Protean’s ONDC (Open Network for Digital Commerce) is backed by the Government of India (GoI) as an initiative to disseminate or decentralise e-commerce. Its aim is to support small-scale and local businesses in establishing a digital presence, expanding their customer base, and operating online at an affordable cost, thereby promoting open commerce.
In June 2023, Protean e-Gov Technologies, in collaboration with NPCI Bharat BillPay Limited (NBBL), launched the Reconciliation and Settlement Product (RSP) to ensure secure and transparent fund settlements within the ONDC platform.
In this article, we will explore Protean’s RSF (Reconciliation and Settlement Framework) and its role in enhancing the payment ecosystem in ONDC.
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Protean’s Reconciliation and Settlement Product (RSP)
Protean has specialised in creating large-scale digital public infrastructure solutions.
Its Reconciliation and Settlement Framework (RSF), built against the specifications provided by ONDC and NBBL, is meticulously designed to handle high transaction volumes efficiently.
Furthermore, ONDC has now mandated all participants to integrate RSF for continuous participation in the network.
Main Features:
Protean’s RSF automates ONDC transaction reconciliation. It provides a unified dashboard for financial oversight. NOCS, underpinning RSF, facilitates participant onboarding and bank validation, ensuring network integrity.
Let us learn more about its significant features:
- Automated Reconciliation
This product features an automated, rule-based transaction reconciliation system. This system can assist in fulfilling the dynamic terms of ONDC order contracts.
- Comprehensive Dashboard
It includes a 360-degree admin panel and a dashboard, giving buyer and seller network participants a clear view of payouts and receivables from open network transactions.
- Exception Handling
It enhances operational control and governance for network participants by providing exceptional handling capabilities and detailed control reports.
- Control Reports
Detailed control reports are another way to enhance governance and control in operations.
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How RSF Simplifies ONDC Payment Ecosystem
Payments are inherently central and sensitive but also more complex on open networks, so a solution was required to add standardisation, efficiency, predictability, ecosystem trust and more.
ONDC has addressed these challenges by automating the reconciliation and settlement process of the buyer and seller apps. Now, the entire settlement process has been streamlined. The platform has helped businesses to scale with technology and achieve growth.
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Participants in RSF
Several notable participants in RSF (Reconciliation and Settlement Framework) are:
- The collector collects money from the buyer and settles it with the receiver.
- The receiver accepts the settlement from the collector.
- Reconciliation Service Providers (RSPs) consolidate inputs from collectors and create a pairwise settlement report.
- Settlement Agency (SA) captures input from network participants and completes the net settlement between banks.
- Settlement banks receive information from settlement agencies. On that basis, they settle with their account holders.
How Payments and Settlements Happen in ONDC
To understand this process, let us consider an example:
- Buyer app X (collector) and seller app Y (receiver) conduct two transactions of ₹2000/- each, with a commission of ₹500/- each.
The process would start with these settlement initiation steps:
- Seller App Y would begin the process by sharing a “/settle” call with the Settlement Agency (SA).
Note: This call includes the order details and settlement information, such as the commission amount and the amount due to the Seller on Record (SoR).
- Buyer App X would also share the order details with the SA.
Note: This includes settlement details and the Buyer Finder Fee (BFF) amount.
After initiation comes matching and validation:
- The SA would then match the order details received from Seller App Y and Buyer App X.
- The SA would also verify the balance in Buyer App X’s account designated for ONDC settlements.
Then comes instructions for settlement and bank actions:
- If the order details match and Buyer App X has sufficient funds, the SA will instruct the respective banks to move the funds.
- The SA would then instruct Buyer App X’s bank to debit the agreed amount from Buyer App X’s ONDC settlement account.
- The SA would instruct Seller App Y’s bank to credit the amount to Seller App Y’s ONDC settlement account.
- Suppose Seller App Y has opted for settlement to Sellers on Record (SoRs). In that case, the SA will also instruct Seller App Y’s bank to transfer the due amount to the SoR’s bank account and any commission to Seller App Y’s operational account.
- The SA would finally instruct Buyer App X’s bank to move the Buyer Finder Fee (BFF) amount to Buyer App X’s operational account.
In our example:
- Let us assume X has an account with ABC Bank and Y has an account with PQR Bank.
- The net settlement between banks would be a debit of ₹3000 from ABC Bank and a credit of ₹3000 to PQR bank via their respective treasury accounts with RBI.
- ABC bank receives an individual settlement summary file instructing a debit of ₹3000 from X’s account.
- PQR bank receives an individual settlement summary file instructing a credit of ₹3000 to Y’s account.
Once the settlement cycle is complete, these would be the post-settlement steps:
- The SA would inform Seller App Y about the payouts made.
- The SA would inform Buyer App X about the payouts settled.
- Seller App Y would reconcile its records and identify any discrepancies.
- Buyer App X would reconcile its records and identify any discrepancies.
- Buyer App X and Seller App Y would exchange reconciliation details for any unsettled orders or discrepancies.
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Conclusion
Protean’s RSF (Reconciliation and Settlement Framework) can potentially transform the payment and settlement process within the ONDC (Open Network for Digital Commerce) ecosystem. In collaboration with NPCI Bharat BillPay Limited, Protean’s RSF has introduced a structured, transparent mechanism to ensure seamless fund transfers between buyers and sellers.
The payment and settlement process involves Collectors, Receivers, RSPs, Settlement Agencies and Settlement Banks, streamlining the operations and enhancing efficiency. Each participant has a clearly defined role, making the transaction smooth. This framework has significantly accelerated fund transfers while minimising disputes.
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