Deloitte-ONDC report identifies four key sectors with transformative potential: financial services (bridging the ₹20–25 lakh crore MSME credit gap), agriculture (integrating Farmer Producer Organisations into digital value chains), manufacturing (optimising procurement and logistics costs), and e-commerce retail (direct-to-consumer channels for artisans and local producers).

Social Implications: Gender, Rural Inclusion & Financial Access

ONDC's social implications are particularly significant for women-led rural enterprises. The network's integration with DAY-NRLM and the SHE-MART initiative (Union Budget 2026–27) creates a channel for Self-Help Group products to reach national markets without middlemen. Combined with ONDC's expansion into financial services — personal loans, gold loans, micro-SIPs — the network can address the structural credit exclusion that keeps rural MSMEs dependent on informal moneylenders. For rural women specifically, ONDC offers three compounding benefits: market access, financial inclusion, and data-backed creditworthiness that can unlock formal banking access over time.

Competitive Market Implications: Structural Shift in E-Commerce

If ONDC achieves critical mass, it will fundamentally alter the competitive dynamics of Indian e-commerce. Today, platforms use their data advantage — knowing what consumers buy, how often, at what price — to build moats that prevent competition. ONDC, by decentralising data, prevents any single platform from accumulating this advantage. This has two cascading effects: first, it forces Amazon and Flipkart to compete on service quality rather than data lock-in; second, it enables new entrants — hyperlocal startups, logistics innovators, agritech platforms — to build competitive services without the prohibitive cost of acquiring a seller and buyer base from scratch.

Geopolitical & Soft-Power Implications: India as DPI Exporter

ONDC represents India's most ambitious attempt to offer a third model of digital commerce — distinct from the US model (private platform capitalism) and the Chinese model (state-directed platform capitalism). Countries across Asia, Africa, and the Middle East are in active discussions with Indian institutions about adapting elements of the India Stack, including ONDC. The World Bank's DPI primer cites India as a prime example of open digital systems that lower transaction costs. If ONDC can scale and demonstrate commercial sustainability, it positions India as a norm-setter for how developing economies should architect their digital commerce infrastructure — a significant source of soft power in a multipolar world.

Foundational Policy Architecture

ONDC was established through a two-step policy process. First, the ONDC Strategy Paper (January 25, 2022) published by DPIIT articulated the vision of an open, unbundled commerce network. Second, the Public Consultation Paper (September 29, 2022) defined the roles of network participants (buyer apps, seller apps, logistics providers, technology service providers) and invited public input on governance norms. ONDC was incorporated as a Section 8 company — a legal structure that prevents profit distribution and ensures that any surplus is reinvested in the network's public interest mission. Key institutional shareholders include SBI (7.84%), with PNB proposing a 9.5% promoter stake.

Sectoral Expansion: From Retail to a Full Commerce Operating System

ONDC's design as an open protocol allows virtually unlimited sectoral expansion. Current and planned domains include: Retail (food, grocery, fashion, electronics, FMCG); Mobility (Namma Yatri, Bharat Taxi — competing with Ola/Uber on zero-commission); Financial Services (personal loans, gold loans, micro-SIPs, insurance — health, marine, motor); Agriculture (FPO integration, agritech discoverability, farm-to-consumer); Tourism & Culture (ASI monument ticketing, FICCI hospitality MoU); Health (potential integration with Unified Health Interface, Ayushman Bharat Digital Mission).

The Global Problem: Platform Capitalism and Market Concentration

The concentration of digital commerce power in a small number of technology platforms is a global challenge. Amazon, Alibaba, and a handful of other corporations collectively dominate e-commerce across North America, Europe, China, and Southeast Asia. Governments around the world are responding through two broad approaches: regulatory intervention (legislation to limit platform power) and structural alternatives (building competing open infrastructure). India has chosen the second, more radical path — and ONDC is its primary instrument.

Why India's Model is Structurally Different — and Globally Significant

As an ORF analysis notes, while Western governments have chosen the regulatory route — slow, litigation-prone, and reactive — India is exploring a globally unprecedented experiment: using technology and market architecture to address structural concentration before it fully forms. Rather than legislating against a dominant platform after it has captured the market, ONDC creates a parallel open infrastructure that makes platform dominance structurally harder to sustain. The analogy is instructive: the EU's DMA is like passing traffic laws after a highway monopoly is built; ONDC is like building public roads so no private highway can monopolise transit.

This approach has significant appeal in the Global South. Countries in Africa, Southeast Asia, and the Middle East — where platform infrastructure is still nascent — are actively studying India's model. The World Bank has highlighted India's DPI approach as a potential template for developing nations. If ONDC succeeds commercially, India could export its open-protocol architecture, creating both a diplomatic and economic advantage.

The UPI Analogy: Where It Holds and Where It Breaks Down

The comparison between ONDC and UPI is the most commonly invoked framing — and it is both illuminating and misleading. Where it holds: both are open protocols governed by a government-backed non-profit; both separate the infrastructure layer from the services layer; both aim to democratise a domain previously dominated by a small number of powerful intermediaries. Where it breaks down: a payment is a simple two-party, near-instantaneous transaction. E-commerce involves multiple parties (buyer, seller, logistics provider), time-delayed fulfilment, returns, dispute resolution, quality verification, and product discovery — orders of magnitude more complex. UPI needed one thing to succeed: banks to plug in. ONDC needs sellers, buyers, logistics providers, technology platforms, and government regulators to simultaneously align — a fundamentally harder coordination problem.