Digital Payments & Blockchain - In Nepal

Digital payment and cashless transactions were not widely used before. With the advancement in technology and internet usage, digital transactions are increasing enormously in Nepal. The tradition of using cash as a payment method is steadily changing and shifting to digital transactions. We can assume, the future lies in a cashless payment method, and Nepal is on its way to becoming a cashless society. But first, let us define what a cashless payment actually is?

A cashless payment method utilizes digital platforms like QR (Quick Response) code or mobile banking and credit or debit cards for monetary transactions and does not involve physical money. In a cashless economy, payment merchants make transactions through different means and not paper cash. The use of banking and digital systems has expanded dramatically since the emergence of COVID. We've observed as well as used electronic payments to pay bills in malls and restaurants, and now it's even being used in the small Kirana shops near our house.

Digital transactions are not just becoming more appealing to the younger generation but also have been widely used by them in comparison to the older generation. Instead of cash, the Millenials prefer using digital wallets and other services. Banks and numerous digital payments firms provide digital payments services such as eSewa, Khalti, Fonepay, IME pay, Connect IPS, and others.

But the users have to open accounts on multiple payment platforms since different businesses require different payment wallets, making it unsuitable for users to use it in different locations. Therefore, due to these reasons, many people don’t find it compatible to use digital payments, and instead, they prefer to use cash. Cash payments are being overlooked due to the prevalence of electronic payments, yet cash-based payment systems have many advantages.

“We should look forward to how we can move from paper to digital systems without hampering the paper benefits and assurance that it provides.” - Mr. Bipin Khadka, Senior Business Development Executive of Fonepay.

Digital payment apps and mobile banking services are widely available and give services to users. However, there are still a limited group of people, namely Senior Citizens and non-tech savvy people who hesitate to use all these platforms. They refuse to use digital payments systems for many simple reasons. Some of those reasons are listed below:

• Inconvenient
• Lack of data privacy and more cases of a data breach
• Lack of trust
• Lack of awareness
• Fraudulent transactions
• Financial illiteracy
• Incompatibility between several electronic payment systems One user uses a different electronic payment system

During the pandemic, there was a spike in the usage of digital payments which was accompanied by a sharp rise in digital payment fraud. The number of fake phone calls and SMS, threats, and cashback/refund frauds, increased dramatically. Although digital payments are driven by technological advancements, they are nevertheless vulnerable to risks and cyber-attacks. 

Meanwhile, the blockchain experts believe that there are numerous advantages of using electronic media but still, there are trust issues related to data privacy that needs to be solved, which can be done through the usage of blockchain technology. As this technology records every transaction in millions of different blocks, even if one block is hacked, the information contained in the remaining blocks will remain safe and secure. To hack a Blockchain system, threat actors would need a wide range of electronic power to compromise millions of nodes (blocks) at once. So, It's almost impossible to hack a Blockchain. Some of the benefits of blockchain technology are: 

• Decentralized system
• Better Customer Experience
• Better data security and efficiency
• Potential to reduce transaction costs
• Broaden Financial Inclusion

Nepal still has a long way to go before it can go cashless. However, the rapid rise of digital payment systems and the fintech sector indicates that constant effort, time, and hard work is being put into the transformation. Furthermore, blockchain technology can be used to secure data, and Nepal will be able to shift into a cashless economy seamlessly in the future by enhancing existing infrastructure and establishing new ones.