Open Transaction Network: Could this shift in technology transform the global economy?

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Satwik Mishra, Acting Executive Director, Centre for Trustworthy Technology, Neeraj Jain, Vice President, Network Expansion, ONDC, Rajeesh Menon, Head, Growth & Strategy, Foundation for Interoperability in Digital Economy (FIDE)

• A new type of digital public infrastructure – the Open Transaction Network (OTN)—is a pioneering way to address the growing challenge of reduced interoperability and platform power in the economy.
• OTNs have been piloted worldwide over the last two years and promise to make tech platforms more equitable and enable inclusive economic participation.
• OTNs are digital public infrastructure being adopted by policymakers for better efficiency across sectors, including urban mobility, energy transition and hyperlocal commerce.

For a thriving global economy, smooth transactions that encourage value creation and transferability are essential. Ideally, we want an economy that works on a universal digital system, making it easy to handle transactions across several platforms and stakeholders, known as interoperability. This approach is key to sparking innovation, promoting competition and ensuring open access. It helps prevent one party from having too much power or control over how things work in the market.

In the last 20 years, the platform economy has concentrated power among a few big companies, making competition harder and increasing economic inequality.

As these platforms grow, they often control things in a way that can limit buyers and sellers. This control becomes particularly problematic when users – consumers and suppliers – seeking to switch platforms find they cannot transfer their data and hard-earned reputation. The situation hampers the free “flow of value” essential for a fair market, stifling choice and innovation.

A new type of digital public infrastructure – Open Transaction Network (OTN) – is a pioneering way to address the growing challenge of reduced interoperability in the economy. OTNs are community-supported, open source and standardized. They allow for smooth transactions between individuals and organizations, irrespective of the platforms they use, making the digital landscape more inclusive and accessible.

At the forefront of this transformation is the Beckn Protocol (or “network protocol) – a globally recognized digital public good that unifies machine-friendly language, ensuring transaction-level interoperability across organizations within an OTN.

OTNs can thus facilitate a paradigm shift in the global economy, according to Bruce Schneier, security technologist and professor in public policy at the Harvard Kennedy School.

“By fostering a competitive rather than monopolistic landscape, By lowering barriers to entry, it can democratize technological access and stimulate generative collaboration and creativity,” he says, stressing it can make tech platforms more equitable and enable inclusive economic participation, paving the way for new markets and business models.

Benefits of Open Transaction Networks (OTNs)

• Market competition enhancement: OTNs reduce entry barriers and mitigate monopolistic trends so that innovation and quality drive competition in the market over network control or consumer restrictions.
• Innovation stimulation: OTNs, being open and interoperable, encourage innovative service development and improvement, leading to advanced efficiency, security and user experience.
• Collaboration boost: The unified transaction platform enables businesses to leverage combined strengths and develop comprehensive, value-added services, strengthening the digital economy.
• Promoting equity and inclusion: OTNs democratize transactional access, advocating for fairness and participation, which benefits individuals and businesses and introduces diverse perspectives into the marketplace.
• Market creation: The openness of OTNs fosters new market and business models similar to how the internet spurred e-commerce growth, unlocking novel transactional and expanding consumer choices and innovation.

“Many complex problems, be it of social or economic inclusion, climate action or scaling new markets for sustainable livelihoods and solutions e.g. scaling an electronic vehicle charging ecosystem, deal with exponential costs when solving at population scale,” notes Sujith Nair, co-author of the Beckn Protocol.

“Instead of each of such efforts trying to solve by themselves a multitude of costs like cost of discovery and fulfilment, of transaction and trust, we could raise all efforts to a new common ground,” he continues. OTNs using the Beckn protocol are the shared infrastructure that distributes and reduces costs and risks across the ecosystem.

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Open, interoperable and inclusive transaction networks are critical for unlocking the full potential of the digital economy in developing countries.”— Joseph Jassey, Acting Country Executive Director, Foundation for Digital Economy Africa

OTNs as social interventions

High-income countries are transforming – by demography, climate change and sustainability efforts, and industrial changes influenced by artificial intelligence (AI) and other technologies. OTNs, piloted worldwide over the last two years, are now being considered as an important policy intervention to establish robust transaction ecosystems across critical sectors such as urban mobility, energy transition and hyperlocal commerce, among others.

They can aid socio-economic development in low- or middle-income countries by increasing access to public services, stimulating economic growth, and boosting small businesses to reach wider markets. Policymakers in these regions are considering OTNs to boost further societal interventions in education and skills, agriculture, health and other sectors.

“In the mobility space in Europe, most integrations are based on one-on-one connections between transport operators and mobility providers,” says Jef Heyse, co-founder of Automicle, “This is time consuming and limits innovation, as only those integrations with a clear short-term business potential are established.”

Heyse explains that OTNs will support public transport operators, who are now obliged by European Union law to make data and tickets available on alternative ticketing platforms. Once OTNs are more widely known, other mobility solutions will take advantage of their flexibility and cost efficiency to integrate transport operators and mobility providers.

“

Many complex problems, be it of social or economic inclusion, climate action or scaling new markets for sustainable livelihoods and solutions… deal with exponential costs when solving at population scale. Instead of each of such efforts trying to solve by themselves a multitude of costs…we could raise all efforts to a new common ground.”— Sujith Nair, Co-Author, Beckn Protocol

“The current steps we take in preparing the Open Amsterdam Network for hyperlocal commerce and hyperlocal delivery would not be possible [without] an OTN. Amsterdam entrepreneurs and cargo-bike couriers will be some of the first in Europe to demonstrate the capabilities of OTNs,” Heyse says.

Global OTN pilots

Brazil saw its first city-wide OTN in Belem with the Open Belem Mission or Rede Belem Aberta, aiming to connect producers to markets with a sustainable objective.

“The RBA Open Transaction Network is opening new avenues for private, public sector and academia collaboration here in Belém,” explains Marcelo Sa, Founder and CEO, Jambu Tecnologia.

“Coupled with the Belém Innovation District, it is the much needed catalyst for technology-driven socio-economic progress, beginning with unlocking upskilling and employment opportunities and I am confident this effort could set the foundation for more such societal interventions in other cities of Brazil and Latin America at large,” says Sa.

India also boasts population-scale OTNs through Open Network for Digital Commerce (ONDC), a pilot launched in April 2022 targeting grocery and food delivery across India.

It is built upon the fundamental principles of transaction interoperability, unbundling of the building blocks of digital commerce and ecosystem participation, explains T Koshy, managing director and chief executive officer of ONDC.

“This initiative, at its core, a solid force multiplier to accelerate the digital transformation of [micro, small and medium-sized enterprises] augment” choice” for consumers, while broadening the business potential for incumbent and new market players,” he says. Others are also seeing OTNs’ early potential and impact.

“Open, interoperable and inclusive transaction networks are critical for unlocking the full potential of the digital economy in developing countries. The OGa initiative in the Gambia is a pioneering example, paving the way for others to follow in the region and beyond,” adds Joseph Jassey, acting country executive director of the Foundation for Digital Economy Africa.

The OTN-based ecosystem redefines the market economy, representing not just technological advancement but also a profound transformation in how value is created, distributed, and consumed across sectors.

Views expressed in this blog are those of the authors and do not necessarily represent the views of the funding agencies, companies or institutions mentioned.