The Open Network for Digital Commerce (ONDC) reported a 5% month-on-month increase in transactions in August to 12.58 million, compared to a 21% increase in July, as the government-backed interoperable network tightened payment incentives for mature categories such as food and groceries.

Out of the total, 4.74 million transactions were in the mobility category through Uber, Ola's opponent Namma Yatri, and the remaining 7.84 million were in the non-mobility category, which comprised consumer retail purchases and on-network logistical transactions to deliver orders.

Until a few months ago, the majority of orders submitted on ONDC were fulfilled by vendors outside the network. However, this has changed swiftly as logistics services supplied over the network by businesses such as Ola, Loadshare, Pidge, and Shadowfax have expanded their offerings in recent months. On-network logistical transactions for orders increased by 20% month over month in August, reaching 1.7 million.

While grocery orders increased by 61% in July, they fell 11% to 1.28 million in August. The number of food and beverage orders increased 12.5 percent month on month to 1.89 million.

Fashion accounted for 650,000 transactions in August, while home and kitchen accounted for 570,000. The remaining 1.75 million purchases came from various categories such as gift cards and gadgets.

Over the last year and a half, a slew of new-age startups, including Paytm, Ola, PhonePe, Meesho, Magicpin, and Shiprocket, have entered ONDC, hoping to disrupt the country's online retail monopoly held by Amazon, Flipkart, Zomato, and Swiggy.

With ONDC, the government intends to boost e-commerce penetration in the country to 25% during the next several years, with a gross merchandise value of $48 billion.

In response to the retail industry's rapid expansion, ONDC has announced a gradual reduction of up to 75% in financial incentives for network participants by the September quarter. Network participants have also been urged not to deduct incentive bonuses from their goods and services tax calculations.

The network has provided financial incentives to network players based on order volume and category. This money is then used to support consumer discounts and incentives designed to encourage quick adoption of the government-backed network.

The new incentive system has also decreased a player's maximum monthly reward ceiling to Rs 2.5 crore, down from Rs 3 crore before. Additionally, it has set a quarterly cap of Rs 6 crore.

The food and beverage (F&B) and grocery categories, which now account for a sizable portion of the network's monthly retail order volumes, would see the greatest reduction in incentives under the new structure.