Consider a society in which no paper money or coins are used. Digital platforms underpin all of our transactions. To name a few, Khalti, eSewa, fonepay, PrabhuPay, and QR Nepal. With the growth of the digital wallet industry and the convenience it provides, it would not be incorrect to say that the number of people opting for it is increasing. Furthermore, the Covid-19 pandemic has instilled in citizens a fear of transmission due to increased chances of contact while using paper money.
Following the lockdown on March 24, 2020, there has been a significant increase in the number of mobile banking users. When we compare the monthly Banking and Financial Statistics published by Nepal Rastra Bank for the months of March 2020 and 2021, i.e. before and after the pandemic, the numbers have increased from 9,806,237 to 12,689,445 respectively. This translates to a 29.4 percent increase in mobile banking users following the lockdown. Many e-commerce businesses have expanded during this time period.
People were able to experience the ease of making online payments rather than cash payments. It allowed people to pay for everything from groceries to school fees to internet services with a single click, eliminating the need to visit ATMs or banks to withdraw cash, saving time and avoiding exposure during the pandemic. Banks increased transaction limits on card transactions, POS transactions, mobile banking, internet banking, QR code, wallet transactions, and other digital transactions to alleviate the discomfort caused by Covid-19.
According to Falgun 2077 BS Payment System Indicators, mobile banking transactions account for 40 billion, wallet transactions account for 10 billion, internet banking transactions account for 8 billion, QR based payments account for 2 billion, point of sales (POS) accounts for 3 billion, and online payment using card accounts for 904 million.
However, our economy has yet to become completely cashless. To date, the majority of our transactions have been conducted in cash. However, with a broadband internet penetration rate of 72.98 percent, up 10.79 percent from last year, there is hope for an increase in access to cashless transaction systems. Proper policies are critical in effecting this transformation.
According to the Monetary Policy 2020/2021, the settlement of financial transactions via digital means is encouraged in the spirit of the GoN’s Digital Nepal Framework, which aims to promote a sound and secure electronic payment system in order to reduce cash transactions. It also states that a policy will be issued to manage electronic payments made via Quick Response (QR) Code. Based on the information presented above, we can conclude that Nepal is on its way to becoming a cashless economy.
Despite the positive attention digital platforms are receiving today, trust in paper money remains unchanged. People are unfamiliar with the concept of not holding money in their hands, so they are hesitant to switch to an electronic or online payment system. When people take their first step, however, they are unlikely to return to using cash. Because the platforms we use are vulnerable to cyber-attacks and hacking, security becomes an important consideration when transacting online.
Cash transactions are sometimes not recorded. This gives the digital wallet industry an advantage because every transaction that occurs through the respective platform is recorded, ensuring transparency. The question is whether, with the presence of an underrepresented community due to age or socioeconomic factors, the cash-based economy will indeed transform into a cashless economy while a large portion of the Nepali population adopts electronic or online forms of payment.