Kathmandu, April 11 – Over the last three fiscal years, the volume of digital payment transactions has risen by 43.5 percent. According to a report from the central bank, the aggregate transaction value climbed at an annual rate of approximately 23.7 percent during this period.
The report entitled “Key Accomplishments and Developments of the Nepal Rastra Bank for 2020-2025,” released last Friday, indicates that between the financial years 2021-22 and 2023-24, transactions involving QR codes experienced an average yearly growth rate of 230% in volume. Regarding transaction values, QR payments increased by 210% annually during this period.
The report links the significant increase to greater availability of digital payment systems, thereby substantially enhancing the adoption of these methods.
“This indicates a healthy adoption of QR code payment systems. People prefer QR payments to ATM transactions for convenience. Adoption is growing steadily because it’s fast, convenient, and processed in real time,” said Kiran Pandit, acting executive director of the Payment Systems Department at Nepal Rastra Bank.
Electronic exchanges offer specific benefits, such as improved credit management in transactions for businesses and individual buyers alike.
However, Pandit acknowledged ongoing challenges such as lack of inclusivity, a digital divide, and insufficient infrastructure in rural areas. “With the rise in scams, it’s crucial to increase public awareness,” he added.
Outside the Kathmandu Valley, inadequate mobile connectivity has deterred traders from embracing digital transactions because they worry about potential errors during purchases. “Strengthening and supporting the digital payment system falls upon all parties involved,” Pandit stated.
Over the last five years, there has been a significant rise in merchants adopting QR payment methods, largely due to supportive policies encouraging such transactions. The report indicates that the issuance of QR codes by banks and financial organizations to retailers grew from approximately 282,000 in mid-July 2021 to around 2.34 million by mid-January 2024.
Likewise, the transaction amount for QR-enabled merchant payments significantly increased from Rs20.28 billion through 5.5 million transactions in the fiscal year 2021-22 to Rs500 billion via 160.93 million transactions in 2023-24.
By mid-January 2024, the nation has nine payment system operators and 25 payment service providers actively operating within its borders. Furthermore, 20 commercial banks, along with 17 development banks and 11 microfinance institutions, have been granted licenses to function as payment service providers.
According to the Digital Lending Guidelines from 2021, banks issued loans online amounting to Rs2.98 billion during the previous fiscal year. Currently, thirteen banking and financial entities provide digital loan services, with borrowing caps set at up to Rs500,000 for those holding salaried accounts and Rs300,000 for other clients.
The objective of these guidelines is to simplify the complete loan procedure—from application through to repayment—and enhance transparency throughout the process.
The adoption of mobile banking has surged significantly. Between mid-July 2020 and mid-January 2024, the count of mobile banking users increased from 114 million to 265 million.
According to the report, the proportion of cash transactions within overall payment activities is diminishing. Conversely, there has been an increase in QR code payments, mobile banking usage, and quicker transaction methods, whereas withdrawals from ATMs have seen a decline.
In the past fiscal year, ATM withdrawals made up only 9.70% of total transactions, which is a decrease from 16.38% in 2020-21. Conversely, mobile banking’s proportion climbed from 24% to 31%, whereas QR code-based transactions surged from 1% to 12% over this timeframe.
The Payment Insight Report 2023-24 from the central bank indicates that the prevalence of QR code transactions has notably decreased the necessity for physical debit cards. Additionally, advancements such as connectIPS, intra-bank money transfers, card-free cash withdrawals, and payment platforms have also diminished reliance on conventional banking methods.
Authorities observed that young customers are progressively preferring mobile and online banking to conventional payment methods such as checks and debit cards.
Since the introduction of cross-border digital payments with India in March 2023, QR-powered transactions through the UPI acquiring service have amounted to Rs1.41 billion from 519,039 transactions as of mid-February this year.
Furthermore, transactions via Alipay+, UnionPay, and WeChat for payments to China amounted to Rs101.21 million across 5,129 transactions from mid-July to mid-February.
The report indicates that cross-border QR code transactions between both India and China have experienced consistent expansion since they were first introduced.
