Are We Moving Towards A Cashless Economy?
May 26, 2021 | Flabia Maharjan
Imagine a society where we no longer use paper money or coins. All our transactions are supported by digital platforms. Khalti, eSewa, fonepay, PrabhuPay, QR Nepal to name a few. With the growth of the digital wallet industry and the convenience brought by it, it wouldn’t be wrong to say that the number of people opting for it is seen increasing numbers. On top of that, the Covid-19 pandemic has engraved a fear of transmission amongst the citizens due to increased chances of contact while using paper money.
There has been a sharp increase in the number of mobile banking users after the lockdown imposed on 24th March 2020. If we are to compare the monthly Banking and Financial Statistics published by Nepal Rastra Bank for the month of March 2020 and 2021 i.e. before the pandemic and a year into the pandemic, the numbers have increased from 9,806,237 to 12,689,445 respectively. This translates to a 29.4 percent growth in the number of mobile banking users after lockdown. This period has seen many e-commerce businesses grow.
People were able to experience the convenience of making online payments over cash. It enabled individuals to make their payments from groceries, school fees to internet services in a single click without the need to visit ATM or banks to withdraw cash, saving time and from exposure during the pandemic. To ease out the discomfort caused by Covid-19, banks extended transaction limit on card transactions, POS transaction, mobile banking, internet banking, QR code, wallet transactions etc. encouraging more digital transactions.
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As per the Payment System Indicators of Falgun 2077 BS, mobile banking transactions account 40 billion, wallet transactions account 10 billion, internet banking transactions account 8 billion, QR based payments account 2 billion, point of sales (POS) accounts 3 billion, and online payment using card accounts 904 million approximately.
However, our economy is yet to be 100 percent cashless. Indeed most of our transactions are cash to date. But, with a broadband internet penetration rate of 72.98 percent which has shown an increase of 10.79 percent from last year, there is hope for a rise in access to cashless transaction systems. Proper policies play a crucial role in bringing about this transformation.
According to the Monetary Policy 2020/2021, settlement of financial transactions through digital means is said to be encouraged following the spirit of the Digital Nepal Framework implemented by the GoN, which aims to promote sound and secure electronic payment system in order to minimize cash transactions. It also states that a guideline will be issued to manage the electronic payments made through Quick Response (QR) Code. In reference to the above information, we can say that Nepal is heading towards establishing itself as a cashless economy.
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Despite the positivity digital platforms are receiving today, the trust in paper money somehow remains the same. The idea of not having money physically in one’s hands is new to people; thus, they are reluctant to switch to an electronic or online payment system. However, when people take their first step, they are unlikely to switch back to using cash. Security too becomes a key factor while transacting online since the platforms we use remain prone to cyber-attacks and hacking.
There are times when cash transactions are unrecorded. This gives an upper hand to the digital wallet industry because every transaction that takes place through the respective platform is recorded, maintaining transparency. The question is, while a large mass of the Nepali population is adopting electronic or online forms of payment, with the presence of an underrepresented community either due to age or socio-economic factors, will the cash-based economy indeed transform into a cashless economy?
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