Nepal has experienced a significant transformation toward digital payment systems, spurred by the COVID-19 pandemic, government initiatives, and an increase in mobile and internet penetration.
According to the Payment System Oversight Report 2023/24 released by Nepal Rastra Bank (NRB), the country’s payment systems have witnessed notable growth, with faster payment systems, QR code-based payments, and mobile/internet banking leading the way. While the use of traditional methods like cards and cheques has slowed or declined, the overall trend points to a strong move toward digital payment methods.
The report aims to shed light on the development of Nepal’s payment systems and outline the oversight activities of the Payment Systems Department (PSD) to ensure an efficient, secure, and robust payment infrastructure in the country.
Growth in Faster Payment Systems and QR Codes
The use of connectIPS, a leading faster payment system that enables bank customers to make instant payments through a mobile app or web portal, has surged, particularly post-pandemic. In FY 2023/24, the total number of connectIPS transactions increased by 49.5%, reaching 75.56 million.
Similarly, QR code-based payments have gained significant traction, becoming one of the most favored payment methods in Nepal. The number of QR code transactions rose by 117.03%, and their value grew by 103.66% in FY 2023/24, compared to the previous fiscal year.
Expansion of Mobile and Internet Banking
The user base for mobile and internet banking has also seen considerable growth. In FY 2023/24, mobile banking users increased by 15.4%, reaching a total of 24.65 million, while internet banking users grew by 3.4%, reaching 1.92 million.
Decline in Traditional Payment Methods
While the use of debit and credit cards has been increasing steadily, their growth rate has slowed in comparison to newer payment options like QR codes and faster payment systems. The report suggests that the growing popularity of these alternative payment methods is the main reason for this shift.
Prepaid card usage experienced a significant decline during the COVID-19 pandemic due to travel restrictions. However, the growth rate has begun to recover, thanks to the revival of tourism.
The report also highlighted a decrease in cheque usage and the ECC (Electronic Cheque Clearing) system, as digital financial services become increasingly prevalent. In FY 2023/24, cheque usage dropped by 4.5%.
Role of Increased Mobile and Internet Penetration
The growth in digital payment systems is largely attributed to the rise in mobile and internet penetration. The report notes that 4G/LTE services now cover 741 of 753 local levels across 77 districts in Nepal. Additionally, the smartphone penetration rate stands at 72.94%, with 15% of people having access to computers or laptops, and 38% of households having access to the internet.
This shift in Nepal’s payment landscape is a clear indicator of the country’s growing digital economy, with a strong emphasis on mobile and internet-based solutions for financial transactions.
