News & Analysis

ONDC Isn’t UPI, So Let’s Stop Comparing Them

Barring the fact that both of them are protocols, there is not even a grain of similarity in what the two are attempting to achieve

Government’s ambitious program to create player parity in India’s growing eCommerce market is getting some confusing signals, none more so than the comparison between the Open Network for Digital Commerce (ONDC) and the Unified Payments Interface (UPI). And adding further to the confusion is a report that claims the former’s implementation could be tougher. 

Equity research firm Jefferies claims while the primary function of UPI was to ensure safe and secure transfer of financial data across banks, payment wallets and customers, in the case of ONDC it is a direct transfer of goods and services. This brings variables such as quality, reliability, speed of delivery into the equation into a system with no real world interactions. 

However, ONDC chief executive T Koshy is quick to disagree saying it reflects individual opinion (that of the author). In the prevailing eCommerce model, the same entity provides end-to-end solutions, managing both the customer experience and the seller interface. The open network model enables democratization of the market with broader participation and more competition. 

Which means that against the siloed platform-centric model that leads to market concentration and encourages possible anti-competitive practices, the open model provides consumers with more options as more sellers would come in bringing more choice even with the costs as it would depend on the platform that the customer is using. 


They’re as different as chalk and cheese

Coming to the comparison by Jefferies that ONDC would be tougher to implement than UPI, the opinion is unanimous amongst the partners of the former that such a comparison itself is wrong. Says Anup Pai, co-founder and CEO of eSamudaay which facilitates digitizing enterprises at the local level, “This equivalency between UPI and ONDC is erroneous. The only common factor is that they’re both protocols.” 

Pai says while the UPI is a user interface improvement on online banking transactions that had already existed, ONDC is different in that it allows eCommerce players of all hues and sizes to be part of the game. “For example, it is high time that we correct the public perception that ONDC was anti-Amazon or anti-Flipkart,” he adds while reiterating that these two and others of their ilk were potential participants on the ONDC. 

In fact, it is erroneous to believe that ONDC was here to thwart the big companies or take away their users. The intent is exactly the opposite as such a protocol could potentially bring in a larger audience that is not digitally enabled into the eCommerce ambit, especially since the big players in the game have only managed to penetrate into just 7% of the potential market. 


Dispute redress isn’t working anyways

Coming to another point raised by Jefferies that ONDC on brings the buyers and sellers on the same platform without possibly stepping in to quell disputes, Koshy says the sellers on the network will be responsible for dispute redress and if the issue persists it will get escalated to a third-party online dispute resolution platform. 

While one may look askance at this response, the fact that Jefferies questioning ONDC on this front appears facetious as does its arguments that the service levels of Amazon and Flipkart were “satisfactory for most users”. This indicates a clear armchair-level analysis, given that both these companies face grave issues product quality and delivery – a cursory look at the feedback on the platforms would tell us that. 

Moreover, the entire argument made by Jefferies appears to suggest that both Amazon and Flipkart would not be a part of the ONDC network and that it’s a binary equation for the customer. This smacks of a complete lack of understanding of the protocol and what it is aiming to achieve. 

In the words of ONDC CEO T Koshy, the entities readying themselves for this new reality will reap the benefit and the others will pay the price.

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