In today’s Finshots, we look at how far ONDC has come since it began and what went wrong with the food delivery revolution it promised.

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The story

We last wrote about ONDC (Open Network for Digital Commerce) exactly two years ago. But in case you haven’t read that story or haven’t tried ONDC yet, here’s a quick refresher.

ONDC isn’t your typical app. You can’t download it and start browsing restaurants. It’s more like the plumbing behind the scenes — a digital network that connects sellers and buyers, sort of like how UPI connects banks for payments. Seller-side apps like Magicpin onboard restaurants, while buyer-side apps like Paytm or Meesho bring in the customers. And once they’re plugged into the network, they can “talk” to each other — no exclusive tie-ups needed. So a restaurant listed on one seller app can show up across multiple buyer apps automatically.

And back then, this model felt like a real game-changer. ONDC looked ready to take on the mighty food delivery duopoly of Zomato and Swiggy. A new way to shake up the space. Lower commissions. Better margins for restaurants. More choices for customers.

But fast forward to 2025, and the plot’s taken a twist.

Just recently, a rumour began making the rounds that the National Restaurant Association of India (NRAI), which represents over 50,000 eateries, had decided to pause onboarding its members onto ONDC. Instead, it was apparently flirting with Rapido, the ride-hailing app, that’s eyeing food delivery too.

Now, both ONDC and the NRAI have rubbished these rumours, calling them misleading.

But the fact that this rumour even gained traction says something. It hints at a deeper sense of discontent and that something isn’t clicking the way it was supposed to.

So, what’s going on?

Let’s start with the numbers.

Retail transactions, think food, groceries or fashion, which were once ONDC’s poster child, are losing steam. Back in October 2024, ONDC was clocking about 65 lakh retail orders a month. But by February 2025, that dropped to 46 lakh. And that has dragged retail’s share of total ONDC transactions down from 47% to 29%. 

Meanwhile, mobility zoomed ahead. Ride-hailing apps like Namma Yatri and Ola helped push its mobility’s share from 40% to 56%. Even logistics got a decent bump.

That shift tells us something important. ONDC’s retail play including food delivery, just isn’t landing as planned.

Why?

Well, retail is messy.

There are way too many moving parts — real-time inventory, smooth user interfaces, order cancellations, refunds, returns, customer support. The works. And platforms like Zomato, Swiggy, Blinkit and Zepto have already nailed all of it. So unless ONDC can offer a clearly better experience or really great deals, users don’t see the point in switching.

And let’s be honest. ONDC isn’t exactly smooth sailing for users. Surveys show that over half of them find the user interface clunky, and nearly a third complain about poor customer service.

But we know what you’re thinking. If retail’s struggling, why are mobility and logistics on the rise?

It all boils down to one thing. Simplicity. Booking a ride or scheduling a delivery is quick, clean and happens often. There’s no messy inventory, no returns, no fuss over product quality and way less hassle with refunds. And that makes it a perfect match for ONDC’s plug and play model.

But user experience is only half the story. The other half is, well… Money.

Going up against deep-pocketed giants like Zomato and Swiggy, is  no easy feat. These startups, both now listed companies, were built on the back of venture capital. Investors poured in crores, absorbing losses year after year, all in the name of grabbing market share. And that gamble paid off. Today, the two command over 90% of India’s food delivery market.

ONDC, on the other hand, is backed by public sector entities and government institutions like SBI, NABARD and ICICI. And that comes with a very different mindset. There’s pressure to show financial prudence, to use public money wisely and to keep losses in check.

Which is why, barely two years in, ONDC began tightening its purse strings. It slashed incentives for buyer and seller apps from ₹2.5 crore to just ₹30 lakh per participant. And when those subsidies dried up, the generous discounts offered to customers began vanishing too.

Just think about it. These apps were expected to lure in users with heavy discounts, but also charge low commissions to sellers because that’s part of ONDC’s pitch. The math just didn’t add up. And that’s exactly why PhonePe’s Pincode walked away from ONDC too.

If others follow suit and the user experience doesn’t improve, people will inevitably ask, “Why am I here if I’m not even getting a good deal?”

And finally, there’s the leadership shake-up. Since December 2024, ONDC has lost three senior executives — R S Sharma, the non-executive chairperson, Shireesh Joshi, the chief business officer, and most recently, CEO T Koshi. That has raised eyebrows about ONDC’s stability and its long-term growth.

But wait… ONDC set out to do for food delivery and e-commerce what UPI did for digital payments. And if UPI could become such a success… why is ONDC still struggling to hit the same stride?? After all, UPI too was created by NPCI, a non-profit just like ONDC, backed by big Indian banks like SBI, ICICI, HDFC and the RBI.

Well, a Jefferies report answers this nicely.

For starters, with UPI, cash was the only “product”. It was essentially a one-SKU game. E-commerce, on the other hand, deals with millions of SKUs. From freshness and sizing to packaging and return policies, there’s a lot that can go wrong. And getting all of that right, at scale, is incredibly tough.

Also, before UPI came along, payments in India were a pain. You either had debit cards, credit cards or wallets. These wallets often required you to load money and didn’t let you transfer funds back to your bank account, which was super inconvenient. But UPI came in and offered instant, no-fuss transfers. A few taps and a PIN, and you were done.

That’s not the case with e-commerce. Zomato, Swiggy, Amazon and Flipkart already offer fast, reliable service. So for most users, there’s no real pain point for ONDC to solve. No burning reason to switch.

Sure, UPI still leans on government support. But it had nearly eight years to scale up before thinking of introducing any kind of fees. Thanks to its zero-cost appeal for both consumers and merchants, it became the default way to pay in India. It rode on massive network effects. More users meant more value, and the flywheel kept spinning.

ONDC doesn’t have that luxury. Cutting back on subsidies now could slow adoption even further.

And while ONDC might be bringing more participants into the network, it hasn’t yet figured out how to bring more users. Without those deep discounts that Zomato and Swiggy perfected, getting scale will be a tough nut to crack.

That’s exactly why the food delivery game still looks the same. Zomato and Swiggy haven’t budged from their thrones. And ONDC, for all its promise, is still struggling to find its footing.

Can it still turn things around?

Maybe. That’s if it doubles down on smoother user experience, faster support and better handling of issues for both customers and sellers.

But until that happens, the existing players will continue to rule the roost.

Until then…

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