The Rising Wave of Digital Finance in Nepal

The Rising Wave of Digital Finance in Nepal

The adoption of Digital Finance in Nepal is having a big impact on our economy

‘Digital disruption’ is becoming the buzzword recently. With the ever-increasing penetration of mobile internet, availability of smartphones at a very low cost and rapid growth of social media usage, people are opting to digital technologies more than ever before.

Along with all other technological advancements, we can see the ‘digital disruption’ coming on the way transactions are happening. From cash and cheques, people are switching to cards and mobile payments.

Current stage of mobile payment and e-commerce in Nepal

Increased penetration of mobile internet and availability of smart-phones at relatively lower costs have led to the increased use of social media and internet; thus, this trend is ultimately urging the people to opt digital lifestyle.

E-commerce platforms are growing rapidly in Nepal. Similar is the case of mobile wallets and payment gateways. Digital wallets like Khalti, eSewa, iPay, and IME pay are going through exponential growth.

Talking about the case of Khalti Digital Wallet alone, it was received so well that more than 500,000 users registered on its platform within one year of its launch in the Nepali market. This shows people’s attraction towards digital wallet and economy.

Khalti also won Google Business Group Storytelling Contest – a global start-up competition. It indicates the potential of mobile wallets and digital economy in Nepal.

Currently, as many as 200,000 people use Khalti every month to make payments on various services, from mobile balance top up, to pay for electricity/water bills, from paying DTH and internet bills, to buying movie and airline ticketing. More than 1000,000 people are thought to be using mobile wallets for payments as of today.

Why are people adopting digital lifestyle?

Primary benefits of going digital are easier and faster service delivery, reduced costs, higher productivity, and improved safety and security.

In the recently conducted Digital Birgunj program, Birgunj Metropolis received an overwhelming response from its students, government officials and house makers. More than this, every ward of Birgunj metropolis is on the verge of getting connected online, making it possible to carry out all the works digitally, and using the software provided by the government to the local body.

This is sure to replicate in other cities of Nepal, too.

There are so much of opportunities for Nepal if it becomes digital-first economy. Online marketplaces can be developed where small and medium enterprises (SMEs) and small-scale farmers can sell their agro-products easily.

The economy is going digital means taking strides to change the lives of millions of people. The digital economy would surely prove to be an important vehicle for change.

Changing payment habits

People have started to pay for utility bills using digital wallets and e-banking services. A growing youth population is digital savvy and has been aptly equipped with the necessary digital skills. This has been the major thrust in accelerating the growth of digital economy in Nepal. The rapid spread of Internet access is creating new growth opportunities for businesses such as retailers, mobile operators and payment service providers. E-commerce in Nepal represents an untapped market with great potential for trade and economic growth.

The popularity of e-commerce businesses like Sastodeal and Daraz clearly indicates that online purchases are on the way of becoming the norm in Nepal. More is to be seen in the near future.

Digital Finance => Financial Inclusion

People living in rural areas are poorly served by traditional banks. Mobile wallets and E-banking system can be the most effective means to increase financial inclusion in those areas. Digital Financial System (DFS) opens up new avenues into the financial system for the disadvantaged, and also contributes to the objective of women’s economic empowerment.

The number of people with access to formal finance is rapidly increasing in Nepal. As per the recent data of UNCDF (June 2016), more than 60% of the population of Nepal has access to formal finance. The number of e-banking users has been increasing, and as per the latest data of NRB, more than three million people use e-banking in Nepal. Digital wallets too are on rapid expansion mode now.

Zimbabwe has set a record by becoming the cashless economy. In Nepal also, many cities will go cashless, or cash will be used the least if the adoption of digital payment is to go at the current pace.

Nepal Rastra Bank is gearing up for the national payment gateway. Digital financing has helped promote financial inclusion in Nepal, and people no longer have to walk hours to nearest the bank branch to collect remittance sent from abroad. They can simply receive it on their phone.

Digital finance in Nepal: promoting transparency in payments

The government has already channelized government to people payments including pensions and other social security allowances through digital channels. Thus, the unbanked population is on the verge of being banked.

If this trend is to continue and the growth of mobile wallets is to sustain in the current pace, NRB can cut the amount of bank notes it prints every year.

Digital Finance lowers transaction costs, increases transparency, and accelerates access to formal financial services that help people break the cycle of poverty and drive inclusive economic growth. It will ultimately assist in health, government, trade, agriculture, tourism, business, education and industrial sectors.

Payments through digital channels can improve efficiency for government bodies reducing transaction costs and leakage. Thus, it will ensure increased transparency in government transfers and better traceability of payments.

In a nutshell, Digital economy is rapidly developing worldwide. Though cash is still the king and the mode of payment in almost all transactions, future of digital financial system in Nepal too looks really bright. It is on the way of becoming the most important tool for innovation, competitiveness, and growth, and holding a huge potential for Nepali entrepreneurs, government, and small and medium-sized enterprises.

By Basanta Kumar Dhakal

This article originally appeared in the print magazine, Management Vision, an opinion based magazine of business and entrepreneurship prepared by the BBA students of People’s Campus.

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The Rising Wave of Digital Finance in Nepal

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