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  • Writer's pictureYashwarya Gupta

What Is ONDC For Financial Services Players?

If you’ve been following the latest developments in India’s digital economy, you’ve probably come across the term "ONDC." But what exactly is ONDC, and why is it generating so much buzz?


Whether you’re a business owner, a tech enthusiast, or just curious about the future of e-commerce in India, understanding ONDC and its functionality is key to grasping the significant changes it could bring to the marketplace. 


The blog breaks down the meaning of ONDC, the financial services and, a brief glance how you can use ONDC. 


 

What’s ONDC? Understanding Its Functionality


ONDC stands for the Open Network for Digital Commerce. Launched by the Government of India, it’s a groundbreaking initiative aimed at democratizing digital commerce by creating an open network that connects buyers, sellers, and service providers across various platforms.


Essentially, ONDC is designed to level the playing field in e-commerce, making it easier for small businesses and local retailers to compete with giants like Amazon and Flipkart.

Think of ONDC as a public digital infrastructure, much like UPI (Unified Payments Interface) is for payments.


While UPI revolutionized how we handle transactions by connecting different banks on a single platform, ONDC aims to do something similar for online commerce. It’s about creating an interoperable network where sellers of all sizes can reach customers without being restricted to a single marketplace.


How Does ONDC Work? The Basics of Its Overall Functionality


What is ONDC and how ONDC works

E-commerce in India received US$ 15 billion of PE/VC investments in 2021, which is a 5.4 times increase year-on-year

(Source: IBEF 2022)


To understand how ONDC functions within this growing market, think of it as a decentralized network that facilitates e-commerce transactions across multiple platforms. Here’s how it works:


1. Connecting Buyers and Sellers Across Platforms: Traditionally, if you wanted to buy something online, you’d go to a specific e-commerce platform—say, Amazon, Flipkart, or a local online store. These platforms operate in silos, meaning you can only purchase from sellers listed on that particular platform. ONDC changes this by creating an open network where buyers can find products from various sellers, regardless of which platform they’re listed on.


For example, let’s say you’re looking to buy a pair of shoes. With ONDC, you could use any participating e-commerce app to search for shoes, and the results could include options from sellers on multiple platforms. This interconnectedness allows customers to access a broader range of products, while sellers can reach a wider audience without being limited to one marketplace.


2. Interoperability Between Platforms : One of the key features of ONDC is its interoperability. This means that different e-commerce platforms, payment gateways, and logistics providers can communicate and work together seamlessly.


For instance, a seller on one platform can sell to a buyer using a different platform, with the transaction processed smoothly through ONDC’s network. Payments, logistics, and even customer support can be coordinated across platforms, making the entire e-commerce process more flexible and efficient.


3. Standardization and Open Protocols: ONDC operates on a set of open standards and protocols, which ensures that all participants—whether they’re large e-commerce companies or small neighborhood shops—can connect to the network in a standardized way. This removes the barriers that typically come with closed, proprietary systems.


4. Empowering Small and Local Businesses: One of ONDC’s primary goals is to empower small and local businesses. In the current e-commerce landscape, large platforms often dominate, making it difficult for smaller players to get noticed. ONDC helps level the playing field by providing these businesses with the tools and access they need to reach customers online. 


Whether it’s a local grocery store, a boutique clothing shop, or an independent artisan, ONDC allows these businesses to tap into the growing digital market without needing to invest heavily in their own technology.


 

What Financial Services Are Offered On The ONDC Platform?


Did you know that ONDC isn’t just about e-commerce? It’s also playing a significant role in revolutionizing access to financial services across the country. From digital banking to insurance and lending, ONDC is creating a more inclusive financial ecosystem that brings essential services to the fingertips of millions.


So, what financial services can you access on the ONDC platform?


1. Digital Banking Services


One of the most significant impacts of ONDC is its integration of digital banking services. By connecting various banks and financial institutions within its network, ONDC allows users to access a range of banking services directly through the platform. Here’s what you can expect:


a. Account Management: ONDC enables seamless access to your bank accounts across multiple banks. Whether you need to check your balance, view transaction history, or manage multiple accounts, ONDC simplifies these processes by integrating them into one platform. This is especially beneficial for small businesses and entrepreneurs who manage finances across different institutions.


b. Fund Transfers: Just like with traditional banking apps, ONDC supports various types of fund transfers, including IMPS, NEFT, and RTGS. What’s unique about ONDC is that it allows you to make these transactions across different banking networks, creating a more interconnected financial environment.


c. Bill Payments and Recharges: Need to pay your utility bills or recharge your mobile? ONDC has got you covered. The platform integrates various payment services, allowing users to settle bills or top up their phones directly from their bank accounts, all within a single interface.



2. Lending and Credit Services


Access to credit and loans has traditionally been a challenge for many small businesses and individuals, especially in rural areas. ONDC is changing that by integrating lending and credit services into its platform, making it easier for users to apply for and receive loans.


a. Small Business Loans: For small and medium-sized enterprises (SMEs), ONDC offers a streamlined process for accessing business loans. Whether you need working capital, want to expand your operations, or invest in new technology, the platform connects you with financial institutions that offer tailored loan products. The integration of these services within ONDC also allows for quick application processes and faster disbursement of funds.


b. Microloans: One of the key features of ONDC is its interoperability. This means that different e-commerce platforms, payment gateways, and logistics providers can communicate and work together seamlessly. For instance, a seller on one platform can sell to a buyer using a different platform, with the transaction processed smoothly through ONDC’s network. Payments, logistics, and even customer support can be coordinated across platforms, making the entire e-commerce process more flexible and efficient.


c. Credit Scoring and Evaluation: ONDC partners with credit agencies to provide users with access to their credit scores and reports. This service is crucial for those looking to understand their creditworthiness before applying for loans or other financial products. The platform may also offer credit evaluation tools that suggest ways to improve your score, helping you secure better loan terms in the future.


 

How To Use ONDC: Simple Steps For New Users


What is ONDC and how to use ONDC? What is ONDC and how does it work?

So, how do you get started with ONDC? Don’t worry if you’re new to the platform—this guide will walk you through the simple steps to start using ONDC, whether you’re a buyer looking to shop or a seller wanting to reach more customers.


Step 1: Understand Why ONDC Matters:


  • More Choices for Buyers: You can shop across various platforms and sellers without hopping from one app to another.


  • Greater Reach for Sellers: Small businesses and local shops can reach a broader audience, leveling the playing field.


  • Standardized Protocols: ONDC uses open standards, making it easy for different platforms to work together, which means more seamless transactions for everyone


Step 2: Choose Your ONDC-Compatible Platform


To start using ONDC, you need to choose a platform that is integrated with the ONDC network. ONDC is not an app itself but a network that connects various e-commerce apps, buyer apps, and seller apps.


For Buyers:


  • Download an ONDC-compatible app like Paytm, Mystore, or Craftsvilla. These apps have integrated ONDC protocols, allowing you to shop from a wide variety of sellers across different categories—right from groceries and clothes to electronics and more.


For Sellers:


  • Register with an ONDC-compatible seller app such as Mystore Seller App, SellerApp, or GoFrugal. These apps help you list your products and connect with potential customers across the ONDC network.


Step 3: Set Up Your Account


Once you’ve chosen an ONDC-compatible platform, the next step is to set up your account.


For Buyers:


  • Create an Account: Open your chosen app and create an account. You will need to provide basic details like your name, email, and phone number. Verify your contact details via OTP (One-Time Password) for added security.


  • Add Your Payment Methods: Add your preferred payment methods such as UPI, credit/debit cards, or digital wallets. ONDC supports various payment options to make shopping easy and convenient.


For Sellers:


  • Register Your Business: On your chosen seller app, register your business by providing necessary details like business name, GST number, and bank account information.


  • List Your Products: Add your products to the platform. Make sure to include clear images, detailed descriptions, and accurate pricing to attract more customers.


  • Set Up Payment Options: Link your bank account or payment gateway to receive payments directly from customers.


Step 4: Start Shopping or Selling


Now that you’re all set up, it’s time to dive into the world of ONDC and start shopping or selling!


For Buyers:


  • Browse Products: Use the search bar to look for products you need. ONDC-compatible apps will display options from multiple sellers, allowing you to compare prices, reviews, and delivery times all in one place.


  • Add to Cart and Checkout: Found what you like? Simply add it to your cart and proceed to checkout. The app will guide you through selecting delivery options, applying discounts, and choosing your preferred payment method.


  • Track Your Order: Once you’ve placed your order, you can track its status directly through the app, just like you would on any other e-commerce platform.


For Sellers:


  • Manage Your Storefront: Keep your product listings up to date by adding new items, adjusting prices, and updating stock availability. The more active and accurate your listings, the more likely you are to attract customers.


  • Fulfill Orders: When an order comes in, the app will notify you. Make sure to fulfill orders promptly, manage inventory, and provide great customer service to build your reputation on the platform.


  • Use ONDC Tools: Leverage tools provided by the ONDC platform to optimize your sales strategy, such as analytics for tracking customer behavior and demand forecasting.


 

Thus, ONDC represents a revolutionary shift in how digital commerce works in India, creating opportunities for both buyers and sellers. Whether you’re looking to discover a wider range of products or expand your business reach, understanding how to use ONDC effectively can make a world of difference.


From onboarding and accessing diverse borrower segments to leveraging rich data for better underwriting and streamlining the lending process, ONDC offers a comprehensive framework that enhances every aspect of digital lending. As ONDC continues to grow and evolve, embracing its potential could be the key to unlocking new growth in the digital lending space.


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