ONDC: How India's Digital Commerce Revolution is Reshaping Fintech

India's digital commerce landscape is on the brink of a revolutionary transformation with the emergence of the Open Network for Digital Commerce (ONDC). This groundbreaking framework has the potential to unleash unparalleled growth and innovation in the fintech sector. In this article, we delve into the future potential of ONDC in India and examine its profound impact on the fintech ecosystem, supported by data-driven insights.

ONDC is the catalyst that brings about a paradigm shift by decentralizing e-commerce, breaking the dominance of major platforms.

Despite lagging behind countries like Brazil and Indonesia, where e-commerce penetration stands at 15-25%, India's digital commerce is poised for exponential growth with ONDC. Projections indicate that within the next five years, India's e-commerce penetration could reach an astounding 25% from the current 6-7%, attracting a staggering one billion consumers to the ONDC network.

Commerce-as-a-Service: Every Digital Apps is now a commerce App

Unlocking the potential of commerce has always been a tantalizing proposition for digital apps. However, the challenges of onboarding sellers, logistics providers, and payment solutions made it a daunting task. Enter ONDC, the game-changer that turns enabling commerce into a "Plug-N-Play" switch.

By becoming "Buyer Apps" on the ONDC network, digital apps can activate commerce for their customer base, driving revenue growth. This shift has led to major players like Paytm, PhonePe, and banks embracing ONDC, transforming their consumer apps into ONDC-enabled commerce marketplaces to tap deeper profit pools from their vast customer base.

Revolutionizing Online Payments: A New Era Dawns

ONDC's emergence signals a significant acceleration in online peer-to-merchant (P2M) payments. In just seven months, ONDC has witnessed remarkable progress, expanding its merchant base from a mere 200 to a staggering 85,000. Daily retail transactions have skyrocketed from 185 to 11,000 per day, illustrating the growing acceptance and adoption of ONDC across 85 cities in India.

As more merchants migrate to ONDC, traditional aggregators such as Zomato, Swiggy, and Amazon may experience a loss in market share, forcing payment aggregators with large exposure to these aggregators to navigate this shifting landscape.

Empowering Small and Medium Businesses (SMBs): A New Dawn for Growth

ONDC's inclusive approach unlocks immense opportunities for SMBs, kiranas, and local markets to participate in the digital commerce revolution. Currently, only 5% of India's 100 million MSMEs sell on e-commerce platforms.

Photo by Annie Spratt on Unsplash

However, with ONDC, the game changes. Take the Namma Yatri App, for example, an open network auto-rickshaw booking app on ONDC framework, empowering over 55,000 auto drivers in Bengaluru to compete with established aggregators like Uber and Ola. Similarly, over 22,000 restaurants have joined ONDC through apps like Magicpin, benefiting from lower commissions compared to traditional aggregators.

Fueling Fintech Innovation: Redefining the Financial Landscape

The integration of ONDC with the fintech sector sparks a wave of innovation and expands financial services. As BFSI players embrace ONDC, credit products like EMIs, BNPLs, and short-term loans become seamlessly integrated into every checkout journey on the network. The value chain for credit issuing is decoupled, allowing NBFCs on the network to lend to customers and merchants without the need for acquiring them first.

Photo by Smartworks Coworking on Unsplash

This democratizes access to credit and opens up the market to a whole new segment of customers and SMB merchants. With competition increasing due to the wide availability of credit products, digital lenders may see their net interest margins decrease.

However, this also presents an opportunity to tap into a vast pool of new-to-credit customers/merchants and drive financial inclusion.

Furthermore, ONDC promotes the development of sector-specific solutions, fostering innovation in embedded finance and commerce. One notable example is Razorpay, a leading fintech player leveraging ONDC to distribute reconciliation suites tailored for the apparel industry. By streamlining processes and enhancing business productivity, ONDC drives efficiency across various sectors.

Omnichannel Shopping experience: Blurring lines between offline & online

Photo by Ravi Sharma on Unsplash

But the impact of ONDC doesn't stop there. It promises to revolutionize the very nature of the shopping experience. As ONDC expands its network of merchants to include SMBs, kiranas, and local markets, customers can enjoy a truly omnichannel experience. They can explore products in physical stores and make instant purchases through ONDC, availing themselves of discounts, affordable payment options, logistics services, and other benefits available on the network.

This seamless integration of online and offline commerce reshapes the way consumers interact with businesses, bridging the gap between the physical and digital realms.

The future potential of ONDC in India's digital economy sector is immense, and the statistics and industry trends support this notion. As the framework gains momentum and reaches more businesses and consumers, we can anticipate a radical transformation of the digital commerce landscape in India and beyond. Accelerated online payments, increased fintech innovation, empowered SMBs, and the rise of omnichannel experiences and social commerce are just a glimpse of the boundless possibilities that ONDC brings to the table.

Photo by grayom on Unsplash

ONDC is unleashing the power of digital commerce in India, disrupting traditional models and paving the way for unprecedented growth and innovation. It empowers businesses, fosters financial inclusion, and transforms the way consumers shop.

With its wide-ranging impact on the fintech ecosystem, ONDC heralds a new era of opportunities, promising to reshape India's digital economy and inspire similar transformations worldwide.

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