Nepal’s digital payment platforms saw a 94 percent year-on-year jump in business in the first quarter as consumers took to paying online for daily essentials at local stores besides premium products.
Digital payment refers to contactless transactions made via online methods as opposed to cash payments made physically.
According to Nepal Rastra Bank, the country’s central bank, digital payments almost doubled in the first quarter of the current fiscal year, started mid-July 2021, mainly due to an increase in the number of people adapting to online payment.
Turnover in the first three-month period (mid-July to mid-October) reached Rs1.22 trillion compared to Rs630.85 billion in the same period in the last fiscal year.
According to the central bank, digital payment platforms saw the highest monthly turnover of Rs470.51 billion between mid-September and mid-October, coinciding with the festival shopping season.
During the same period in the last fiscal year, online payments totalled Rs256.39 billion.
Digital payments in the first month of the fiscal year (mid-July to mid-August) amounted to Rs361.20 billion, which increased to Rs392 billion in the second month (mid-August to mid-September).
The number of transactions also swelled greatly, reaching 54.12 million transactions in the first three months of the current fiscal year, up from 34.23 million transactions in the same period in the last fiscal year.
The national payment switch opened on November 18 which, industry insiders say, will see digital transactions take a great leap forward.
A breakdown by online payment platforms shows that 1.28 million transactions worth Rs200 billion were made through the Interbank Payment System (IPS) during the monthlong period from mid-September to mid-October.
The figure represents a sharp drop from the Rs234.49 billion recorded in the same period in the last fiscal year. The IPS transfers funds from one account to another at any of the participating member banks and financial institutions.
Wallet transactions during the period mid-September to mid-October amounted to 13.56 million with a total value of Rs15.18 billion, an increase from the Rs9.88 billion recorded during the same period in the last fiscal year.
According to the central bank, quick response (QR) code-based payments during the period mid-September to mid-October rose sharply to Rs6 billion from Rs969 million previously.
Electronic transfer of funds at point of sale (retail transactions) also swelled to Rs4.84 billion in the review period from Rs2.34 billion previously.
E-commerce transactions made during the period mid-September to mid-October using cards dropped to Rs455 million from Rs794 million in the same period in the last fiscal year.
Despite the rise in digital transactions, Nepal still has a long way to go to achieve a cashless society, stakeholders say. Electronic funds transfer is being seen as the way of the future due to its transparency and reduced operation costs.
At a recent discussion on the e-commerce ecosystem, Mahesh Sharma Dhakal, senior deputy chief executive officer of Global IME Bank, told the Post that to encourage people to go for digital payment, the government should subsidise charges on transactions or charge a minimum amount.
According to Dev Kumar Dhakal, spokesperson for Nepal Rastra Bank, there are problems in interoperability systems while making online transactions through QR or wallet transactions as all banks and financial institutions are not linked to one service provider.
“We have been working on making infrastructure for digital payment, and awareness and transactions using the existing infrastructure that support the transaction are increasing,” he said.
“As people’s attraction towards easy and secure payment systems is rising, the volume of transactions has also been rising,” Dhakal said, adding that online transactions would increase in the coming days.
The central bank has been working on the promotion of digital wallet since the starting days of its introduction to increase the number of digital transactions.
“If we started moving to a less cash society, the percentage of cash transactions will decrease while the digital transaction volume will increase,” Dhakal said.
Industry insiders say that poor internet service and higher data charges discourage people from using digital services whether online payment or online shopping.
According to the Connectivity in the Least Developed Countries Status Report, a Nepali has to spend 2.6 percent of the gross annual income to buy internet service, which puts Nepal behind India, Sri Lanka and Pakistan in affordable digital access where the cost is less than 1 percent.
As per the International Telecommunication Union, broadband service in the developing countries should not cost more than 2 percent of the gross national income per capita.
People have been complaining about slow internet connections too.
Internet penetration as of mid-October was 113.57 percent of the total population where mobile broadband accounted for 84.63 percent and fixed broadband (wired) accounted for 28.28 percent of the subscriptions, according to a management and information system report published by Nepal Telecommunications Authority.