Banking Sector in the Digital Era

The world is going digital and so is Nepal. This is especially true for the Nepali banking sector that has become a trailblazer in digital transformation. The sector is not just keeping up; it is setting the pace. From QR codes popping up like wildflowers to easy to use mobile banking apps, banks here are flipping the script on what it means to be digital. Who would have thought that banking in Nepal could feel this modern?

But here is the million-rupee question: Is the Nepali banking sector genuinely hitting global high notes, or merely joining the tech parade as a spectator? This article explores Nepal’s position on the innovation curve and what it can do to transform from being a tech pageant participant to a serious competitor in the global arena.

The Global Landscape

The global digital banking sector, which was estimated at $10.9 trillion, is anticipated to reach nearly $19.9 trillion in 2026, expanding at a CAGR of 3%. In 2024 alone, around 1.75 billion digital accounts handled $1.4 trillion, which is roughly $2.7 million per minute - a vivid reminder of how frictionless finance is becoming the norm.

This explosive growth is not just about convenience; it is also a strategic imperative for the banking industry. Over 70% of global financial institutions are prioritizing investment in digital transformation strategies to keep up with evolving customer preferences. Behind the scenes, banks are going all-in on AI-powered tools, cloud-native platforms and blockchain integration.

AI, in particular, is becoming the front door of modern banking. Over 65% of banks have deployed AI-driven chatbots to handle everything from account queries to payment reminders. By 2025, 95% of customer interactions in banking are expected to be via AI chatbots.

Consumers are driving the shift too. Around 63% of users prefer digital channels over physical branches, and 61% believe AI makes their banking experience smoother. Nearly 90% of global banking customers now prefer using digital channels instead of visiting the bank in person. This highlights a significant change in consumer behavior. Further, widespread smartphone adoption, with over half the world’s population, some 4.3 billion people owning one, is propelling this growth and interest in digital banking.

But digital transformation is not just about being flashy, it should also be delivering cold, hard savings. Research shows that digital transformation can slash operating costs by 40% with the right technology stack.

For instance, Australia and New Zealand bank (ANZ), invested $2.5 billion in its digital banking platform “ANZ Plus” and is betting big on lowering acquisition and servicing costs. The anticipated payoff? More room to innovate, better customer retention and improved agility in adapting to market shifts.

The transformation is already well underway. But as the world rewrites the rules of banking, is Nepal shaping the story or just treading along?

Nepal’s Digital Banking Market: A Rapidly Rising Contender

Nepal’s digital finance story did not start yesterday. It dates back to the early 1990s when Nabil Bank introduced credit cards. Fast forward, Himalayan Bank rolled out ATMs and local cards by 1995, Kumari Bank launched internet banking in 2002, and mobile banking with SMS came via Laxmi Bank in 2004.

Today, digital banking is more than a trend; it is a lifestyle. With 16.5 million internet users (about 56% of the population) and smartphone ownership over 73% in early 2025 (expected to hit 85% by 2030), Nepal is primed for a digital leap. From bustling cafés in Kathmandu to the serene slopes of Kalinchowk, cashless transactions are becoming the norm. Mobile banking users surged 15.4% between July 2023 and July 2024, crossing 24.7 million.

At the center of this financial change is the rise of digital wallets. Once viewed with scrutiny and mistrust, e-wallets have become crucial to everyday life for the Nepali people. eWallets have exploded from under 5 million users in 2020 to a jaw-dropping 23.46 million by mid-2024, a 5x growth in four years.

Leading the charge are eSewa (with 8 million users and 250,000 agents across Nepal), along with Khalti by IME and Namaste Pay. Whether it be paying utility bills, transferring remittances, settling school fees, booking movie tickets or handling traffic fines, these apps are turning into one-stop platforms for daily financial tasks for fellow countrymen.

QR payments are also scanning their way to the top. The service witnessed a 117% jump in transaction volume hitting 169 million, and a 104% leap in value, nearly Rs 500 billion (approximately $3 billion), during the period. On the other hand, ConnectIPS, the interbank transfer platform, also witnessed a 49.5% growth in volume, processing 75.6 million transactions in fiscal year 2023-24.

But it is not all smooth sailing. Rural and peri-urban areas still grapple with patchy internet, limited digital literacy, fear of fraud and smartphone availability challenges. Plus, merchant adoption varies because many sellers need clear, relatable use cases that make digital payments feel worth it. Therefore, fixing these needs may require a two-pronged approach: relevant, everyday use cases that resonate with people, and evolving services tailored to peer-to-peer, person-to-business and government payments verification services.

The Policy Power-Up: Government’s Digital Handshake

Nepal Rastra Bank (NRB) is not just watching but is actively steering and shaping the broader banking industry’s digital transformation. Here’s a quick look at the major initiatives setting the stage for Nepal’s digital finance future:

● Digital Finance Innovation Hub (2025): A sandbox where fintech startups can safely test new digital payment ideas under regulatory guidance of NRB before going live.

● Digital Nepal Framework 2.0 (2025): A big-picture plan to boost digital infrastructure, sharpen digital skills, promote inclusiveness, and power sustainable economic growth.

● Digital Payments Strategy (2024): Creating a safe, innovative fintech environment that encourages fresh ideas and strong regulations.

● QR Code Nepal Project: Growing merchant QR acceptance from 40,000 in 2020 to over 300,000 across every district by mid-2024.

● Compulsory Digital Banking Services: NRB is making it compulsory for all commercial banks to offer accessible digital banking platforms.

● Rural Outreach Programs: Ensuring women, elderly, and farmers aren’t left out of the digital revolution.

NRB introduced the Cybersecurity Framework in 2025, which requires all banks to enhance protections against fraud, breaches and data misuse. This way, as digital banking grows, it does so securely. However, this move came only after a string of high-profile breaches between 2017 and 2023 caused serious financial headaches for major banks and their customers. Clearly, there is still plenty of room for the banking sector to step up as a vanguard in cybersecurity, proactively safeguarding customer trust and financial stability rather than reacting after the fact.

While the banking sector has made notable progress in digital transformation, the question remains: is it genuinely catching up with global leaders or just keeping pace?

Learning Curve of Nepal’s Banking Industry

The global race is no cakewalk, and to compete, Nepal needs to accelerate its innovation pace. In Nepal, security is a ticking clock. A 2023 survey by the Nepal Bankers’ Association found that only 30% of banks conduct regular cybersecurity audits, even as cyberattacks surged 60% between 2020 to 2023.

The wake-up call came in 2022 when a major cyberattack knocked a bank offline for three whole days, affecting 500,000 customers. This highlighted the need for systemic improvements in the banking sector.

Experiences of neighboring countries can be valuable for Nepal. The Bangladesh Bank, the central bank of Bangladesh, for instance, created a Cyber Security Incident Response Team (CSIRT) to monitor threats in real time by coordinating quick responses through proactive strategies like mandatory cybersecurity audits and regular training on phishing awareness for bank employees. By adopting such proven regional strategies, Nepal could strengthen its defenses and build a safer digital banking environment.

Nepal’s push for universal QR payments, guided by its 2021 QR Standardization Guidelines, is a strong first step toward streamlining digital transactions for both merchants and consumers. But to truly compete on the global stage, Nepal must look beyond setting technical rules. Vietnam’s VietQR highlights the impact of a centralized, interoperable QR platform that simplifies payments across institutions, while India’s BharatQR illustrates how deep integration with banks and card networks can make QR payments part of everyday life.

Inspired by these examples, Nepal could consolidate its fragmented QR ecosystem into a unified national QR gateway with real-time settlement capabilities. This would not only advance financial inclusion but also ensure seamless interoperability between banks, wallets and service providers, thus bringing QR adoption from convenience to ubiquity.

Afterthoughts

Nepal is not just mimicking global trends; it is localizing and applying them effectively in several key areas of digital banking, especially in mobile wallet usage, QR code payments, and financial outreach.

However, it now needs to move beyond basic adoption and focus on strengthening digital infrastructure, enhancing cybersecurity, and expanding financial literacy to compete globally. Drawing from the experiences of Bangladesh and India, Nepal could be well-positioned to accelerate its digital transformation and build a future-ready digital economy.

This opinion article was originally published in September 2025 issue of New Business Age Magazine.