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Anhoni ko honi kar dein, honi ko anhoni Ek jagah jama hon teeno ONDC Aadhaar UPI

Episode Description

Roti, Kapda aur Makaan, The Three Musketeers, the 3 Little Pigs and 3 Idiots are just a few of the many good things that come in threes. And this phenomenon has been used to express some of history's most powerful ideas as well. “Veni, Vidi, Vici.” (“I came, I saw, I conquered”) Julius Caesar. “Liberté, Égalité, Fraternité.“ (“Liberty. Equality. Fraternity.”) The national motto of France. “Citius, Altius, Fortius.” (Swifter, higher, stronger”) The Olympic motto Aristotle observed that people find it easiest to remember three things. The rule of three started with his writing, “The Rhetoric;” In fact, the use of the rule of three is also referred to as rhetoric. The India Stack is also made up of three major components: Aadhar, UPI and ONDC (the focus of this episode). Many of the world’s most lasting jokes begin with three people walking into a bar (a priest, a reverend, and a rabbi or an engineer, a physicist, and a mathematician).Given the popularity of the Rule of three, it should not come as any surprise that our podcast is called Three Techies Banter. We would love to hear back from you. Do record or write in to tell us what you think of the show.

Transcript

Hi, I am Samiran! Hi, I am Nilesh Hi, I am Sheetal and you are listening to 3TB Banter. 3 Techies Banter.

Hi Samiran and Nilesh. You know I was just reading the marketoonist and the comic strips around it and the one that really caught my attention and has some relevance in today’s conversation was an interesting one on shopping and e-commerce shopping specifically. You have this lady who is obviously placing her orders on Amazon through Alexa and she is telling Alexa - “Alexa, please place an order for Kleenex ”. For some of you who may not be aware, Kleenex is a brand for tissues. So she places this order and says, reorder Kleenex and of course Alexa pops up and says, Amazon brand tissues are at 50% off. And so this woman goes saying, i said Kleenex and Alexa again say, Amazon brand is at 50% off. Now this lady is getting a little angry and she says, Kleenex, I said Kleenex. Of course Alexa in its true self says, the weather today in phoenix is…. And you see this woman really frustrated and says, just buy tissues. So it's really interesting how and when voice happens and the way shopping is going to change. Life is going to change a lot, especially on platforms. Platforms are going to dominate whether we buy Kleenex or we buy so limo and that is going to be the fun piece. Is our choice really going to be our choice or is it something we are going to bow down to amazon and say buy so limo tissues, it doesn't really matter. That's the interesting thing and that brings me and if all of you listeners are wondering why I was thinking about Kleenex v/s so limo, then today’s podcast is really the third episode in our theme of the month which is the India stack and today we are going to talk about data empowerment and we are going to talk about ONDC. Before we jump into the episode we just want to quickly introduce ourselves. I am Sheetal Choksi and welcome to 3TB, a podcast where 3 techies banter. It's a podcast where you can explore tech the non-tech way. Like I told you, it's full of jokes, it's full of data, it's full of fun facts and of course it has a dog barking in the background every time she is disagreeing with the men and agreeing with me. This podcast is about how tech and economics behind tech impact us today and in the future. It's full of information and fun facts. I bring common sense to the table, Samiran brings madness to it and Nilesh is the voice of reason. It's spoken in a language which everyone understands and we look forward to and hope that you enjoy this episode on data empowerment and ONDC as the third episode in our India stack. Let me talk a little more since I love this whole amazon example, when you think about online and platforms and shopping in India, various platforms come to mind. One is amazon and the other is Myntra and that is the fun bit about the duopoly in e-commerce. Yes, there are other platforms but the top 2 seem to be thee two. Nilesh, you need to give me a duopoly in another segment and Samiran you need to give me another duopoly in another segment if you think there are duopolies and monopolies in various categories.

There absolutely are in every country and most of the segments where platforms have come up, the concentration happens and we will talk about it in detail. For example, let me take the cab aggregation. So you can see it's a duopoly of OLA and Uber, nothing else. Maybe Samiran can see another one.

No, actually for me I kind of descend to the madness as in when it comes. So for me, you don't really have to be very fancy to be a monopoly and my classic cases are my Ashok Vada Pav wala near Kirti College. He I think is a monopoly and if you think of it as a duopoly there is another one near Prabhadevi, some other Shankar or something and there was one more in Dadar. The point being is that, what really makes a monopoly. The fact that people come there, people gravitate to him and my little hypothesis is that there is probably something he puts in that Vada pav. There is no reason why anybody will defy death and corona and stand in that line to take that Vada pav. Now he has got security guards, he has got a rope; he has a token system also so you have tokenization also going on. So there you are.

So let me come back from the Vada pav to the platform economy and let me talk a little bit about, right now focusing on the e-commerce space and the retail space in India. So the retail space in India is likely to be about 1400 odd billion dollars by 2026 and about 1.8 trillion in 2030. What is interesting and the reason why I am bringing this up is e-commerce which we are all kind of addicted to, we all love it, we love the comfort of sitting in our homes etc. Today it's just about 4% of the overall retail industry in this country but the expectation is that it will go up to 8% by 2025 and is likely to take a large lion share in the next couple of years going all the way up to 25-30%. Now in a space where the e-commerce market is growing so rapidly when you have duopolistic players in the marketplace then there is a challenge that we are going to sit with because these duopolies or in short monopolies are actually controlling a large percentage. So between amazon and Myntra, they cover about 80% of the e-commerce in this country. They are the leaders, maybe a little less but that's what they are covering and imagine if they continue to do that than the numbers become really -really large, then what happens to the small mom and pop stores, what happens to the millions and millions of retailers that we have scattered across the country and that i think is the interesting thing which brings me into the theme today because when we talk about ONDC and when we talk about data empowerment, one of the big things that government is looking at is after democratizing identity and democratizing payments, they are now looking at democratizing the country’s online market. So imagine its e-commerce at population scale and that's what ONDC is expected to do. Before we go in, Nilesh you want to talk about what ONDC is, what it is that they are doing, Samiran you can jump in and then talk us through how you think this is going to work.

Ya, so I would like to use Sheetal just to bring some clarity. The numbers are correct but I beg to differ on one aspect. I don't think platforms have a lot of capability to dramatically grow the market. So it can grow from 4-8%, perfectly fine but the jump from 4 to 25% is actually growth of the digital commerce market. So the pie is becoming bigger while these people have been playing in the slice part of pie. How do I increase my slice by giving better and better services? Why do I say that is, the platforms you know, what is a platform? Platform essentially is that you have the whole value chain under a single entity. When I say the whole value chain, you have buyers, you have sellers, you have logistics, you have service delivery under a single umbrella. Now what it does is, if the platform gives a great service, there is concentration that happens. So obviously more and more sellers, even if they have predatory pricing mechanisms or whatever they are, it's like a winner takes all, they will gravitate towards the platform. But for increasing the market multiple times, you cannot have just pure contraction and will not do it because there will be some mom and pop shops and all. The kind of pricing they have or the kind of entry barriers, you will not see them onto this platform. So they will be excluded. Similarly, people who do not maybe have a way of paying or discovery or understanding of this whole system because of the knowledge or digital nativity as I may say, they will also not gravitate. So the growth will not happen in dramatic scenes from the platform perspective. Having said that, this concentration leads to the monopoly duopoly idea so there's no doubt about it. And ONDC is the answer. So ONDC is one thing and I am highly excited about it. ONDC is something that can grow this pie; it can grow 45 to 25%, otherwise in a shorter period of time. We saw that with Aadhar, we saw that with UPI, the kind of operational scale, the interoperability that it provides and the scale it provides, that is the real growth and we saw it. Mind boggling numbers. Last time we saw it, it is going to flip now. The digital payments are going to be more than the offline payments very soon and the biggest catalyst was UPI. Similarly, ONDC is going to be that growth factor.

So in fact famously in some interviews it said, ONDC is the UPI movement of e-commerce is what they are saying and just another thing, I would just like to quickly step back and talk a little bit about the platform. So obviously there are dominating platforms and they exercise undue power or maybe disproportionate power. The other thing that also comes into play and why they do it, is this whole concept of network effect or network externalities and very long ago it was proposed as a part of the Telco networks is that where it's called Metcalfe’s law which says, the value of a telecommunication network is the square of the number of connected users which means as the number of users grow, the value of the network grows disproportionately and I think somewhere with all the large platforms and it's no surprise that most valuable companies in the world are platform companies. Microsoft, Alibaba, Amazon, Google, Apple, everyone is a platform company because they realize that platform is the…. So I think the ONDC network and when we kind of come back in the next section we will talk about is the government’s attempt to manage e-commerce in an equitable way without regulating it because you can very easy become a regulator and say do this, do that but i think the government is very cleverly trying to introduce a market correcting mechanism by a way of ONDC, riding on the back of Aadhar, payments, GST, fastag and others and trying to make this a more level playing field by introducing ONDC and we will kind of talk about that a little more when we come back.

So before we jump into the next section, because we haven't covered this for you, for those of you who are wondering what ONDC is, it is an open network for digital commerce.

That's common sense for you.

I just jumped into using the acronym but all of us need to know what ONDC stands for and it really stands for open network for digital commerce and we will come back and talk a little more about ONDC in the second segment.

Hey, welcome back. So in this section we are going to try and unbundle ONDC which in turn is trying to unbundle e-commerce which in turn is trying to do some more unbundling somewhere. So I think like we spoke in the previous section, ONDC is really the government’s attempt to intervene in the e-commerce market place without really intervening and the intent like we talked about, it's going to be a 1 trillion market and they hope that so much of it is going to be e-commerce driven because of India’s population scale, everything is a large number so we hope 200-250 billion is going to be e-commerce so we obviously want it to be equitable. So essentially I think, also please bear in mind that this is really work in progress so please don’t kind of take what I saw and jump into the ONDC bandwagon. But from whatever reading we have done, it is essentially one protocol or a set of protocols that allows interoperability between different markets and platforms. It allows a set of buyers to form groups from large groups or small groups and take their demand to X platform or platforms using this ONDC protocol. At the other end of that there will be a set of sellers who could be from anywhere and the whole mechanism is that the protocol is supposed to shape the query. Think of it like a Google search being constructed based on your requirement and that is being put to a set of sellers, then offer a whole bunch of sellers, offer what they have through that protocol and you buy it. There is some super simplistic, it is extremely complex and it is riding on a lot of digital infrastructure that has been created over a decade now. The intent of the government therefore is that buyers however big or small they are and sellers however big or small they are, have a place of coming together without the platform really exerting too much influence or pressure or being able to direct demand or supply in a certain manner. So that was at least what I could gather but Nilesh you maybe have a different perspective.

So Nilesh before you jump in I have something. What Samiran mentioned as super simple was really super complicated in the way he said it. So let me simplify it for you guys. Let me put this in pure and simple English for you, for those of you who thought about what set of protocols allows for buyers and sellers to do whatever that he said. Basically what they are trying to do is, digitize the entire value chain, that is standard operations and they want to bring in logistical efficiency such that small retailers can get included without having to worry about everybody being on the same platform. It's as simple as that. To achieve that super simple solution there is a lot of complexity behind it. Sorry Nilesh, all yours.

So both of you have already to a certain extent explained what ONDC is. Thankfully you gave the full form for ONDC in the last section, open network for digital commerce. To simplify it, if I had to say what is the life cycle of a commerce transaction and I am keeping it very generic, we can think of e-commerce, we can think of delivery, we can think of cab hailing but what is the typical life cycle. So if I have to say, every person starts with discovering whether I want to do travel, tourism, food, e-commerce. So discovery is the first aspect. The second aspect is shopping. After you shop, you have to pay for the service or the goods. Then is the delivery, if it is in person transaction, it is then and there or it is the delivery involved. After delivery comes essentially, you may think of rewards and royalty and the whole system needs to have some grievance and dispute resolution mechanism. So broadly if I have to say commerce transaction has to look like discover, shop, pay, deliver, reward and dispute and grievance management. What ONDC has done is, they have handled this. So what platform was doing was, they were doing all of these multiple things, the whole lifecycle under AGs of a single organization. So let’s say amazon, amazon is managing this for you. Honestly when you look at your transaction details you will look at, inside amazon it is actually unbundled. So there are pillars on amazon, there are logistic folks suppliers of that service on the platform and there are buyers. But the platform was giving you kind of this end to end service and in effect that was the reason for the concentration of people on the platform and hence the monopolistic nature. Now ONDC is doing is they are unbundling this and duty is, i have to come back to my favorite topic which is decentralization so essentially they are decentralizing and in decentralizing they have created an economic model where every participant has a take to be a good Samaritan on the platform. So when i say this, i have unbundled, now the discovery and the sharp part is the buyer side. So now I am taking a example, forget you login on Amazon is what you do to buy and shop, on a ONDC think of it that you are banking with SBI, now State Bank of India may decide to offer certain wealth consumer or certain segment of consumer whatever is there in their mind, it might want to offer you buyer side application, which actually connects to ONDC and they may say for my wealth consumer on SBI above certain I am going to give you buyer side application and you can buy Montblanc Pens, now today if SBI have to do that they will have to bring a seller, there will be a complete department who will run is whole of onboarding Merchants and together do logistic support but on the ONDC what happens is, SBI is only going to look at buyer side I will give you buyer app and would give you fantastic interface, once you do discover and shock the request for your Montblanc Pen might go through a gateway, again run by ONDC, this gateway will broadcast that is Montblanc pen is required to multiple seller who are on the platform and the seller will return their codes to you and your buyer app will show them, so the experience should be exactly similar to Flipkart or Myntra, it won’t be different. But what it does now is that the bank has a stake in creating fabulous buyer side experience. On the other hand if the seller is sending you a code and not servicing it, there is a chance the seller is off boarded from the platform, so there would be mechanism and we will be talk about more of Reputation management, where by seller need to manage their reputation on platform, first the seller need to be on-boarded on the platform then the reputation has to be managed that they keep doing the business and the best part for the seller is, if they do these good stuff and manage their reputation the margins are much higher, if you are doing the same thing on Amazon but not getting the kind of margin but you may pass out this benefit to the buyer by giving them a great price, so it is the win-win situation from all the side of core economic concept. For me ONDC essentially is unbundling and a protocol which helps you to navigate this unbundle service.

So, the reason why we are looking at E-commerce so intently, is that Sheetal had that example of how she also has become the little aggregator and holder of Pan when she goes and buy lot of them and now her PAN wala have turn around and told her that why don’t you just order it online. (Laughs) So, I have some of the pet theories, just like paradox, some intoxicant theory in the Vada Pav. I have another theory that beggars and Nariyal wala in Bombay have transferable Jobs, they have the centralized network, so the Beggar you see at Siddhivinayak will be there for a month and then will go to other side, I know for the fact the Nariyal Pani wala which use to be at Nirmal Building actually I saw him near Stock exchange after a month. So, the decentralization is built into the fabric of how we operate.

That PAN example, which Samiran mentioned, I think is unbundling if you look at it. Suddenly PAN wala said unbundle the logistics, let DUNZO or online do it for you, why you have to come and buy for a whole week.

So, what interesting for me of whole ONDC thing is as a country, let me honest we were socialist kind of country and then we realized that we need to be more capitalistic but what ONDC does is it allows for the capitalistic growth but it also ensures that the small guy on the street is able to participate in the capitalistic growth and I think that is fabulous, capitalism is not bad please go ahead and be a capitalist.

Being an equal opportunity capitalist is an issue.

Correct be an equal opportunity capitalistic and I think it is a very interesting way of looking at it v/s is the old socialist regime which says take from the rich and give to the poor and ultimately everybody becomes poor because nobody wants to work hard. I thought that is the interesting piece for me, that now we are empowering the young guys and saying come actively participate in a space which is highly capitalistic and how hard you work and what you put in and the trust that you build and the reputation, really decides how large you can grow and no longer it is about few companies, it is about everyone play and participate.

That is why I mention in the 1st section the growth of the manifold of digital commerce that we will see. We will only see when there is more participation on it, and it just cannot happen with the platform setup, it has to be a protocol, it has to be a network. The other interesting bit is the success of the platform is when it reaches and winner takes it all, is economies of scale, ONDC is completely opposite, it is actually specialization and innovation, so when I say this think about it and going back to my example of SBI wealth consumer Mont Blanc is still sold by many digital native sellers, but think I can give you exclusive that you can buy Pashmina from Leh or Kashmir or something more obscure, which you will not see those products on Amazon, or a Thangka from Sikkim, those things are not easily available, so the enablement from the buyer app side is what SBI have to do without thinking of how I am going to source this Pashmina from Leh or Thangka from Sikkim and deliver it, at the same time the artisan living in this village have such a small audience who is aware of it through tourism and COVID killed that also, so for them they are not limited to that, now they have suddenly access to buyers across India without doing any effort to reach them, the protocol is just to connect you all around. So, for me ONDC does not happen anywhere in the world, I will be watching this space very closely and the success of this will catch up India digital commerce to the next level.

So, a few data points for you before we close this section and jump into the next one. ONDC have already rolled its test out in 5 cities which is Delhi NCR, Bangalore, Shillong, Coimbatore, currently ONDC focus on retail, restaurant and facilitating their real time online transaction, but there are plans to extend ONDC to other category like Nilesh was saying, so they will look into things like Hospitality, travel, mobility, so it is not just about retail in traditional way it is going to go much more and these are just some category they are talking about, it could change the game on the whole bunch of things, which are currently platform driven, so it is a protocol. Before we go into the next segment we know a lot of you, like us, have a lot of questions around ONDC. So what we are going to do in next segment is we will do a quick round of FAQs around ONDC and we will try to decode it as much we can and bring you some answers because let be honest it is still in the test phase and lot of question people have, there are lot of answers we don’t have but we will try to attempt most of the questions.

Welcome! Back to the third segment of this Episode and this segment I am going to do a quick Rapid Fire, question around with Samiran and Nilesh. It is really a question people told us they had around ONDC. Samiran, 1st question is for you: If the ONDC team is talking about on-boarding 2 million sellers, how do you think the on-boarding process would be?

Just pairing in mind that it is work in progress but I think they are doing just like any other platform service or network, they are going to be having some kind of KYC protocol where you need to declare who you are, what’s your eligibility to be a seller, some small checks and balances which bring you eligible on the platform and the next level filter which is the flea market part, that as you progress and your behavior drives how good or bad seller you are, so something stays with just fundamental principles, and not make it super difficult to get on but once they are ON they need to be worthy to be ON, so there is going to be some checks and balances, once they get on so transaction, reviews will drive.

Nilesh you talk about the journey and one of the Journeys is on-boarding but one of the key journeys is fulfillment. What happens with Supply chain and logistics in ONDC, because it is Amazon delivery what happens on an open platform like ONDC?

So, going back to my example of unbundling, everything is unbundle there will be logistic provider on ONDC platform, so like seller you would also on-board so they are also seller of the surface which is logistic, 2 things can happen of what I read and understood, seller take care of all logistic, Amazon can be on ONDC and they might handle the logistic, but taking back to your PAN wala thing, he might need to use logistic provider which is unbundle and you will also have a group of provider who is also on the ONDC network so you use that logistic for delivery, like Samiran mention reputation is the thread that ensures everyone.

Another question we always wonder, here is the question for you Samiran which is going to be a bit of a twist. Amazon today is able to give us fantastic service, because they have data and AI which is utilized and manipulated, so I know they are taking data and I have concern about Data privacy and I am also aware that some of my experiences are great because it has my data. What happens to Data Privacy and Data Management, when you are looking at an open network does GOVT own it or private?

So from the best of my knowledge it obviously do not sit on the protocol, ONDC is not taking your Data at all, as we talked earlier it is going to be a whole set of buyer apps so each of the apps own people and they will have individual privacy norms and they will then building up your profile, the beauty of such is I don’t think one person will control all the data, the buyers side app will have something about you, seller side will only get that feed fulfill it. So while we have not solved the problem of complete data privacy, I think accruing the same thing again, unbundle the privacy problem and spread it around a little more so no1 can build the full profile of you. At least from the best of my knowledge GOVT is not intending to hold on your data, they will know how many times UPI is used, validation, authentication, and stuff like that. It is not a solution to data privacy; I think we would have moved away from one platform knowing it all to everybody knowing little bit about you.

If I was the seller on Amazon, I know that I don’t get any information related to the end consumer, because Amazon becomes the Gatekeeper for me, but do you think on ONDC seller gets to know the buyer better simply because the seller has little bit more data about you and is able to provide better service to you, honestly at this point of time platform are the gatekeepers, will this remove the gatekeepers in that sense.

So in my sense, I think the ONDC is the solve for the market and not solve specifically for people getting better data about you, so we are trying to create the intervention that creates better buyer requirement and better seller discoverability at the other end, which makes it possible for more equitable market to exist, but I think the owner of discovering and profiling might be with the seller, I don’t know how the protocol will evolve but honestly today I don’t think ONDC plans to collect your data and sell it, I mean you can buy the data from Amazon, Hindustan Unilever does it but I don’t think that is the intend, I am seeing this as a market fix as suppose to the ability of somebody to get more information as an individual.

I think to add a little bit, my short answer is no, the seller will not know the end buyer, as I tell you it is a transaction message which goes through a gateway, so the buyer side application will know you as they have to essentially service you, the seller will get the transactional details. If you want Pashmina from Leh that person won’t know he would just say this is 10 Pashmina shawls.

Last question for you Nilesh: Is how after the fulfillment we face problems like return, grievances, delivered incorrectly or broken? How do you see the grievance management happening on ONDC?

So I told you about the economic construct, so the whole owner is given to buyer and seller, buyer side application takes care of buyer and servicing and delivering is taken care of by the seller. Now what does ONDC provide as an protocol and network is that they are creating 2 framework one is the open dispute kind of frame work so what they will do is they will facilitate dispute resolution but network is not a marketplace, it is just facilitating the disputers, so the dispute resolution framework I think it is in the pilot and second thing they are doing is reputation so the reputation and algorithm is well placed and tested so whereby seller need to maintain reputation to be on the platform, my answer to grievance related.

So, these were the questions we have from people. If you have any questions on ONDC please feel free to write to us. I would let Samiran lighten up the mood a little bit before we wrap this episode on ONDC and Data empowerment.

(laughs) Cannot think of anything.

Also we have some very exciting news for you. In the next couple of weeks we are going to have with us Vinod Verma who is one of the key architects of India stag, if you have questions I am sure we can get him to answer. With this we come to the end of the 3rd Episode and another episode of 3 Techies Banter. If you like our Banter, please share the episode, and don’t forget to follow the show, we are available on major podcast platforms. If you are on an apple podcast, please leave a rating and review. Until the next time.