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Why do we need ONDC and other open protocols? Beckn co-founder Pramod Varma answers

Varma explained that the role of open digital protocols is to facilitate the third layer of public digital infrastructure.

Open protocols are crucial for a country’s digital empowerment and India’s diversity and size calls for it. The more we decentralise through such protocols, the more opportunities we create for new platforms to emerge and thrive, Dr. Pramod Varma, co-founder of beckn.org, said at IAMAI’s India Digital Summit 2022.

The Indian government has been working on rolling out the Open Network for Digital Commerce (ONDC), a digital project announced in 2020 to develop an open UPI-like architecture for the e-commerce industry. But very little is known about what role such a network will play and why we need it. Varma sheds more light on these questions.

What makes up a country’s public digital infrastructure?

Varma explained that the essence of the larger digital infrastructure, as well as digital empowerment story, distills down to three layers:

  1. Digital identities: This foundational layer allows people and entities to say who they are, which is key to being able to participate in any digital transaction, Varma said. Aadhaar, PAN, GST are examples of this layer, Varma added.
  2. Digital assets and credentials: 
    • Assets: People accrue digital assets such as money in the bank or property records. Add data to this, which Indians are accruing at a fast rate because there are more than 500 million people active on the Internet who are leaving behind a digital footprint as they interact with various platforms, Varma explained.
    • Credentials: Another form of asset that forms the second layer is credentials or certificates. For people with a college degree or working for a big company, it is easy to verify the same, but it’s not easy for most blue-collar workers such as carpenters or mechanics to prove their skills. This is because their skills and proof of work are not portable, which is why digital credentialing is an important asset, Varma explained.
  3. Digital transactions: After the “who I am” and “what I have” layers comes the “what I do” layer, Varma remarked. “What I do is everyday things: I might be looking for a job, I might be applying for something. I might be looking for a nearby lab hospital facility, I may be looking for a loan offer from someone, or I may be a provider of it as well. So I might be a service provider. I may be a plumber who is on Urban Company looking for a deal to come through,” Varma elaborated. To carry out these transactions, people need the third layer. This is where the government’s role comes in: to build digital highways, digital railroads and the other infrastructure that startups can use to create value,” Varma said.

Why do we need open digital protocols?

Varma explained that the role of open digital protocols is to facilitate the third layer of public digital infrastructure–the digital transactions layer, and we need them because:

  1. The role of platforms in the middle: “I think we can just go back to anytime in humanity’s history when there were service providers on one side who were saying I can provide information, I can provide products, I can provide services. On the other side consumer saying I want information, I want to find where the nearby job is, I want to find a product nearby. How these two get solved traditionally is through a platform in the middle,” Varma said.
  2. The problem with having just one big platform: 
    • Difficult to cater to everyone: The first problem with just a few players such as Amazon and Uber trying to match all the customers’ demand is that it is hard for them to become universal and cater to everyone.”Like today, if you look at Uber, it does less than one or two percent of countries mobility. I mean, if you put mobility as a whole, if you look at buses, metros, autos across the country,” Varma gave as an example. India is extremely diverse and multilingual in every sense we can imagine. “One platform solving the digital economy problem for the whole billion people, I think it’s impractical, Utopian, and not going to work,” Varma said.
    • Antitrust issues: And even if a platform grows really big, people will start looking at it from an anti-competitive lens, Varma said. When the value is concentrated in one platform, regulators start asking if this is a risk for the country, Varma added. The ONDC project was in fact launched in the wake of a large number of complaints of malpractices and monopolistic tendencies of existing e-commerce companies.
  3. Internet was not built that way: “What is interesting is that Internet was not built that way. Internet is not one platform. Internet is a network. We’ve had many, many platforms connected through interoperable protocols like HTTP, SMTP,” Varma remarked. But since 2000, US standard bodies became slow in building new standards and left it for Silicon Valley to solve, Varma explained. “And in Silicon Valley, if I am building a platform, of course, I want to be a big platform,” Varma added.
  4. Taking forward UPI’s success to other areas: The Unified Payments Interface is an open set of protocols inspired by the Internet and has been hugely successful in terms of enabling financial inclusion and efficiency. This has got people thinking why only stop at payments and why not build something similar for tourism, commerce, healthcare, lending, etc, Varma explained. In Kochi, for example, the government is experimenting with an open mobility network that allows travellers to avail themselves services across multiple modes of public transport–bus, taxi, metro, auto– via a single app.
  5. A whole new world of opportunities: Once the framework for protocols are built, we are essentially inviting more and more platforms into that market. “We are saying, let there be platforms, many, many platforms. Why only one platform?” Varma remarked.
  6. ONDC is an early attempt at unifying commerce: ONDC will define the language through which you can discover a listing, select a listing, buy a listing, fulfil it, maybe return it if it’s not correct or raise a grievance, Varma explained.”There is a lot of buzz on ONDC. It’s an early attempt at unifying a highly fragmented, diverse, large provider to consumer network in the commerce world through an open protocol instead of saying the government will build one more platform,” Varma said.

“Must admit that it is a dream. But you know what? Some of us are crazy. I think India’s diversity calls for attempting something like this. And we have the policymakers and startups who are listening and saying, the more you decentralize the more innovation opportunities I’m going to get. The dominant incumbent platform might feel it as a threat, but most people will see more opportunities.” – Pramod Varma

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