India’s plan to crack Amazon Inc and Walmart Inc’s Flipkart e-commerce supremacy by developing its open network has started lining up banks and other key partners needed to carry it forward, reported Reuters, citing sources familiar with the situation.
Some of India’s largest banks are discussing building “buyer platforms” that would allow their customers to place orders for products and services across the Open Network for Digital Commerce (ONDC), which was soft-launched by the Indian government in April. Read More
The network’s success, which would safeguard fair opportunities to all online sellers and buyers irrespective of size, is a top priority for India’s honorable Prime Minister Narendra Modi, who is under pressure from small businesses to act against Amazon and Walmart’s Flipkart’s disproportionate impact in India’s e-commerce space.
Seller Side Looking Bright with ONDC
“On the seller side,” ONDC Chief Executive T. Koshy stated, “anyone who can make their digital stock public using this standard language would have access to a big pool of customers shared across apps.”
“It’s no longer under the control of a single huge corporation.”
Koshy said he had spoken with banks, venture capitalists, and telecommunications companies. However, he didn’t disclose their names or how far the conversations had advanced.
According to government figures, Indian e-commerce was valued at more than 55 billion USD in gross merchandise value (GMV) in 2021 and will surge to 350 billion USD by the end of the decade. In India, with a population of 1.35 billion people, Amazon and Flipkart control more than 60% of the market, which today accounts for around 8% of all consumer purchases.
By August, ONDC intends to have covered at least 100 cities and towns, with a five-year goal of signing up 900 million customers and 1.2 million sellers.
Responses from Banks
Akhil Handa, Chief Digital Officer of Bank of Baroda, said that his bank is discussing the project with the government. However, it is too early to discuss about any specific use cases.
“It certainly has the potential to become the next big thing in the space,” he added.
State Bank of India, Punjab National Bank, Axis Bank, HDFC Bank, Kotak Mahindra Bank, and IDFC First Bank are among other financial lenders in talks with ONDC to set up buyer platforms, told three sources familiar with the matter to Reuters on condition of anonymity.
Kotak said it invested in ONDC because it believed it would “reshape digital commerce in the country.” It didn’t say anything about buyer platforms.
Other banks didn’t respond to comments on requests from Reuters.
According to the sources, the platforms would allow banks to increase the usage of their cards, credit, and other services.
The ONDC project had already received a combined initial investment of 2.55 billion INR (32.8 million USD) from banks and other financial entities.
Responses from VCs
While the project is progressing forward, there are concerns that it may reduce Amazon and Flipkart’s market share.
“The network isn’t about every small participant colluding to render a large company like Amazon obsolete,” said Pranav Pai, Managing Partner of 3one4 Capital, a start-up investment firm. “Factors such as customer loyalty and trust in Amazon’s fulfillment services will continue to influence consumer decisions online.”
One of the sources said that VC firms Accel and Sequoia are also discussing potentially investing in ONDC-affiliated start-ups. As per two sources, Bharti Airtel and Vodafone Idea are discussing how they can use the network.
Reportedly, Alphabet Inc’s Google is in talks with ONDC, and Paytm, one of India’s leading fintech firm, has already joined.