A growth spurt for Digitalization in Nepal: Contactless payments in the pandemic

Posted on: Thu Jan 7 2021

2020 brought along a new outlook and a different understanding towards a great deal of things; Digitalization being one of them. The pandemic changed the people’s perspective towards digital payment in Nepal. Although digital payment services had already been gradually proceeding towards tentative growth with the innovation in technology, the industry was yet to reach higher ground. However, as the technology was already up and running, making the switch to cashless, zero-contact transactions was easy in the time of urgency. We are now quickly adapting and undertaking the usage of digital payment services for our daily expenses and micro payments. 

Digital payment methods took speed as a way for people to reduce exposure when the Covid-19 virus first hit Nepal; by now people have become more familiar, discovering many other perks including saved time, lower costs and better client experience. There is more trust built towards these online payment platforms now more than ever because what was once only viewed as an alternative option became close to mandatory due to the nature of the situation. Digitalization reduced or even eliminated the dangers of virus transmissibility through cross-contamination when handling cash or cards. While the contactless transactions keep people at a safe distance, primarily during the national lockdown, many households discovered how digital platforms allow you to make daily utility payments without leaving the safety of your home altogether. Post-lockdown, many continued to opt for these digital platforms for all sorts of utility payments, having explored the swiftness and convenience in steering clear of physical offices. 

There is a growing level of ease among local businesses in receiving customer payments contactless and digitally from various payment getaways. Nepalese merchants have now come to the realization that, use of wallet payment services not only reduces the overall transaction cost but also offers customers better security and surety for their payments made, emboldening their customers’ trust towards the business. Furthermore, digitalization allows businesses to gain useful information about their customers and take a customer-centric approach to improve their services. Now, companies are actively participating and supporting digital payment service providers in educating the public on digitized payments, which is another big reason for the swift growth in the industry. Simultaneously, several governing bodies and banking institutions of Nepal are engaging in promotional activities to encourage cash alternatives like Digital Wallets, QR Code Payments, E-banking and M-banking services. 

The demand for digital payments prompted many businesses, big and small, to make the option available. Digital payments accounted for over 40 percent of the online sales in recent months with partner banks and digital wallet companies offering discounts to further encourage cashless transactions during the festive season. This growth is astonishing compared to a mere 10 percent during this time last year; the kind of growth which would have taken four years at the least if not for the pandemic. 

We live in a cash-driven economy, it is only natural for the public to be apprehensive and put off adapting to cashless payments. However, with the enormous user base of smartphones, digital payment service providers have a great opportunity to possess significant growth and penetration. Digital payment platforms offer both offline micropayments and online purchase options to the customers. We know that physical currency is still the most preferred practice, but it is more often than not replaceable. Now with all the options, security and convenience that mobile electronic payment services are providing, we can expect further growth of mobile payments that might even surpass payments made via credit and debit cards.

The initial phase of the lockdown period was hardest on the Nepalese migrant workers all over the world sending remittance to their families back home in Nepal. However, against all odds, the influx of remittance surprisingly went up by 23 percent, negating the forecasts that the income of Nepali migrant workers could see a 14 percent crash. It is believed that the unexpected growth may be due to the decrease in use of informal trade due to the lockdowns and restrictions helping more remittance move to formal channels. The call center of IME Pay during that time was bustling with inquiries to find a feasible medium to receive remittance on their phones, instead of facing the restrictions or risks associated with visiting a physical counter. This growth is also reflected in the sudden 25 percent spike in the user base of IME Pay between the months of March and August. It was identified that over 60 percent of the new users IME Pay onboarded in that period were from semi-urban and rural parts of the country. Furthermore, in the duration of those months, the number of active users escalated by a massive 500 percent. 

Digital wallet and online payment services play a vital role in this 21st century, as users can, within a few taps on their smartphone, transfer money without the limitations of geographical barriers. A smartphone is the kind of device that is always handy, and now it can hold everything that your wallet can and more. Digital wallets grant you the convenience of not having to take your wallet out, nor do you have to count your change, swipe cards or fill out any details before making a transaction. A few taps on your phone and you’re done.

The development in the Nepalese digital payment behavior has been unusually quick; people now opt to shop online for a wide range of goods and services including essential and household commodities; many more people are making online contactless payments; there is a swift increase in the use of mobile wallet apps to make utility and financial bill payments; people are found to be scanning QR codes to pay in all kinds of payout locations and deliveries; sending and receiving money, even domestic and international remittance directly in your mobile is widely adopted. One area Nepalese digital payment services are still lagging behind is in international payments, primarily due to government restrictions. But with the growth in technology and market penetration, given more access is granted with a revision in government regulations, it is conceivable that digital and online payment services will be able to further expand in the global market in the near future. 

Although the year 2020 was difficult in every aspect and we are still adapting everyday to a new way of life, like a glimmer of light in the dark, we are now experiencing the kind of favorable environment in the digital payment industry of Nepal which might just bring about a revolution.