93% of retail in India is still offline
India, a country of 1.3 billion people, is a melting pot of 28 states and 8 union territories, each with its own unique culture and ethnicity. Despite this diversity, when it comes to commerce, which is intertwined with culture and ethnicity, it is important to consider local preferences rather than simply aping the West.
While the West has taught us valuable lessons about customer focus and execution, it is time to penetrate deeper and bring the philosophy of “Unity in Diversity” into cormmerce as well. Retail in India is a $1.3 trillion industry, contributing 7% to GDP and projected to grow to $2.0 trillion by 2030. Yet, 93% of retail is still offline.
The dichotomy lies in the fact that consumers want personalized and convenient experience, while merchants do not appreciate the real value that technology can offer to serve the consumers. This is where the Open Network Model comes in.
Technology enabled Open Networks
The open networks leverage modern technologies and allow everyone to participate. This truly democratic model smoothens out the technological frictional points of entry and exit and digital touchpoints, for all the participating entities.
Furthermore, this open network model, solves the challenges of technology adoption and that of deployment at population scale simultaneously. The open networks have been built on strong foundations of India Stack, aka, Digital Public Infrastructures, refer the image. Together they enable online, paperless, cashless, and privacy-respecting digital access to a variety of public and private services.
India Stack – Digital Public Infrastructure and its benefits
Identity layer including Aadhaar and PAN, digitized and simplified the KYC procedures and lowered the cost of compliance for banks that use e-KYC from $12 USD to $ 0.06 (6 cents). The decrease in costs made lower income clients more attractive to service and generated profits to develop new products.
Roughly 4.5 million individuals and companies have benefited from easier access to financial services through the Account Aggregator, since it was first launched in August 2021 and 8.8. million new taxpayers added to GST ecosystem.
The UPI was launched in 2016, and now it is the most popular and preferred payment mode accounting for 75 per cent of the total digital payments. As per RBI governor’s report in March 2023, daily UPI transactions crossed 36 crores, up 50 percent from 24 crore in February 2022 with more than 260 million unique users. The value of UPI transactions has increased from just Rs 1,700 Cr to Rs 12.98 lakh Cr in this period.
Next turn, Commerce
Currently, the Open Network for Digital Commerce network model (ONDC) is in implementation. It started as a concept in 2020 and a reality now with more than 10,000 merchants across the country discovered by a million customers daily on ONDC network.
The Open Network for Digital Commerce (ONDC) model unbundles the marketplace model into three distinct components viz., Seller, Buyer, and Logistics Provider.
Seller – One who has a product and is interested to sell it in a particular area to a targeted set of customers.
Buyer – One who is interested in choice of offerings and wants to choose the best product or service meeting his/her needs.
Logistics Provider – One who is interested to fulfil the order by moving the goods from the seller side to the buyer side seamlessly.
In an Open Network model, the same order can be fulfilled seamlessly by participation from multiple local entities with varied interests without compromising the quality of service and with little technical knowledge needed to transact on the network.
Chief Digital Officer and Co-Founder
nStore Technologies
In the next 5 years, ONDC aims for a market transformation with INR 3.7 lac crores additional GMV, 90 Crores Buyers and 12 lacs Sellers enabled on the open network.
Promising time for Credit growth
Open Credit Enablement Network (OCEN) digitizes and standardizes the loan life cycle across financial institutions and marketplaces and aims to bring Credit to the fingertips. It will coexist with the Commerce layer and will be equally accessible to potential lenders and borrowers with multiple offers on an open network.
Credit growth in India is already on upswing with banks and financial institutions getting it to 15.4% in 2023, up from 9.2% in 2022. It is likely to continue for next 2 years in the range of 15%.
In conclusion, every layer of the India Stack’s Open Network model is thriving on its own and simultaneously bond with the other Network layers to unlock high value of outcomes at population scale. This multi layered Open Network model is truly democratising and it is the model that promises to level the field at scale and provide opportunities to all by lowering the centre of gravity to the lowest level while all participating localized entities such as KYC partner, seller, buyer, logistics partner, fintech partner, lender, borrower are considered equal based on their merit.
