Digital transactions, which had been progressing at a sedate pace, are expected to rise due to COVID-19 restrictions.

With the lockdown in place by the governments the world over in a bid to stop the possible outbreak of coronavirus, digital transactions have become the preferred mode of payment at present. In Nepal too, which is under lockdown since March 24, cashless transactions have grown significantly as more people are getting used to the digital mode of payment. From mobile SIM recharge/balance top-up, paying of utility bills such as electricity, water supply, telecommunication and internet using digital wallets to purchase of groceries and other daily essential items via e-commerce marketplaces using bank cards, cashless transactions have attracted many people who never thought about cashless transactions have started going digital.

Though large transactions aren’t taking place now due to the restrictions in place to curb the possible spread the virus, fintech companies operating digital payment platforms say that SIM recharge and mobile top-up have increased in volume.  

IME Limited, which operates the digital wallet IME Pay, has registered almost 200 percent growth in transactions through its wallet, after the lockdown. The company’s CEO Suman Pokharel says that customers have also started becoming aware of the convenience of digital platforms in the recent days.

Roshan Lamichhane, Chief Operating Officer (COO) of eSewa  says that mobile SIM recharge feature has been the most used service after the start of lockdown.

Likewise, Khushal Regmi, CEO of Prabhu Pay notes that daily transactions have risen by 30 percent after lockdown. While mobile recharges top the list, remittance transfer, internet and TV package payment are other transactions which have been going quite well, says Regmi.

According to Manish Modi, managing director of Khalti, recently they have been getting inquiries and requests from local groceries and medical shops. “This is a new area for us. Most of them take orders from WhatsApp and ask their customers to pay digitally,” says Modi. After lockdown, Khalti has been seeing almost 200 percent growth in transactions.

Although the number of sign-ups in digital wallets is significant, only 10 to 15 percent of them are active users. For that reason, entrepreneurs say that they haven’t faced any major challenges in their system due to increased transaction.  

Modi from Khalti says that the software part of the digital wallet is scalable. “So, the system is equally strong for any number of customers. And we update the hardware frequently,” he says.

Esewa COO Lamichhane says that only lockdown cannot contribute to increased transaction aftermath. “From our experience of more than a decade, we observe that this market grows organically,” he adds “However, people have started realising the worth and convenience of digital payments.”

Along with the public, it has also been helpful for government institutions as certain populations have been paying the utility bills online. Currently, the situation is pushing people to go digital. This has brought certain changes in user behaviour. Nepal Rastra Bank has also been requesting the public to pay online as much as possible. NRB also has formed the Payment Systems Department to address all electronic transactions.  

The technology-enabled payment system has been seeing gradual popularity, however, just popularity cannot strengthen the cashless economy. Just because lockdown has pushed many Nepalis to pay digitally does not mean that the digital revolution has started in Nepal. Lack of connectivity, expensive cellular data and consumer protection policies are still major issues.

Manohar Bhattarai, ICT and Information Economy expert says that as the security issues have already started showing up in Nepal, the challenges will be more acute with the increasing volume.

According to a recent Management Information System (MIS) report (March 2020) published by Nepal Telecommunication Authority, in Nepal, internet penetration has reached 72.16 percent of the population. According to the report, 16.10 percent are using fixed broadband (wired), 0.76 percent are using fixed broadband (wireless) and 55.30 percent use mobile for the internet. “On one hand, good internet quality is an issue in remote areas, and on the other, the data price is not affordable for regular use,” says Bhattarai. According to him, it is high time for the State to use strategies to reduce mobile data cost with priority to data security, consumer protection policies and fraud prevention mechanisms.

Digital Literacy is another challenge which limits the concept of digital payment in urban areas. “To carry our commercial activity on the internet requires ample investment from government. The Internet cannot come as a pillar of development until anything significant happens in terms of policies,” says Bhattarai.  

Interoperability in payment system - the ability which allows different systems to connect with one another and makes it easier for people to send payments to anyone and receive payment quickly. “Payment mechanism is not interoperable, and this doesn’t encourage people to use digital method for payment,” adds Bhattarai “In Nepal, using cash is easier than using digital wallets as cash is flexible and can be used anywhere.”

Pokharel from IME Pay says that increasing fintech players in the market is a good sign of growth. However, companies with sustainable business models are also important for a good payment ecosystem. The current players in the market have not even reached 10 percent of the population, says Pokharel. Smartphone penetration is increasing, so payment industries have opportunities. “However, being a capital intensive business, it is challenging to make a sustainable business model,” says Pokharel.

Some players are finding innovative ways to reach the segment that doesn't have access to the internet. Prabhu Pay has recently started a system where anyone with feature phones can also pay digitally. The users can pay through Unstructured Supplementary Services Data (USSD). This is a communication protocol used by mobile networks. “The process is similar to the process of taking data and voice packs in your phone,” says Pokharel.