He co-founded the software powerhouse Infosys Ltd., became a billionaire and continued to lead a colossal government program to create biometric identification for India’s nearly 1.4 billion people.
Now 66 years old, Nandan Nilekani has another ambitious goal. The high-profile mogul is helping Prime Minister Narendra Modi build an open technology network that seeks to level the playing field for small merchants in the country’s fragmented but fast-growing $ 1 trillion retail market.
Its stated purpose is to create a freely available online system where merchants and consumers can buy and sell anything from 23-cent detergent bars to $ 1,800 airline tickets. But its unspoken goal is ultimately to curb the power of Amazon.com Inc. and Walmart Inc.-owned Flipkart, whose online dominance has alerted small merchants and the millions of local mom-and-pop stores, called kirana, that form the nation’s retail backbone.
As the two global giants together poured $ 24 billion into India and conquered 80% of the online retail market with aggressive discounts and promotion of favorite sellers, the kirana stores fear for an uncertain future. Despite the fact that online commerce accounts for only about 6% of the total retail market, they are apprehensive that they will eventually be wiped out and face a fate similar to many family-owned businesses in the United States and elsewhere.
The non-profit system, which goes by the unmanageable name Open Network for Digital Commerce or ONDC, seeks to address these concerns. Never tried anywhere else, it aims to give small merchants and retailers the opportunity to join and get the giants’ reach and economies of scale. Basically, the government wanted to create its own e-commerce ecosystem for everyone, designed to loosen the stranglehold of companies like Amazon, dictating which brands get access to the best consumers and on what terms.
“It’s an idea whose time has come,” Nilekani said recently in a conversation at his private office in the Billionaire’s Row area of Koramangala, Bangalore, home to some of the country’s leading technology magnates. “We owe it to the millions of small sellers to show an easy way to participate in the new high-growth area of digital commerce.”
A pilot of the not-for-profit, state-run network is set to roll out next month to select users in five cities. Lenders, including ICICI Bank Ltd. and state-owned Punjab National Bank and State Bank of India, have bought shares in the unit. A spokesman for Amazon said they are trying to understand the model better to see if the Seattle-based company has a role to play. Flipkart did not respond to a request for comment.
India has become a battleground for some global retail giants who are either shut out of China or struggling to compete with local rivals there. With nearly 800 million smartphone users, the large size and potential has made the South Asian country an ideal test site for many companies, including Google, Meta Platforms Inc. and homemade giants like billionaire Mukesh Ambani’s Reliance Industries Ltd.
In its previous avatars, Nilekani helped the government develop Aadhar’s biometric ID system, roughly a digital equivalent of the US Social Security program. For most Indians, it is their first proof of existence. Authorities say it helps reduce fraud and ensures that welfare payments reach the right people. Nilekani also helped introduce a payment backbone called the United Payment Interface or UPI. Used by Google and WhatsApp, it exceeded 5 billion transactions last month.
Employed as an advisor to ONDC last summer, the salt- and pepper-haired, mustachioed tech tsar wants to do for e-commerce what UPI did for digital payments.
But his biggest challenge would be to make sure the network reaches its goals. Amazon and Flipkart have dominated the market because their tested technology lures merchants and buyers to their platforms. The government needs to build something comparable – or better – if it wants to surpass the dominant e-commerce platforms, said Anil Kumar, CEO of Redseer Management Consulting Pvt.
“It all depends on the network that brings the widest set of buyers, sellers, payment logistics and warehousing providers and so on,” said the Bangalore-based Kumar. “The challenge is to standardize and smooth the experience such as returns and refunds for buyers and sellers and to create an open network where everyone wins.”
Nilekani will also be under pressure to avoid the kind of controversy that has haunted his previous projects. Aadhar has been under a cloud of data protection, security and identity-related concerns. India’s Supreme Court is currently investigating a case linked to UPI after a lawmaker accused Amazon, Google and Metas WhatsApp of participating in the system without much investigation and allegedly violating the rules.
If successful, the e-commerce network can help millions of small businesses go online and worry less about the global giants. Among those eager to try it, Kauser Cheruvanthody, 42, is one of the owners of a chain of five baby product stores in Bangalore. He has never sold online, but a 30% drop in sales during the pandemic came as a shock.
“ONDC could change the game,” Cheruvanthody said. “I’m ready to fight Amazon and others, discount by discount.”
Despite the challenges, Nilekani is the right man for the job, said Hemant Taneja, managing partner at Palo Alto-based venture capital firm General Catalyst.
“Nandan is known for its long game, for setting up systems for lasting change with very conscious thinking about what parts of the economy should be digital public goods, and what parts capitalism-driven,” Taneja said.
Entrepreneurs like Kumar Vembu are excited about the prospect of an open model. His startup GoFrugal delivers enterprise software to over 30,000 small merchants and fast restaurants. He is now helping hundreds of them integrate with the new network.
“Until now, small retailers have brought a knife to the gun fight,” Vembu said. “Now we can equip them properly to compete.”
The open network is targeted at 100 cities in the coming months, says CEO Thampy Koshy, a former senior partner at Ernst & Young.
It took Aadhar nine years to reach one billion people on the platform, while UPI took five years to cross 4 billion monthly transactions. Nilekani said he is optimistic that ONDC will be rolled out much faster as India has been on this path before.
“We are setting a new course and the goal is to change the rules of the e-commerce game,” he said.