How Open Network for Digital Commerce Will Change the Way You Transact

As per a report by Business Standard and insights from experts in the field, the new financial functionalities are expected to become available within the next few weeks.

Before we delve into the topic, first let's understand what ONDC is;

What Is ONDC?

The Open Network for Digital Commerce (ONDC) operates on an open protocol and is designed to facilitate local commerce in various sectors, including grocery & food ordering and delivery, hotel reservations, and travel, among others. It allows any network-enabled application to discover and interact with these segments.

The platform's goal is to generate fresh prospects, mitigate digital monopolies, and support micro, small, and medium enterprises and small traders in their transition to online platforms. This initiative falls under the purview of the Department for Promotion of Industry and Internal Trade (DPIIT) within the Ministry of Commerce and Industry.

The Open Network for Digital Commerce, known as ONDC, has gained popularity as a direct challenger to food delivery giants like Zomato and Swiggy, as well as e-commerce leaders such as Amazon and Flipkart.

What Are Buyer Apps And Seller Apps?

As ONDC removes entry barriers in digital commerce, enabling businesses to operate as either buyer apps or seller apps, it is crucial to grasp the roles of buyer and seller apps within the ONDC Network.

Buyer apps are applications designed to facilitate purchases within the network. These apps handle and process purchase orders.

Seller apps on ONDC are tailored for network sellers and offer services specific to sellers.

ONDC permits both buyers and sellers to connect without being tied to a single platform, resulting in several apps serving as either buyer apps or seller apps.

ONDC's Expansion to Fintech Services:

ONDC serves as an intermediary in the realm of online shopping, connecting both buyers and sellers. It operates on an open protocol, making itself available to businesses seeking to expand their reach and network through network-enabled applications.

ONDC, which has been actively engaging various participants in the financial services sector since August, is now prepared to launch financial services, such as credit, insurance, mutual fund investments, and gift cards, on its network through buyer applications that have been officially registered with the Insurance Regulatory & Development Authority of India (IRDAI), the Association of Mutual Funds in India (AMFI), and the Securities and Exchange Board of India (SEBI).

ONDC has received financial backing from industry giants such as SBI, HDFC Bank, Kotak Mahindra Bank, BSE Investments, and NSDL.

The upcoming services, scheduled to become operational in a few weeks, have received significant interest from over 65 entities looking to join the network as technology service providers and institutions wishing to offer buyer/seller applications. Additionally, more than 20 companies have initiated the integration process with the platform. Among these companies are well-known organisations such as Karnataka Bank, Tata Digital, Aditya Birla Finance, India Lends, Easy Pay, and DMI Finance.

ONDC Credit Offerings:

Regarding its credit offerings, ONDC is commencing with personal and GST-based loans for individuals and sole proprietors. The draft specifications for the associated Application Programming Interfaces (APIs) were released in early August to solicit feedback from the market.

ONDC Insurance Offerings:

In the realm of insurance, ONDC is placing a significant emphasis starting with health insurance, vehicle insurance, and marine insurance. API specifications for insurance are set to be released in the coming weeks.

ONDC Mutual Fund Offerings:

MF Utilities India is partnering with ONDC to establish connections with Asset Management Companies (AMCs), and the introduction of mutual fund offerings is expected soon.

The initial report indicates that commission-paying regular MF schemes might be the first ones available. Many online MF distribution platforms offer commission-free direct investment plans to customers.

Ganesh Ram, the Managing Director and Chief Executive Officer of MFU, mentioned, "Technology integration is currently in progress, and ONDC plans to release API specifications for MFs soon. If everything proceeds as planned, MFs could become accessible on the ONDC platform in the next few months."

ONDC Gift Card Offerings:

ONDC has already unveiled the "ONDC Network Gift Card," primarily intended for corporate gifting and employee engagement purposes. This gift card operates within the RuPay network and has a maximum loading limit of Rs 10,000. YES Bank and OmniCard are the initial issuers of this gift card, with several other banks and fintech platforms are expressing interest in becoming part of ONDC.

Before this, in April 2023, fintech unicorn Razorpay became a part of the network to optimise payment procedures for ONDC's various participants, including buyers, sellers, and logistics partners.

Furthermore, ONDC has introduced gift cards associated with over 100 brands spanning various product categories in August, with Spice Money serving as the buyer application, and Vistaar (Earnest Data Analytics Private Ltd.) as the seller application in this context.

Final words:

The Union Budget for the fiscal year 2022-23 has set the stage for India to advance further in its fintech evolution. The government is persisting in broadening its backing for the development of digital advancement in the fintech industry of the nation through recent initiatives like mutual fund investments through Visa debit cards and the introduction of financial options on ONDC. The government's dedication to the 'Digital India' vision will be enhanced through such initiatives.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.