Unlocking Opportunities for Banks with ONDC: Navigating Challenges and Embracing the Future
While banks are still exploring how best to leverage ONDC, our experience working with banks of varying sizes and digital maturity has allowed us to identify key challenges and propose strategies to address them
- Jul 18, 2023,
- Updated Jul 20, 2023 11:33 AM IST
The Open Network for Digital Commerce (ONDC) is India's transformative eCommerce project, often associated with the retail industry. Its aim is to decentralize the marketplace, offering equal opportunities for sellers of all sizes and localized options for buyers. Remarkably, ONDC plans to increase eCommerce penetration from 8% to an unprecedented 25% within two years.
However, the potential impact of ONDC extends far beyond retail. We believe that the next significant opportunity lies within the financial services space. For instance, ONDC enables banks to address the needs of micro, small, and medium enterprises (MSMEs) by providing working capital loans and other financial services. This presents a growth opportunity for banks to acquire new customers and expand their existing customer base.
While banks are still exploring how best to leverage ONDC, our experience working with banks of varying sizes and digital maturity has allowed us to identify key challenges and propose strategies to address them.
Opportunities for Banks with ONDC:
1. New channels: ONDC offers a modular and unrestricted marketplace, serving as a new channel for both retail and wholesale use cases. Major banks like IDFC FIRST and Yes Bank are already utilizing ONDC as a platform to reach customers who were previously unable to access branches or online channels.
2. Tech as a service: By combining buyer and seller apps, financial services companies can become holistic banking tech stack providers. This expands the business-to-business-to-customer (B2B2C) landscape, creating additional revenue streams through subscription or value-added services.
3. Data-driven banking: Banks gain access to a wider range of customer data, enabling them to personalize experiences, offer relevant promotions, and loyalty programs. For MSME customers, ONDC-enabled relationships provide better visibility into orders and invoices, leading to improved creditworthiness assessment and tailored financial solutions.
Challenges for Banks with ONDC:
1. Grievance redressal: The resolution of grievances within the ONDC platform is still under development. Financial institutions launching buyer/seller apps should establish robust mechanisms for grievance resolution to maintain customer trust and brand reputation.
2. Privacy and data security: Banks must ensure privacy and data security safeguards, as policies governing ONDC-specific data are yet to be established. Proactively defining data governance guidelines will facilitate compliance when policies are implemented.
3. Policies to scale: As ONDC accommodates an unlimited number of participants, policies must be designed with scalability in mind. Banks should adopt a principle-based model to allow flexibility and adaptation over time.
4. Customer experience benchmarks: To succeed on ONDC, banks must match or surpass the user interface, user experience, tech maturity, and fraud management capabilities of existing marketplaces like Amazon and Flipkart. This will instill confidence in consumers and encourage long-term adoption of ONDC.
Getting Started with ONDC:
To overcome these challenges and embrace the opportunities presented by ONDC, banks should:
● Evaluate use cases for complexity, effort, and exceptions with a solid business rationale
● Embrace the evolution of the platform and maintain agility
● Forge strategic partnerships with technology allies experienced in leveraging ONDC, open-source frameworks, and security/scalability aspects
Having won the ONDC Hackathon in 2021, we have been partnering with ONDC, providing solutions and expertise. We understand the intricacies of leveraging the platform and can assist banks in navigating its vast potential.
By recognizing the broader implications of ONDC beyond retail and proactively addressing challenges, banks can position themselves at the forefront of the digital commerce revolution in India.
Author: Mahima Gupta, Principal Consultant, Financial Services at Thoughtworks and Ritika Shetty, Lead Consultant at Thoughtworks
The Open Network for Digital Commerce (ONDC) is India's transformative eCommerce project, often associated with the retail industry. Its aim is to decentralize the marketplace, offering equal opportunities for sellers of all sizes and localized options for buyers. Remarkably, ONDC plans to increase eCommerce penetration from 8% to an unprecedented 25% within two years.
However, the potential impact of ONDC extends far beyond retail. We believe that the next significant opportunity lies within the financial services space. For instance, ONDC enables banks to address the needs of micro, small, and medium enterprises (MSMEs) by providing working capital loans and other financial services. This presents a growth opportunity for banks to acquire new customers and expand their existing customer base.
While banks are still exploring how best to leverage ONDC, our experience working with banks of varying sizes and digital maturity has allowed us to identify key challenges and propose strategies to address them.
Opportunities for Banks with ONDC:
1. New channels: ONDC offers a modular and unrestricted marketplace, serving as a new channel for both retail and wholesale use cases. Major banks like IDFC FIRST and Yes Bank are already utilizing ONDC as a platform to reach customers who were previously unable to access branches or online channels.
2. Tech as a service: By combining buyer and seller apps, financial services companies can become holistic banking tech stack providers. This expands the business-to-business-to-customer (B2B2C) landscape, creating additional revenue streams through subscription or value-added services.
3. Data-driven banking: Banks gain access to a wider range of customer data, enabling them to personalize experiences, offer relevant promotions, and loyalty programs. For MSME customers, ONDC-enabled relationships provide better visibility into orders and invoices, leading to improved creditworthiness assessment and tailored financial solutions.
Challenges for Banks with ONDC:
1. Grievance redressal: The resolution of grievances within the ONDC platform is still under development. Financial institutions launching buyer/seller apps should establish robust mechanisms for grievance resolution to maintain customer trust and brand reputation.
2. Privacy and data security: Banks must ensure privacy and data security safeguards, as policies governing ONDC-specific data are yet to be established. Proactively defining data governance guidelines will facilitate compliance when policies are implemented.
3. Policies to scale: As ONDC accommodates an unlimited number of participants, policies must be designed with scalability in mind. Banks should adopt a principle-based model to allow flexibility and adaptation over time.
4. Customer experience benchmarks: To succeed on ONDC, banks must match or surpass the user interface, user experience, tech maturity, and fraud management capabilities of existing marketplaces like Amazon and Flipkart. This will instill confidence in consumers and encourage long-term adoption of ONDC.
Getting Started with ONDC:
To overcome these challenges and embrace the opportunities presented by ONDC, banks should:
● Evaluate use cases for complexity, effort, and exceptions with a solid business rationale
● Embrace the evolution of the platform and maintain agility
● Forge strategic partnerships with technology allies experienced in leveraging ONDC, open-source frameworks, and security/scalability aspects
Having won the ONDC Hackathon in 2021, we have been partnering with ONDC, providing solutions and expertise. We understand the intricacies of leveraging the platform and can assist banks in navigating its vast potential.
By recognizing the broader implications of ONDC beyond retail and proactively addressing challenges, banks can position themselves at the forefront of the digital commerce revolution in India.
Author: Mahima Gupta, Principal Consultant, Financial Services at Thoughtworks and Ritika Shetty, Lead Consultant at Thoughtworks