Amid economic slowdown, digital payments see a 13.22 percent decline in the last fiscal

With the contraction in economic activities, digital payments in Nepal have taken a beating in the last fiscal year. While the expansion of retail digital payments remains stable, there was a reduction in the high-volume digital transactions primarily conducted through the Real Time Gross Settlement (RTGS) during the fiscal year 2022/23.

According to Nepal Rastra Bank (NRB), overall digital payment has declined by 13.22 percent in 2022/23. The NRB data shows total digital payments amounted to Rs 51640.88bn in 2022/23 compared to Rs 59508.837bn in 2021/22. As high-volume transactions have declined, NRB said that the decline in RTGS has affected the overall digital payments in this fiscal.

The latest statistics of the NRB show RTGS payments plummeted by 18.61 percent in 2022/23. In the review period, the settlements amounted to Rs 34,289.977bn compared to Rs 42,134.018bn in 2021/22.

An RTGS is a funds transfer system in which the transfer of funds between one bank and another takes place in ‘real-time’ and on a ‘gross’—transaction by transaction basis. The NRB data shows RTGS transactions increased in the first three months of the current fiscal year, then started to decline gradually.

However, retail payments through wallets, QR codes, mobile banking, and ConnectIPS surged in the current fiscal year, according to NRB. The payment through ConnectIPS grew by 33.51 percent in the last fiscal year. According to NRB, payments worth Rs 4,114.628bn were made through ConnectIPS in 2022/23 compared to Rs 3,081.764bn in 2021/22. Similarly, mobile banking transactions surged by 80.64 percent to Rs 2,185.999bn in 2022/23 from Rs 1,210.134bn in 2021/22. There has been a whopping 159.67 percent growth in QR payments in the last fiscal year as Nepalis made payments totaling Rs 245.412bn.

Digital payments which were on an increasing trend till 2021/22, reversed in 2022/23. Bankers and experts point out the current economic slowdown for this. According to them, the spending capacity of consumers has been hard hit by rising inflation resulting in a decline in digital payments.

Guru Prasad Paudel, Chief of the Payment System Department at NRB, has said that the reduction in digital transactions reflects the economic activity’s contraction. “The decline in payments through RTGS has led to a decrease in overall digital transactions,” said Paudel.

There was a significant surge in digital transactions in Nepal in early 2020 following the outbreak of the Covid-19 pandemic. The lockdowns compelled individuals to remain indoors, leading to the swift adoption of digital payment methods and online shopping for daily necessities. This shift was supported by the growing utilization of smartphones, with e-commerce and point-of-sale (POS) transactions emerging as notable trends.

Post-pandemic, digital platforms including connectIPS, e-wallets, mobile banking, internet banking, QR codes, and bank cards are being used widely as customers can use these instruments in self-service mode.