The Indian government recently launched an Open Network for Digital Commerce (ONDC). It enables small retailers to market their products on a publicly run eCommerce network. This is according to a Wall Street Journal article. Vendors and products are then searchable by any app that uses the network. The idea is to make the network interoperable so that many apps can tap into the marketplace.
According to the WSJ:
The network’s launch sends strong signals about how India, which boasts the world’s second-largest population of internet users, wants to cultivate its internet economy: It would prefer a competitive, decentralized model built atop digital public goods.
Underlying the Open Network for Digital Commerce is India Stack, a set of software tools developed by government agencies to cultivate identity verification. One key feature of this system is biometric identity verification. For example, according to the article, more than 90% of India’s population is enrolled in a biometric identity-verification system called Aadhaar.
Part of the function of private eCommerce sites is that they screen out fraudulent products. It will be interesting to see how India’s open eCommerce system handles that.
People buy from platforms such as Amazon in part because the company invests in trying to ensure products are legitimate and will arrive in good shape and in a timely manner. When things go very wrong, customers have various forms of recourse including the courts. Building that sort of accountability and reliability into an open access, decentralized platform may prove quite difficult.
However, there are significant advantages to running the kind of system India is attempting. For example, private eCommerce sites sometimes copy the products sold on their sites by third-party vendors, and then sell those copies, competing with those vendors. A public open eCommerce network gets rid of those incentives.
Overall, India has moved quickly to improve financial inclusion. “As solutions such as the domestic payment scheme RuPay take hold, it will be interesting to see how they address other payment facets,” says Brian Riley, Director of Credit at Mercator Advisory Group. “Aadhaar, the biometric registration system, will certainly help bring payments to the massive market. But the market will need to address the threat of fraud risk that may ensue as they engage smaller merchants who might lack the infrastructure, or branded network support to address the nuances of card not present fraud.”