Why ONDC's core principles could challenge Ola-Uber duopoly in mobility services

The Indian online mobility market, which has long been dominated by Uber and Ola, is about to face a major disruption as the government-backed Open Network for Digital Commerce (ONDC) enters the fray. ONDC's entry is aimed at establishing a level-playing field for all stakeholders in the mobility space, potentially shaking up the current duopoly and paving the way for increased competition and innovation in the industry.

The idea was first tested with Kochi Open Mobility Network (KOMN) last year, which currently has a network of 2,200 drivers, collectively doing over 200 trips daily. ONDC made a significant move recently by on-boarding Bengaluru-based auto booking app Namma Yatri onto the network.

The long-standing concerns in the online taxi service industry, which include issues such as surge pricing, safety concerns, lack of transparency, and inadequate support, have left both users and driver partners frustrated and dissatisfied with the existing services offered by companies like Uber and Ola. ONDC's core principles of unbundling and interoperability make it a suitable solution to create a new ecosystem that can address the industry's inadequacies.

“The core principles of ONDC are unbundling and interoperability. We unbundle demand and supply as two separate businesses where any large consumer apps can become the buyer side and any dedicated mobility player can become seller by on-boarding drivers or vehicles,” Nitin Nair, Senior VP, ONDC, said.

Also read: EXCLUSIVE: Dunzo, Loadshare in talks with ONDC to launch bike taxi services

The financial structure of online taxi services, which requires drivers to bear high commission costs, has led to disinterest in doing business and a poor customer experience. This is where ONDC’s principle of ‘unbundling’ comes to play. It will separate the demand and supply sides of the business in the mobility sector, aiming to take away the total control of platforms on their drivers.

“In the current prevalent commission structure, drivers end up paying high charges. This makes it unviable for drivers and therefore a large segment of drivers are disenchanted. This driver dissatisfaction also translates into bad consumer experience. ONDC is trying to solve this as it unbundles the supply and demand to rationalise the commission structure and improve user experience. The overall cost structure for the industry is expected to come down which will translate into value for everybody,” Nair said.

Also read: ONDC not a platform; doesn’t compete with Flipkart, Meesho, Amazon: DIF chief Arvind Gupta

ONDC's second step involves distributing demand generation across multiple consumer apps on the network, providing users with more options to book a taxi online beyond just two platforms, ultimately expanding the customer pool for drivers.

"An open mobility network on ONDC will build a large ecosystem of customers and service providers, fueling many innovations and possibilities. First, it increases customer convenience by digitising and integrating all mobility services. Then, it provides equal opportunities to mobility players of all sizes and between existing and new players. It also helps drivers and service providers to earn a livelihood not beholden to platform interests. Finally, it amplifies the impact and the leverage of public transportation systems. What UPI and NPCI did to digital payments, ONDC intends to do for mobility," Vimal Kumar, CEO & Founder of Juspay, the start-up behind Namma Yatri, said.

Paytm, the first buyer app on the network, is in the process of launching mobility as a category on the app while several other large consumer-facing apps including PhonePe are being on-boarded on to the network. The momentum of ONDC is expected to increase significantly once some of these apps introduce mobility as a service, without having to build separate interfaces for each provider, enabling their customers to book various taxi services through their platforms. The idea of ‘interoperability’ allows any seller apps like Namma Yatri to connect with all buyer apps and tap into their customer base to generate demand. This principle allows drivers to be a part of any seller app and be visible across all buyer apps on the network.

“ONDC will open up multiple customer discovery channels and customers will get a number of choices. This competition will make everyone sharper. Drivers know that they are competing against each other; seller and buyer apps know that they are not the only ones offering a driver or a trip. They all become sharper, will be careful with the pricing and service because they need to justify what they are charging. With ONDC, I expect both Ola and Uber to become sharper and better. If Ola and Uber want to stay in this business, they will have to join the ONDC at some point in time,” Satya Arikutharam, an independent mobility expert, said.

ONDC is currently expanding its supply network to cabs and other services and plans to make mobility live in multiple cities in the next 6-12 months. As a next step, ONDC aims to apply these principles to integrate different modes of transportation, such as intra- and inter-city buses, metro, and suburban rail to enable multi-modal transportation.

“As we bring other modes of transportation such as intra- and intercity busses, metro, sub-urban rail, cabs, autos and bikes into the network, the next big opportunity is in building a multi-model transportation network. This will potentially enable consumers with a single ticket or QR code enabling an entire journey including a single payment. This is what ONDC mobility wants to be in 12-18 months,” Nair said.

It remains to be seen how these principles will be implemented and whether they can effectively challenge the existing duopoly of Ola-Uber, but the potential for a more efficient, equitable, and user-friendly mobility services ecosystem is certainly on the horizon.