Cross-border trades to be a game-changer for ONDC: CEO T Koshy

The government’s Open Network For Digital Commerce, a decentralised protocol for e-commerce, mobility and other online platforms, recently conducted its first international transaction with a Singapore-based business-to-business network, Proxtera. ONDC’s chief executive T Koshy expects cross-border transactions on the network to continue growing rapidly, enabling merchants to make their products available globally, boosting exports. 

In India, Koshy expects ONDC to boost penetration of e-commerce to 25%, from 4-5% currently. Contributing to this surge will be rural markets, which he says have the potential to outpace urban growth in the medium term. 

ONDC has also been expanding in the mobility space, and is working on integrating multiple transport modes to allow for a single-booking mechanism. 

The network, which was launched in 2021, crossed 5 million transactions across ride-hailing and e-commerce for the first time in December. 

Edited excerpts from an interview:

How do you see e-commerce and online sales evolving in India? What are the early trends that you are picking up as far as the next phase of growth is concerned?

I think there’s a lot of room for growth. ONDC and McKinsey have jointly published a report in which we examined the potential for e-commerce in India. According to McKinsey, ONDC will enable a 5-fold rise in India’s digital consumption to $340 billion. This will lead to an increase in penetration of e-commerce to 25%, from about 4-5% currently, in the next two years by reaching 900 million buyers, and 1.2 million sellers likely having a gross merchandise value of $48 billion.

The inclusion of cross-border trades in addition to this is poised to be a game-changer in the immediate term. The ONDC network protocol operates without geographical restrictions, allowing any seller the freedom to offer products and services to buyers across any location, even internationally. Notably, the network has successfully conducted its first cross-border transaction with Singapore and is progressing towards scaling up this initiative.

ONDC is also attempting to create a network of last-mile service providers to make travel seamless for commuters moving within cities or even between cities. What is the overall plan?

The network is fully prepared for mobility and has experienced the quickest adoption in this category in cities like Bengaluru, Mysore and Kolkata. The team consistently collaborates with various state transport agencies to facilitate the integration of all transportation modes, including metros, buses, and on-demand rides like auto-rickshaws and metered taxis.

Multi-modal transportation, which integrates multiple modes in a single booking, is something we’re working towards. However, this will take some time.

Eventually, do you think ONDC will become a one-stop solution for all online trade requirements?

ONDC is a network backbone. It will enable many more use cases and is designed to support commerce of any catalogue-able product or service. However, comparing it to a “one-stop-shop” is again going down the platform way of thinking. We will be an enabler to unprecedented innovation.

How does ONDC perceive Amazon and Flipkart? As competitors? Or are you looking forward to them joining the network as well?

ONDC does not function as an application or marketplace that competes with existing platforms. It serves as a network, facilitating the discoverability of buyers and sellers across different platforms. Therefore, ONDC complements existing players rather than competing with them.

In fact, those who have already joined the network have experienced business expansion by diversifying their offerings. For instance, a well-established player in the mobility sector has broadened its scope to include the food and beverages segment through ONDC. Similarly, another player deeply involved in the fashion sector now offers groceries to its existing customer base after joining the network. 

We observe active participation from significant industry players who believe that being part of a network not only expands their individual businesses but also contributes to unlocking the economy as a whole. We are confident that other market players will actively follow this trend.

Do buyers and sellers disclose their buyer or seller database with ONDC? Is there any such requirement?

We do not collect any such information.  ONDC is a common language of commerce which connects various digital systems. We do not onboard buyers or sellers directly, nor do we collect such data.

What would be the next steps for ONDC as far as democratisation of e-commerce is concerned?

ONDC is actively engaged in democratising e-commerce by onboarding small and medium entrepreneurs from various geographical locations. Initially, we launched the food and beverage and grocery categories, and then the network expanded to include other sectors such as mobility, fashion, beauty and personal care, agriproducts, home and kitchen, electronics and appliances, and health and wellness due to promising results.

With rising disposable income and adoption of digital payments through UPI, rural areas have the potential to outpace urban growth in the medium term. The network is already seeing active participation from sellers in rural India, who are bringing in distinctive offerings at innovative prices.