DIGITAL WALLET AND ITS EMERGENCE IN NEPAL

A Project Report Proposal

Submitted By:

SAFAL KHATIWADA

T.U. Registered Number: 7-2-920-241-2018

Group: Finance

Danfe College

Putalisadak,Kathmandu

Submitted To:

Faculty of Management

Tribhuvan University

In the partial fulfillment of the requirement for the Degree of

Bachelor of Business Studies (BBS)

Kathmandu, Nepal

January, 2023
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CHAPTER – 1
INTRODUCTION

1.1 Background of the Study

1.1.1. Meaning of Digital Wallet

Digital wallets are financial applications that allow you to store funds, make
transactions, and track payment histories on devices like phones and tablets. A
software, electronic device, or online service that enables individuals or businesses
to make transactions electronically. A digital wallet is also known as an e-wallet. A
digital wallet is an online payment tool or software application that serves as an
electronic version of a physical wallet. Also known as an electronic wallet, e-
wallet or mobile wallet, it enables users to securely store digital versions of payment
methods -- credit and debit cards, gift cards, cryptocurrency, boarding passes, event
tickets, passwords and coupons -- to use on the go with their smartphones
or smartwatches.

There are several digital wallets available. Here are some of the most well-known:

 Cash App
 Apple Pay
 Google Wallet
 Samsung Pay
 PayPal

Digital wallets do not require a bank account at a bank with a physical branch.
Instead, you can place your funds in an online-only bank—which
gives unbanked and underbanked communities’ access to financial services,
therefore enabling broader financial inclusion.
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Traditionally carried in the form of a smartphone app, a digital wallet can also exist
in other forms, such as a desktop. However, the mobile app is the most popular
version of the digital wallet, owing to its mobility and flexibility.

Some of the major wallets available in Nepal are eSewa, Khalti, Imepay, Cellpay,
Moru etc.

1.1.2. Development of Digital Wallet in Nepal

The term digital wallet in itself says about the digital payment system on which it is
based for the systematic and proper functioning. Digital payment is the transfer of
value from one payment account to another using digital devices such as a mobile
phone, POS, a computer or a digital channel. Digital payment in Nepal does not have
a long history. It dates back to the early 1990’s when Nabil bank introduced credit
cards. Few other banks like Himalayan Bank, Kumari Bank and Laxmi bank gave
the phenomena a push by adding services related to it.
Later on with the increasing accessibility of the internet in Nepal, people are starting
to use more digital payments. It is not surprising that Nepal has been adopting the
technologies, being an open economy. Today all digital wallets like Khalti, IME Pay,
eSewa and others have become more trendy. People have become more familiar
with digital payments after Covid-19 as the rules for social distancing have been
implemented. Due to the fear of infection people avoided staying in queue to pay the
bills and shop physically.
eSewa, Nepal’s first digital wallet is 13 years old now. The application that was
released in beta version in 2009 launched its full-fledged service after a while on
January 25, 2010. Since then, it has made significant contributions to building a
cashless economy during this period.
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The concept of digital/mobile wallets started in 2009 after the launch of eSewa by
F1 Soft International. The introduction of eSewa revolutionized the concept of
digital payment in Nepal. Since then Nepal has seen different digital payment service
providers. Since eSewa, other payment systems like Khalti, IME Pay, QPay, iPay,
etc. have launched their services.
Khalti Digital Wallet and Payment Gateway has been a part of this revolution.
Starting its journey from 2017 with a small investment to growing as a big corporate
house in 2021, within a few years it has contributed a lot for the digital payment
industry in Nepal. With a user base of more than 2 Million.

1.2. Profile of eSewa

Established in 2009, eSewa is a household name today. eSewa is Nepal’s pioneer

digital payment service provider, licensed by Nepal Rastra Bank (Central Bank of
Nepal), and an ISO 27001:2013 certified company. eSewa is a subsidiary company
of F1 Soft International, a leading FinTech company of Nepal. Team eSewa has been
working tirelessly to achieve its vision to create a cashless economy. For this, the
company has onboarded more than 400k+ merchants, 120k+ agents, 51+ Banks and
Financial Institutions (BFIs) and established a wider network of agents nationwide.

Customers of eSewa can make various bill payments easily from eSewa’s mobile
app or website. Now, recharging mobile, paying utility bills (NEA, Khanepani,
Landline, etc.), internet bills, TV bills, school fees, and many more are all on your
fingertip. Being able to make the payment to government offices such as Inland
Revenue Department, Traffic Fine Payment, payment to Department of Foreign
Employment, and more act as a cherry on top for the customers.
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1.3. Statement of the Problem

Digital wallets allow businesses and consumers worldwide to accept payments,

receive funds, or send and receive remittances from friends and family in other
nations. Digital wallets do not require a bank account at a bank with a physical
branch. Instead, you can place your funds in an online-only bank—which
gives unbanked and underbanked communities’ access to financial services,
therefore enabling broader financial inclusion.
The era of digital wallet started around 2009 in Nepal since then there has been
significant spike in the digital sector of the country. The Covid-19 pandemic and
nationwide lockdown catapulted the trend forcing users to adopt digital mode of
receiving and making payments. Digital Wallet has helped to make a revolution in
Nepalese Economy.
In Nepal NRB has been tasked with the responsibility of issuance, revoke or refusal
of license to an entity to work as a payment service provider or payment systems
operator as per ‘Payment And Settlement Act 2019.’ Also NRB is empowered to
supervise and inspect the licensed institutions on a regular basis. As the digital wallet
are also payment service providers (PSP’s), they are governed by the central bank
of Nepal, Nepal Rastra Bank (NRB).
Following are the areas covered in this report.
1. How Digital Wallets have been significant in the Nepalese Economy?
2. What is the impact of Digital wallets in financial sector of the country?
3. What are the supporting factors for development of digital wallet in Nepal?
4. How Covid-19 acts as catalyst for rise of Fintech companies?
5. What are the impacts of globalization in the financial Market?
6. What is the perception of cash among people in Nepal?
7. What factors forced people to shift from Cash Payment to digital payment for
retail shopping during CoVid-19?
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8. What will be the main challenging factors impacting prospects of digital

payments in Nepal?

1.4. Objectives of the Study

The objectives of this study are as follow:

 To find the general perception of the public about Cash Payments.
 To explore the reason for shifting from offline Cash payments to digital
payments.
 To determine the future prospects of digital payment in day-to-day
transactions in Nepal.
 To suggest the respective authorities and concern holders for development of
digital wallet policies.
 To find out the market shift from old traditional approach to modern IT based
approach of saving, spending and investing.

1.5. Rationale of the Study

A digital wallet securely stores all the payment information of users in a compact
form. Thus, it greatly reduces the need to carry physical wallets. Companies that
need to collect consumer data for their marketing needs can benefit greatly from
digital wallets. They get to know the purchasing habits of consumers and increase
the effectiveness of the marketing methods of their products. However, it leads to a
loss of privacy for consumers. Many developing countries using digital wallets are
able to increase their participation in the global financial market. Digital wallets
allow users to transfer funds to friends and family residing in different nations.
Moreover, digital wallets eliminate the need for physical banks and companies in
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order to open and maintain a bank account. Hence, they also connect individuals and
businesses in rural areas which is most for the countries like Nepal.

1.6. Literature Review

A literature review creates a "landscape" for the reader, giving her or him a full
understanding of the developments in the field. This landscape informs the reader
that the author has indeed assimilated all (or the vast majority of) previous,
significant works in the field into her or his research. Researcher used to do literature
review to understand research problem better and know the methodology that is to
be used in research. Researcher also try to find out knowledge, gap, problems of the
past research and current status of the topic.

1.6.1 Review of Previous Research Work

2. Tamang (2021), in his research, tries to summarize the Acceleration of Digital

Payment Adoption during COVID-19 Pandemic.
Major objectives of the study are as follows:
o To find the general perception of the public about Cash Payments
during COVID-19 Pandemic.
o To explore the reason for shifting from offline Cash payments to digital
payments during the CoVid-19 pandemic.
o To determine the future prospects of digital payment in day-to-day
transactions post Covid19 in Nepal.

Major findings:
o People preferred digital payment compared to cash, and most of them
use digital payments for daily retail shopping.
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o The fear of coronavirus and government initiatives motivated people to

use ewallets during the pandemic.
o Not providing services and supports to businesses and users in the rural
area and keeping the existing users after the pandemic ends are
challenging factors impacting the future prospect of digital payments in
Nepal. Educating users about the benefits of digital payments and
providing information about government fees and tax payments via
digital payment could attract a new segment of the population that has
not used digital payment even during this pandemic.

3. Hendy Mustiko Aji (2020), in his research on COVID-19 and e-wallet usage
intention: A multi group analysis between Indonesia and Malaysia.
Main Objectives:
 To contributes to the literature by examining the effect of perceived
risk, government support, and perceived usefulness on customers’
intention to use e-wallet during COVID-19 outbreak.
 To give more fruitful insight and
 To investigate the group difference between Indonesia and Malaysia
in the overall model.

Major Findings:
 Statistical tests show that the intention to use e-wallets is directly
determined by perceived risks and perceived usefulness.
 The results show that COVID-19 outbreak has made customers in
both countries worried about getting infected by SARS-Cov2 that can
be possibly transmitted through physical money.

 Perceived risk of COVID-19 significantly affects customers’ intention

to use e-wallet. On the other hand, it means that COVID-19 risk
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perception has a negative connection with the intention to use physical

money.

4. Mukund Jakhiya (2013), has carried out a research work on the topic ‘A Study
On The Effect of Mobile Money in Modern India.’
Main Objectives:
 Understand the emergence of Mobile Money in India;

 Understand the growth of Mobile Money in India; and

 Access the effect of Mobile Money in India.

Major Findings:
 Mobile money that will make shopping a more comfortable experience is
set to transform the Indian retail business.
 Payment services use fraud detection systems equipped with machine
learning to secure the payment process.
 Retailers are developing utility consciousness of mobile payment options
such as P2P, C2B and B2B, Mobile Microfinance Loans, and the two
aspects of Mobile Banking, i.e., Transactional and Informational banking.

1.6.2 Research Gap

The purpose or goal to find, examine and analyze the article is to find a gap for
contributing new research. Authors signal that there is a gap using words such as:

 has not been clarified, studied, reported, or elucidated, further research is

required or needed, is not well reported, suggestions for further research, key
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question is or remains, it is important to address, poorly understood or known,

lack of studies.

Gaps in the Literature are missing pieces or insufficient information in the

research literature. These are areas that have scope for further research because
they are unexplored, under-explored, or outdated.

Gaps could be:

 Population or sample: size, type, location etc…, research methods: qualitative,

quantitative, or mixed, data collection or analysis, research variables or
conditions.

1.7. Resarch Methods

As digital wallets are a comparatively new research area with little previous
empirical work available on the subject, a qualitative approach was chosen to
explore the study on the growth and effect of mobile money or digital wallet in
Nepal. Secondary data from prominent journals, government reports, published
books, newspapers, magazines, online portals, use of focus group interviews and
websites, were undertaken for the study.

1.8. Organization of the Study:

The organization of the present study is done in such a way that the above mentioned
objectives are easily fulfilled. The structure of the study will try to analyze the study
in a systematic way. The study on the respective topic ‘Digital Wallet and It’s
Emergence in Nepal’ is divided into three chapters viz. Introduction, Results and
analysis and Summary, conclusions and recommendations.
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Introduction includes, Background of the study; Profile of the organization;

Objective of the study; Rational of study; Statement of Problem; Review of
literature; Organization of study and method of study. Review of Literature includes,
Theoretical review and Empirical review. Method of the study includes, Research
gap, Population and sample, research design, Method of data collection, Method of
data analaysis and Limitation of study.
Finally, bibliography and appendix are represented at the end of the study.

1.9. Limitation of the Study

Various factors such as time constraints, financial problem, lack of research

experience and lack of either comprehensive or extensive one for the completion of
this study the following facts are the basic limitation of the study in spite of hard
efforts put by the researcher.
Also the study is done for the partial fulfillment of academic degree (Bachelor in
Business Studies) as assigned by the Tribhuvan University (T.U)
a) This study is mainly based on secondary data.
b) This study only covers Nepal in terms of geography.
c) The sources of data i.e. published oversight report and internet site is assumed
to be correct.
d) A whole study is based on the data of last five years only provided the collection
of data is assumed to be done systematically and efficiently.
e) Only some examples of the PSP’s are taken as the sample.
f) The study only covers digital wallet and not the whole digital payment system.
g) It lacks the analysis of PSO, commercial banks, development banks and finance
companies working as PSP for a correct overview of Nepalese financial and
economic market.