September 5: The use of digital technology has increased in the country's financial system over the last decade. Financial institutions have automated many services that used to require physical presence and waiting in line. The facilities such as online bill payments, top-ups, online shopping, ticket booking, and digital transactions are now easily accessible with just a click.

In the past, sending remittances was a challenging task, but with the advent of technology in Nepal, the process has become more transparent and efficient. Mobile phones have played a significant role in reshaping the remittance industry, with the introduction of fintech tools like mobile wallets.

An electronic wallet is an account issued by a payment service provider approved by Nepal Rastra Bank, allowing users to pay for goods and services by depositing money from designated banks and financial institutions. Currently, Nepal has 27 such payment service providers (PSPs), including 10 domestic and other foreign companies operating with permission as Payment System Operators (PSOs).

PSPs act as intermediaries between receiving payments, making electronic payments, transferring funds, and affiliating with payment system operators. PSOs operate payment switches, automatic clearing, and network of electronic payment cards. Fintech companies bridge the gap between traditional banking services and digital platforms, with PSOs focusing on software development and PSPs providing payment services.

These companies primarily earn income through transaction commissions and advertisements on their platforms. Many fintech companies in Nepal are in their early stages and prioritize service expansion over profit.

According to Rasmina Ranjit, executive director of Easy Payments, some major companies form syndicates, while others remain less active. She believes that there are many PSPs in Nepal, and the recent mergers of banks and financial institutions have also affected the fintech sector.

Amit Aggarwal, co-founder and director of Khalti, acknowledges the challenges faced by the fintech sector, including high operating costs and a shortage of IT manpower. He believes that mergers are not feasible in this sector due to different technologies and substantial investments.

Jagdish Khadka, CEO of E-Sewa Wallet, agrees with Agarwal, stating that it's premature to consider mergers at this stage. He emphasizes the need for more companies to work in the sector to increase financial literacy.

While digitization has made significant progress in Nepal's financial system, challenges and opportunities coexist in the rapidly evolving fintech sector.