Our open network for digital commerce must win trust

Source: The post is based on the article “Our open network for digital commerce must win trust” published in Livemint on 24^th August 2022.

Syllabus: GS 3: Changes in industrial policy and their effects on industrial growth.

Relevance: To understand the challenges associated with the ONDC.

News: The Open Network for Digital Commerce (ONDC) aims to make India towards democratizing e-commerce. But there are certain challenges associated with the ONDC.

What is ONDC?

What is the need for ONDC?

E-commerce platforms act as trusted intermediaries between buyers and sellers, offering a safe and secure online marketplace. They played an important role in ensuring that consumers receive the timely delivery of quality goods, and merchants are able to supply goods with the help of necessary logistical support and receive payments in time.

But over-reliance on platforms raises concerns of concentration risk and exclusion. The ONDC aims to address such concerns by promoting unbundling and interoperability in the e-commerce ecosystem through an open e-marketplace.

What are the challenges associated with the ONDC?

The challenges include

a) Potential risks and unintended consequences, feasibility and the challenges of scalability.

b) ONDC makes network participants responsible for managing the order’s life cycle such as catalogue management, order management, invoicing, logistics, customer support, returns and others. Eventually, they might look for network participants to ensure end-to-end transaction surety, especially small scale businesses.

c) The ONDC envisages that a buyer and seller need not be on the same application to discover each other, but will have the ability to connect through different apps. So, a network participant can simultaneously play both buyer and seller. This might create ambiguities. The applicable laws may also differ from the roles that players play in the ONDC ecosystem.

d) Since the platform is open and decentralized, suspicious elements might join the network as service providers, sellers or consumers. This creates challenges in accountability and redressal of grievances.

e) ONDC is incorporated as a not-for-profit company, it is majority owned by private sector institutions. Most of them are likely to act as or have an interest in, network participants, directly or indirectly. This may lead to conflicts of interest in the decisions of ONDC.

f) Consumers and merchants are the targeted beneficiaries of ONDC. But their role in ONDC governance or rule-making processes is limited.

Entities in the e-commerce ecosystem should proactively engage with the ONDC to obtain more transparency and approach integration accordingly.