On a weekday afternoon in Kathmandu, a tea shop owner no longer pauses to ask how a customer would like to pay. A laminated QR code placed beside the counter, creased from sun and steam, has become as permanent as the kettle itself. When asked whether he still accepts cash, the shopkeeper pauses and answers “I do, but digital payment is easier. It is faster, easier to track and avoids the constant hassle of handling small change.” Asked which platforms he accepts, his answer comes without hesitation: eSewa, Khalti, FonePay, or a bank app. The list does not vary.
The same pattern emerges across the city. In grocery stores, clothing shops, pharmacies, and roadside cafés, merchants name the same handful of platforms. Customers too, echo this behavior. Ashish Tamang, a 23-year-old student in Kathmandu, says he last carried cash regularly years ago. Today, he brings cash only when traveling by public bus, one of the few places where digital payments remain impractical. But asked whether he uses any smaller payment wallets, he shakes his head. He has only heard of the same four platforms. “I haven’t heard of any other apps beyond these four, and I haven’t felt the need of using them,” he said.
These ordinary exchanges point to a quiet tension at the heart of Nepal's digital payments transformation. The country's fintech ecosystem has expanded rapidly, licensing more than two dozen payment service providers and processing billions of transactions each year. Yet for most users and merchants, practical choice has narrowed rather than widened. Digital payments are everywhere, but yet the preferences feel confined.
A rapid shift from inclusion to infrastructure
Over the past decade, Nepal's digital payments ecosystem has grown faster than most observers anticipated. What began as an effort to address basic financial exclusion has evolved into a central pillar of daily commerce. According to Nepal Rastra Bank (NRB), the pace of transformation accelerated sharply after the COVID-19 pandemic, as lockdowns pushed both consumers and merchants toward cashless alternatives.
A central bank report published in 2025 shows that over the past three fiscal years, the total number of digital payment transactions increased by 43.5 percent, while transaction value grew by an average of 23.7 percent annually. QR code–based payments have been the fastest-growing segment. Between fiscal years 2021–22 and 2023–24, the volume of QR transactions expanded by an average of 230 percent per year, while transaction value rose by 210 percent annually.
In absolute terms, the shift is striking. QR-based merchant payments climbed from NPR 20.28 billion across 5.5 million transactions in 2021–22 to nearly NPR 500 billion from more than 160 million transactions in 2023–24. Mobile banking usage surged in parallel, with registered users rising from 114 million in mid-2020 to more than 265 million by early 2024.
Cash, meanwhile, has steadily receded. NRB data shows that ATM withdrawals accounted for just 9.7 percent of all transactions in the last fiscal year, down from more than 16 percent in 2020–21. Faster payment systems, mobile banking, and QR-based transactions have filled the gap, reshaping how money moves through the economy.
From a regulatory standpoint, this growth appears to be accompanied by diversity. By mid-January 2025, NRB had licensed 26 payment service providers (PSPs) and nine payment system operators (PSOs), a sharp increase from just two licensed entities a decade ago. PSPs are consumer-facing companies, such as digital wallets and payment apps that provide services directly to users and merchants, while PSOs operate the underlying payment infrastructure that enables transactions to move between banks and platforms, such as national clearing and settlement systems. Reforms such as the establishment of the Payment Systems Department in 2015 and initiatives under the Digital Nepal Framework were designed to encourage competition and innovation. On paper, Nepal's digital payments market looks crowded, but in everyday life it does not feel that way.
Why visibility clusters around a few platforms
According to Vivek Rana, a digital enterprise architect with long experience in Nepal's financial services sector, the explanation lies not in exclusion, but in economics. "A lot of people assume that opening a wallet is the business," he said. "In reality, the wallet is just the interface. The real business is the ecosystem behind it."
Payments, Rana explained, are not a high-margin product. They are an infrastructure play, one that demands scale, capital, and patience long before profits appear. This economic reality shapes which platforms survive, which remain visible, and which quietly fade from public awareness.
That ecosystem rests on three pillars: agent networks, merchant networks, and access to transaction pillar channels. In Nepal's early fintech years, the platforms that succeeded invested heavily in building nationwide agent systems that allowed users to cash in and cash out, particularly outside urban centers where bank branches were scarce and digital literacy uneven. eSewa, for example, in its initial phase invested heavily in an agent-led model, partnering with cyber cafés, pharmacies, stationery shops, and mobile repair outlets to reach users who lacked smartphones, internet access, or bank accounts. At one point, nearly 85 percent of eSewa’s transactions were processed through agents who not only facilitated payments but also educated users, built trust, and normalized digital transactions in communities far from urban centers.
These agents did more than process transactions. They explained the technology, built trust, and normalized digital payments in communities where smartphones and reliable internet connections were not guaranteed.
“For banks or remittance companies, agent networks are already part of their value chain,” Rana said. “For standalone wallets, building and maintaining those networks is extremely expensive.” Replicating such infrastructure today would require years of sustained losses, operational complexity, and capital that few new entrants can realistically afford. This is not a temporary hurdle, it is structural.
Beyond physical presence, digital access points create another layer of cost. Mobile phones are now the primary gateways to payments, but visibility on those screens is neither neutral nor free. In Nepal, most mobile banking and payment services are bundled into platforms operated by a small number of infrastructure providers. Integration into these ecosystems requires technical coordination, compliance work and substantial financial investment.
"It's not that new wallets are blocked from entering," Rana said. "But the cost of being present where transactions actually happen filters out most players long before they ever reach consumers."
Licensing, in this context, allows a company to operate but it does not guarantee adoption. Several providers hold regulatory approval without launching products at scale, while others struggle to move beyond experimental phases. For consumers and merchants, these wallets may as well not exist.
Network effects then compound the challenge. Merchants prefer platforms they know customers already use. Customers adopt platforms they know will be accepted everywhere. Once this loop is established, breaking into it becomes increasingly expensive. New entrants are often forced to rely on aggressive cashback campaigns or short-term discounts that burn capital quickly, attracting users briefly but failing to convert them into long-term customers.
The cost of scale in a low-margin business
Nora Asha Gurung, a fintech product leader with a background in digital financial services policy research sees the same dynamic reflected globally. “The payment business is very low margin,” she explained. “You only make money when you scale. New entrants need enough capital to absorb losses in the beginning, especially when someone else has already built the infrastructure.”
In many countries, Gurung noted, payment platforms emerge first, then evolve into broader financial ecosystems. Kenya's mobile money model is a common reference point. Early payment infrastructure built by telecom operators eventually supported microloans, agricultural financing, and alternative credit scoring based on user behavior rather than collateral. Similar patterns have emerged in parts of Southeast Asia.
In Nepal, by contrast, much of the fintech conversation remains narrowly focused on wallets. “There are so many other fintech products—identity, credit, insurance, lending,” Gurung said. “But here, it feels like getting a license equals to doing what already existing apps and bank apps do.”
This lack of differentiation makes survival even harder in a market where scale is expensive and margins are thin. According to NRB's Monthly Payment Systems Indicators, wallet transactions reached nearly 40 million in mid-2025, with transaction values exceeding NPR 45 billion in a single month. But those volumes are heavily concentrated. Smaller platforms struggle to capture enough activity to justify ongoing investment in compliance, cybersecurity, customer support, and infrastructure.
Trust further shapes user behavior. Both Rana and Gurung noted that for many users in Nepal, reliability matters more than novelty. Failed transactions or delayed reversals can permanently push users away from an app.
Cashback, campaigns, and disappearing users
Promotional campaigns offer a glimpse into how difficult it is to convert awareness into lasting adoption. Gurung recalled an example involving a payment provider backed by a telecom operator with a large existing user base. The platform partnered with a major retail chain, offering substantial cashback on purchases. Adoption surged so quickly that systems struggled to handle the volume.
But when the campaign ended, most users disappeared. “They came for the incentive, not the product,” Gurung said. “Without daily relevance, they didn't stay.”
The episode illustrates a recurring challenge that incentives can buy attention, but sustained usage requires deep integration into everyday life—merchant acceptance, peer-to-peer usage, reliability, and trust. All of these are expensive to build and maintain.
Interoperability helps—but only so much
NRB has attempted to address concentration risks through interoperability initiatives, including QR standardization, connectIPS, and faster payment systems. In theory, interoperability allows users of one platform to transact seamlessly with merchants or users of another, reducing lock-in.
But in practice the impact is sometimes uneven. While transactions may pass across platforms behind the scenes, dominant players continue to control customer interfaces, branding, and data. Smaller wallets gain access to rails, but not necessarily to customers.
True interoperability, Rana argued, requires more than technical compatibility. It requires shared incentives and enforcement mechanisms. According to Rana, interoperability on its own cannot substitute for deeper structural alignment. "Interoperability is something central banks everywhere want, because in principle it should work in the best interest of citizens," he said. "But interoperability only works properly when there is a truly common platform underneath. In Nepal, we don't have that yet. Payment services are still driven by individual companies, each trying to promote its own channel. So, while transactions may technically move across systems, smaller players don't automatically gain access to customers."
Gurung echoed this concern, noting that technical compatibility alone does not change market behavior. “Everyone still wants to promote their own channel,” she said. “Without shared incentives and enforcement, interoperability only goes so far.”
Cross-border signals and the future of payments
Recent developments in cross-border digital payments hint at where Nepal's ecosystem may be heading. Since the launch of QR-based payments with India in March 2023, transactions through UPI acquiring services reached NPR 1.41 billion across more than 500,000 transactions by early 2025. Payments via Alipay+, UnionPay, and WeChat for Chinese tourists have also grown steadily, though volumes remain smaller.
These initiatives underscore both progress and constraint. They show that Nepal's payment infrastructure can integrate internationally, but they also highlight the importance of public payment rails and coordinated policy. Without broader public investment in infrastructure, private platforms will continue to bear the cost of expansion, and only those with sufficient capital will remain visible.
Paying for convenience
Nepal's digital payments boom has delivered undeniable gains. Transactions are faster. Cash dependency has declined. Financial services reach further than before. Yet beneath the QR codes lies a costly ecosystem in which visibility is earned through infrastructure, trust, and sustained investment, not just through licensing or innovation.
The narrowing of everyday choice is not the result of exclusion or regulatory failure. It is the outcome of a low-margin, high-cost business where only a few platforms can afford to operate at scale. Consumers experience convenience and reliability, while the market itself quietly filters out all but the most capitalized platforms.
As Rana put it, “The question isn't how many wallets exist. It's how many can survive.”
(Ms Baral holds a Bachelor’s degree from the University of International Business and Economics in Beijing)
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