The Open Network model marks a major shift in digital commerce, targeting inefficiencies and market concentration in traditional platform ecosystems
Image Source: Ross Tomei/via Getty Images
The prevailing structure of e-commerce continues to be dominated by a few large, vertically integrated platforms that control key layers of digital transactions, from seller onboarding to consumer discovery and logistics. This concentration of power has led to limited competition, restricted market access for small players, and systemic challenges in ensuring fairness and transparency.
India’s Open Network for Digital Commerce (ONDC) offers an alternative approach. By unbundling the components of digital commerce and creating interoperable protocols, ONDC enables a more distributed, inclusive market architecture. Unlike closed ecosystems that rely on proprietary infrastructure and extractive business models, ONDC is designed to allow multiple players across logistics, payments, buyer and seller interfaces to compete and collaborate within the same transaction layer.
The prevailing structure of e-commerce continues to be dominated by a few large, vertically integrated platforms that control key layers of digital transactions, from seller onboarding to consumer discovery and logistics.
However, this approach is not without challenges. Rolling out a network-led model requires time, coordination, and institutional backing. The shift from a dominant platform structure to a networked ecosystem demands significant effort in areas such as participant onboarding, trust-building, and technical standardisation. As e-commerce policy debates globally grapple with questions of monopolistic power, digital sovereignty, and market access, ONDC presents a viable and scalable alternative. It signals that market transformation can be achieved through public infrastructure, market design, and targeted policy support.
Over the past two decades, vertically integrated digital platforms have evolved into near-sovereign gatekeepers of commerce, exerting significant influence over consumer behaviour, pricing structures, visibility mechanisms, and patterns of innovation. Their comprehensive control across the commercial value chain has facilitated a high degree of market concentration, whereby a small number of firms dominate digital transactions, thereby limiting competition and market entry. These platforms often engage in self-preferencing and other predatory practices, leveraging privileged access to consumer and seller data as well as their asymmetric market power to marginalise successful third-party sellers.
Furthermore, they impose standardised consumer experiences that compel diverse and small-scale sellers to conform to rigid transactional norms, resulting in the erosion of cultural, regional, and service-specific diversity. The algorithms that govern key commercial decisions, such as pricing and product visibility, operate with little transparency, offering sellers no procedural recourse or capacity to challenge outcomes. These structural dynamics echo classical patterns of monopolistic behaviour and pose significant challenges to competition law frameworks. In the Indian context, they are particularly consequential, as such concentration and opacity run counter to national policy objectives aimed at fostering a decentralised, vibrant, and MSME-led digital economy.
Governments around the world are responding to the challenges of market concentration and anti-competitive practices primarily through regulatory interventions. Legislative efforts such as the American Innovation and Online Choice Act (AICOA) and the Open App Markets Act in the United States, the Digital Markets Act in the European Union, and the UK’s Digital Markets, Competition and Consumers Act reflect this trend. However, the regulatory route is often slow and complex; drafting, debating, and passing such legislation can take years, and enforcement adds another layer of delay. For instance, the AICOA, introduced in June 2021 after considerable deliberation, is still awaiting enactment.
In contrast, India is exploring a different pathway using technology and market architecture to address these structural issues. The ONDC represents a globally unprecedented experiment. Rather than functioning as a platform competing with existing e-commerce players, ONDC operates on the principles of unbundling and interoperability of core commerce functions, enabling multiple actors to participate across the value chain.
While sectors such as consumer goods, food delivery, and ride-hailing have seen significant platform-driven growth, the overall penetration of e-commerce in India remains relatively limited compared to the size of the country’s digital economy. With rising internet usage and expanding digital infrastructure, there is a significant opportunity to democratise digital commerce across user groups, geographies, and sectors. ONDC seeks to reimagine the way commercial transactions are conducted by enabling an inclusive, decentralised, and interoperable digital marketplace.
The Open Network model represents a fundamental shift in the architecture of digital commerce, aiming to address the structural inefficiencies and market concentration associated with conventional platform-based ecosystems. By unbundling the core components of commerce, such as discovery, logistics, payments, and grievance redressal, and enabling their interoperability, the Open Network seeks to foster a more decentralised and inclusive digital marketplace. The ONDC, serving as the institutional orchestrator of this model in India, has demonstrated proof of concept and scalability by facilitating over 200 million transactions within two years of its inception.
The viability of the Open Network depends on its ability to become the dominant architecture for digital trade, necessitating broad-based adoption across product categories and service domains.
Unlike closed digital platforms that operate within proprietary ecosystems and extract disproportionate value from both sellers and consumers, often favouring market incumbents, ONDC aspires to democratise digital commerce. However, the transition to this open, networked model is complex and requires a critical mass of participants and transactions to ensure sustainability. The viability of the Open Network depends on its ability to become the dominant architecture for digital trade, necessitating broad-based adoption across product categories and service domains.
A key enabler of this transition will be the participation of a diverse set of stakeholders, each experimenting with different operational and business models. While not all approaches may succeed, their cumulative impact can contribute to the maturation and resilience of the network. In this context, ONDC’s trajectory should be seen as a foundational effort to reimagine digital commerce as a public-good infrastructure
Realising the vision of the ONDC necessitates coordinated efforts across policymakers, public institutions, industry stakeholders, and civil society. A multifaceted policy strategy must be employed to facilitate inclusive adoption and ecosystem-wide liquidity. First, public financial assistance provided to entities in key sectors such as MSMEs, artisans, agricultural producers, and cooperatives should be conditional on listing inventory on ONDC-compliant platforms. This approach ensures that public funding translates into enhanced market access and contributes to the growth of the open digital ecosystem. Additionally, government-operated digital marketplaces, including GeM, e-NAM, Khadi India, and state-level cooperative platforms, could be mandated to adopt ONDC protocols to promote interoperability and expand supplier discovery across sectors. Suppliers currently engaged with public sector entities through digital channels should also be required to make their inventory visible on ONDC-compatible interfaces, thereby enhancing transparency, competition, and accessibility in public procurement.
Furthermore, procurement by government ministries, departments, and enterprises could increasingly prioritise vendors discovered through the ONDC network, particularly for standardised goods and services. To counter monopolistic tendencies, private sector merchants and service providers operating within closed digital ecosystems could be incentivised or nudged to participate in ONDC under commercially comparable conditions. Strategic participation from large digital institutions such as banks, telecom providers, NBFCs, and payment gateways could be promoted, either directly or through partnerships, to catalyse user acquisition and reinforce network effects. Support for ONDC-aligned startups and innovators is equally vital, with targeted incentives, incubation, and pilot opportunities provided under existing digital infrastructure or startup missions. Lastly, all ecosystem development initiatives, including those spearheaded by government, financial institutions, or industry associations, could embed ONDC advocacy within their communication strategies, ensuring widespread awareness of the network’s benefits and accessible interfaces such as DIGIHAAT.
The rapid advancement of technologies like artificial intelligence and machine learning is poised to enable a new generation of digital commerce models, ones that foster participation from a wide range of suppliers and consumers. Unlike dominant global platforms that tend to standardise user experiences in ways that privilege large players and suppress local diversity, these emerging models offer the potential for greater inclusion and micro-level innovation.
ONDC represents India’s ambitious response to this challenge. But for this transformation to gain real momentum, targeted early-stage interventions are essential.
India’s ONDC presents a powerful policy alternative for the global community. It shows that through a thoughtful integration of public digital infrastructure, market architecture, and institutional backing, it is possible to counter digital monopolies without relying solely on slow-moving legislative reform. The successful scaling of a networked digital commerce architecture necessitates proactive and sustained intervention, particularly during its formative stages. Government support is essential to overcome initial inertia, as structural shifts in market behaviour typically require time to achieve critical mass. To catalyse early-stage user acquisition and foster meaningful network effects, entities embedded within closed digital ecosystems must be either incentivised or strategically integrated through well-calibrated policy instruments. Facilitating their participation in the network under commercially viable and competitive conditions is essential to level the playing field.
ONDC represents India’s ambitious response to this challenge. But for this transformation to gain real momentum, targeted early-stage interventions are essential. The network’s orchestrator must focus on building core infrastructure components like shared rails that simplify participation for businesses, allowing them to focus on their strengths while ensuring seamless customer experiences. Equally important is widespread capacity building to equip stakeholders across the ecosystem with the skills and knowledge required to engage meaningfully with this new model.
T Koshy was the founding MD and Chief Executive Officer (CEO) of Open Network for Digital Commerce (ONDC).
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
T Koshy was the founding MD and Chief Executive Officer (CEO) of Open Network for Digital Commerce (ONDC), a first-of-its-kind initiative to democratize e-commerce in ...
Read More +
PREV
