Nepal is a developing country with a high illiteracy rate, simultaneously, the country is also rapidly adopting digital technology. Digital transactions are becoming increasingly popular in Nepal and major factors includes the rise of mobile phones, the increasing availability of internet access, and the government's efforts to promote digital payments. There are a number of benefits in adaption of digital transactions. They are more convenient than cash payment, as they can be made from anywhere with an internet connection.

Digital payments have evolved rapidly, with the Covid-19 pandemic igniting their mass adoption in Nepal. New payment instruments have evolved in the payment system, changing how people transact and bank. Credit for the growth of digital transition should be awarded to multiple Payment System Operator (PSO) and Payment Service Provider (PSP) registered (i.e. Fonepay, Connect IPS, E-Sewa, Khalti and more). NRB has also been promoting digital payments through its various initiatives, such as the Connect IPS system. Such instruments are Quick Response (QR) codes, connectIPS (Instant Payment System), Cardless Withdrawal, Smart Point-of-Sale (POS), Contactless Cards based in Near-Field Communication (NFC) technology, Virtual Cards, etc. Additionally, digital transactions can help to boost the economy by increasing financial inclusion and reducing the cost of doing business. As a result, the digital transaction record/data of Nepal is showing a steady growth in recent years. 

According to the Nepal Rastra Bank (NRB), the total value of digital transactions in Nepal amounted to Rs. 4900 billion in Bhadra 2079 (August 2022), up from Rs. 232 billion in the same period last year which represents a growth of over 100%. The growth in digital transactions is being driven by a number of factors, including the increasing adoption of mobile phones and the growth of the e-commerce sector. The growth in digital transactions is having a positive impact on the Nepali economy. It is helping to reduce the use of cash, which is leading to lower transaction costs and increased financial inclusion. It is also helping to boost economic growth by making it easier for businesses to conduct transactions. 

As the country's digital infrastructure continues to improve, and as more people become familiar with digital payments, the use of digital transactions is likely to become even more widespread. 

Key Drivers of digital transaction growth in Nepal:

•      The increasing availability of high-speed internet and mobile phones

In recent years, there has been a significant increase in the availability of high-speed internet and mobile phones in Nepal. This has made it possible for more people to access and use digital payment services.

•      The growing popularity of e-commerce and online services

The popularity of e-commerce and online services is also driving the growth of digital transactions in Nepal. As more people shop and conduct other transactions online, they are increasingly using digital payment methods to do so.

•      The government's efforts to promote digital financial inclusion

The government of Nepal is also playing a role in promoting the growth of digital transactions. The government has implemented a number of policies and initiatives to encourage the use of digital payments, such as the Digital Nepal Framework.

The growth of digital transactions in Nepal has a number of benefits for both businesses and consumers. For businesses, digital payments can help to reduce costs, improve efficiency, and reach a wider customer base. For consumers, digital payments can offer convenience, security, and peace of mind.

The Impact of Digital Transactions on Nepal

Digital transactions have had a significant impact on Nepal in recent years. The growth of digital payments has been driven by a number of factors, including the increasing adoption of mobile phones, the growth of the e-commerce sector, and the government's promotion of digital payments. 

Financial inclusion is the process of ensuring that everyone has access to basic financial services, such as bank accounts, credit, and insurance. Digital transactions are helping to increase financial inclusion in Nepal by making it easier for people to access financial services. For example, people in rural areas can now use mobile banking to open bank accounts and make payments.

Here are some of the key impacts of digital transactions on Nepal:

•       Increased financial inclusion: Digital payments have made it easier for people to access financial services. This has helped to increase financial inclusion in Nepal, which has traditionally been a challenge.

•       Reduced transaction costs: Digital payments have reduced the cost of making transactions. This has made it easier for businesses to operate and has also benefited consumers.

•       Improved efficiency: Digital payments have improved the efficiency of the financial system. This has made it easier for businesses to get the money they need and has also helped to reduce fraud.

•       Increased transparency: Digital payments have increased transparency in the financial system. This has made it easier for businesses and consumers to track their transactions and has also helped to reduce corruption.

•       Boosted economic growth: Digital payments have boosted economic growth in Nepal. This is because they have made it easier for businesses to operate and have also helped to increase consumer spending.

Overall, digital transactions have had a positive impact on Nepal. They have helped to increase financial inclusion, reduce transaction costs, improve efficiency, increase transparency, and boost economic growth.

Here are some of the challenges that Nepal still faces in terms of digital transactions:

•       Limited internet access: Not everyone in Nepal has access to the internet. This limits the reach of digital payments.

•       Security concerns: There are some security concerns about digital payments. These concerns need to be addressed in order to ensure the safety of users.

•       Lack of awareness: Some people in Nepal are not aware of digital payments. This limits the adoption of digital payments.

Despite these challenges, the future of digital payments in Nepal looks bright. The government is committed to promoting digital payments, and the private sector is investing in new technologies to make digital transactions more convenient and secure. Government is also working to improve the infrastructure and to educate the public about the benefits of digital transactions. Nepal Rastra Bank as well as private sector banks are also encouraging people to use digital transactions and working on make the system more secured.

Fraud & Awareness in Digital Transactions

Fraud and awareness are two important aspects of digital transactions. Fraud is the act of deceiving someone in order to gain something, such as money or personal information. Awareness is the state of being aware of something. In the context of digital transactions, fraud awareness is the ability to identify and avoid fraudulent activities.

Fraud is a major challenge for digital transactions. There have been a number of cases of fraud involving digital payments in Nepal. In order to address this challenge, the government and financial institutions are working to improve security measures.

Another challenge for digital transactions is the lack of awareness about digital transactions. Many people in Nepal are not familiar with how to use digital payment methods. This is a major barrier to the widespread adoption of digital transactions.

The government and financial institutions are working to raise awareness about digital transactions. They are doing this by running educational campaigns and providing training to businesses and consumers.

Here are some tips for protecting yourself from fraud when using digital transactions which helps you to protect yourself from fraud and ensure that your digital transactions are safe and secure:

•       Do not share OTP/PIN/Password

•       Get connected only in trusted zone.

•       Only use trusted websites and apps.

•       Be careful about what information you share online.

•       Use strong passwords and keep them safe.

•       Be aware of the latest scams and fraud schemes.

•       Report any suspicious activity to the authorities.

•       Be careful about what information you share online. Only share personal information with websites and organizations that you trust.

•       Be suspicious of emails and text messages that ask for personal information. If you receive an email or text message that asks for your personal information, do not click on any links in the message and do not reply to the message. Instead, contact the organization directly to verify the authenticity of the message.

•       Keep your software up to date. Software updates often include security patches that can help to protect your computer system from malware.

•       Use strong passwords and change them regularly. A strong password is at least 8 characters long and includes a mix of upper and lowercase letters, numbers, and symbols.

•       Be careful about what websites you visit and what files you download. Only visit websites that you trust and only download files from trusted sources. 

- Bidhan Koirala

Head: IT/Digital Banking