That we could make payments via mobile across the spectrum, from street vendors to high-end retail outlets, would have looked far-fetched even a decade ago.
Today, people are making road trips across India without needing cash. That’s how mainstream Unified Payments Interface (UPI) has become in India.
Consider the ripples UPI created in the ecosystem:
- While spending at PoS terminals was about INR 1.7 lakh crore, UPI was used for nearly INR 13 lakh crore worth purchases. (ET report)
- UPI has halved annual ATM visits to just 8, cut cash withdrawals drastically (ET report)
This is a true win-win for both sellers and customers. Sellers weren’t required to absorb the hardware costs (PoS) to offer payment convenience to customers. Customers weren’t asked to overlook the commission charges for using credit cards.
But beyond payment flexibility, UPI achieved something far more revolutionary. It leveled the playing field for banks. Previously, people chose their banks based on their brand trust and size. With digital payments, questions about the bank’s size and spread have been relegated to background and only trust matters.
But the field is still not even in many new-age markets, especially grocery and food delivery space.
There are many complaints in social media about how food delivery apps charge way more than the restaurant’s menu prices, besides pocketing delivery costs. Likewise, restaurants have to keep up with the aggregator app’s commission demands even as they compete with the app’s own cloud kitchens or dark stores.
Sellers and customers alike face a near oligarchical market. Amazon and Flipkart own 63% of the eCommerce market in India.
What if the time is ripe for UPI-zation of the Indian eCommerce market?
Enter Open Network for Digital Commerce (ONDC), an initiative aimed at democratizing digital commerce in India. ONDC is established by the Department for Promotion of Industry and Internal Trade of Government of India.
While the EU is trying to tame the digital oligarchs through regulations, India seems to be betting on creating a platform-agnostic digital public infrastructure to level the playing field.
ONDC is slated to become the intermediary between the sellers and buyers. Not just them, even third parties like delivery and logistics players can operate from the same open network.
So, how does this change the equation?
Customers can order a product from a restaurant, and assign the delivery to the agent with the best bid. If the product requires installation, the customer can search for and zero in on a technician from the network.
Likewise, a kirana store can extend its coverage to its neighborhood without getting short-changed by the platform’s dark stores. Since their digital presence and searchability is not in conflict with the platform’s interests, they only need to compete fair and square in the market.
This unbundling of digital commerce will promote fair competition and prevent monopoly-like behaviors. All the micro-services needed for digital commerce transactions can be handled by different entities. By facilitating the building of apps at both the seller and buyer side, ONDC can foster digital inclusion of the digital commerce space at a rapid pace.
At this point, it’s pertinent to note that all the above wrangling is happening for just 5-7% of the Indian population that has digital access. Reportedly, the Indian B2B sellers’ digital commerce penetration stands at 1 to 1.5%; far below the global average of 20%.
The network is being promoted as an initiative of bringing the undigitized population of India, a vast majority, under the digital fold.
Will ONDC succeed?
Will ONDC succeed in its stated aim of democratizing digital commerce in India?
To answer that, we need to first answer: at what point did UPI become ubiquitous?
To me, it was when my neighborhood kirana store was forced to finally accept UPI payments to prevent his loyal customer-base from straying. When my senior citizen uncle had to reluctantly learn to use UPI to buy a ticket at a mall’s cash counter.
Technology becomes mainstream when there’s a real fear of missing out. When people feel that the entire world has jumped the wagon and you’re the only one to be left out.
Given UPI’s tremendous success, I’m betting big on ONDC too. Let’s wait and watch.
Musings by Madhav 
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