Digital payment transactions and adoption of digital wallets in Nepal

Abstract

Digital Economy Foundations identified by the World Bank start from connectivity and then payments. Nepal has made tremendous achievements in terms of connectivity, while there have been positive trends in digital payments, Cash is still the dominant method of doing transactions. The research explored the legal and regulatory environment governing payment systems in Nepal, focusing on the Nepal Rastra Bank's role and relevant laws. Using Nepal Rastra Bank's data, trends in monthly transactions across various digital payment instruments (mobile banking, digital wallets, cards) were examined, and identifying of the user base, average transaction size, and volume changes, was also done. Mobile banking emerged as the preferred option in 2022, while digital wallets exhibited smaller average transaction sizes compared to mobile banking and cards. Debit card usage for cash withdrawals paralleled general card usage. A survey of 380 respondents investigated factors influencing digital wallet adoption, applying Technology Acceptance Model. Based on the conceptual framework, perceived usefulness, ease of use, credibility, and convenience were hypothesized to explain adoption. 64.5% of respondents were male, indicating potential gender skews in digital wallet usage. All four hypothesized factors (perceived usefulness, ease of use, credibility, and convenience) showed positive correlations with digital wallet adoption, as expected. Median values for each factor (between 3 and 4) suggest agreement by most respondents that these factors play a role in adoption. Correlation and regression analyses confirmed the predicted influence of these factors on digital wallet adoption, with the final model explaining 77.4% of the data variance. This research sheds light on the growing adoption of digital payments in Nepal, highlighting the regulatory framework, user trends, and key factors influencing digital wallet adoption.