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ONDC to charge ‘small fee’ from platforms after growth period: Koshy

ONDC to charge ‘small fee’ from platforms after growth period: Koshy
Photo Credit: Pixabay
17 Dec, 2022
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Open Network for Digital Commerce (ONDC), the open e-commerce protocol set up by the Ministry of Commerce’s Department of Promotion of Industry and Internal Trade (DPIIT), will charge a “small fee” from platforms that will contribute towards “maintenance and development” of the network, T Koshy, managing director, and chief executive of the non-profit network protocol, told Mint.

While he did not mention how much this fee would be, Koshy said that the platform may begin charging its fee from platforms on the network in “perhaps one year”.

Koshy was speaking on the sidelines of ONDC’s first office and operational headquarters in Delhi. The network, which seeks to make online commerce accessible to buyers, sellers, and logistics operators outside of private e-commerce ventures, will seek to reduce the compulsory commissions charged from sellers and logistics partners on the network by private e-commerce firms such as US-based Amazon and homegrown Flipkart — the two largest e-commerce firms in the country.

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At its inauguration, Koshy said that ONDC presently has 26 partners on the network, and expects to onboard homegrown fintech firm, PhonePe, next week. “A further 125 platforms will be coming on board in the next two months. After these, 200 more platforms are presently working on technical integration with ONDC, while 400 more platforms including buyer, seller, and logistics partners are at a paperwork stage,” he said.

Buyers, sellers, and logistics firms with ONDC refer to platforms that cater to various categories of users. A ‘buyer’ partner refers to a storefront that can be accessed by buyers to look for and purchase a product. A ‘seller’, meanwhile, refers to a retailer who puts up a list of products that are offered to buyers. Logistics partners, meanwhile, cater to firms who would offer delivery services between the buyer and seller partners.

While privately owned and operated e-commerce platforms control how sellers are onboarded, which logistics partners work to deliver their products, and how products are presented to buyers, ONDC claims that it will “democratize” how e-commerce works.

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Anurag Jain, secretary, DPIIT said at the inauguration of the office facilities that the approach behind ONDC would be similar to what UPI did for online payments, “but at a much larger scale.”

“Before UPI, the commission levels charged by payment operators were much higher. Bringing this down helped democratize online payments in the country,” Jain said.

Koshy added that e-commerce penetration in India stands at “7% at the most.”

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“We, therefore, have massive market size and opportunity to address, and this model could be adopted even at a global level — since such a framework has never been made before anywhere else in the world,” he said.

As part of its next phase of adoption, ONDC will seek to expand beyond its beta trial phase in Bengaluru, and expand to “tier II” markets, Koshy said.