Impact of Digitalization on the Nepalese Banking Sector
Digitalization means the implementation of technology. Digitalization is rapidly changing the day-to-day living style of people in Nepal. Digitization is not an option for the banking industry. Rather, it is specific because every industry is being digitized, and the banking sector is no exception. With the help of technology, banks can reach out to more customers and provide better services to them.
E-banking has developed in reducing costs drastically and has helped generate revenue through various channels. Commercial banks in Nepal have moved towards technology by way of bank mechanization and Computerization. Many financial institutions are facing digitalization as a challenge. The impact of digitalization on banking is a major concern with the payment services provided by the bank to its customers. Banking is made easier with the help of an internet connection as they always have a support team for solving issues.
The use of sophisticated information and communication technologies together with computer science enables banks to offer better services to their customers in a secure, reliable, and affordable manner and sustain a competitive advantage. Banks are not just a part of our lives but have a significant role in our daily lives. Thus, banks always try to adopt the latest technologies to enhance customer experience.
Due to the implementation of this digitalization, the banking sectors in Nepal deal with some remarkable changes as well as difficulties. We are in the digital era; it is not possible to avoid growth and services or digital banking. Digital banking is achieving popularity in the modern era, and customers’ awareness regarding banking services is increasing day by day, as well after digital banking has gained more attention. Digital transformations have also changed the organization’s design and management of employees. In recent days, we can see the number of branches of financial institutions is increasing all over the country.
The banking sector has been passing on through rapid transformation due to progressive economic reforms and fast-paced technology. Digital banking provides end-to-end services to their customer through digital platforms like mobile, tablets, and the internet. Banks provide paperless, branchless, and signatureless services, and added to it also offer 24*7 services which help customers to access banking services even on bank holidays.
Among the subscribers, most people are users of Nepal Telecom. A total of 21.1 million people have subscribed to the NT service. Likewise, 15.55 million have subscribed to Ncell. Similarly, the number of Smart Cell users is 2.27 million. Of total mobile phone users 36.52 million use GSM phones, whereas 1.69 million use CDMA. It is the impact and advancement of digitalization. A study on online banking in Nepal shows that there are 4 million mobile banking customers and 0.78 million internet banking customers. Nepal’s internet penetration rate stood at 38.4 percent of the total population at the start of 2022.
Digital technologies have affected the way we live and interact, including our expectations of financial services. Customers now demand digital-first, fast, and individualized financial services through any touch point. The banking sector has skilled generated changes and improvements in the last few years.
Nepal has 27 commercial banks, 17 development banks, 17 finance companies, 66 microfinance institutions, and one infrastructure development bank. The banking industry is one of the most regulated industries in Nepal.
The changing habits of consumers are demanding a new way to use financial services. In addition, banks are concentrated on promoting their brand, product, and services through digital channels. Digitalization to achieve a combined goal efficiently and effectively which in turn improves profitability and at the same time reduces cost and manual errors.
Banking sectors have an incredible employment opportunity to drive forward digital transformation. Employers need to empower all employees to play their part in developing and implementing new ways of working. By implementing digitization, banks are providing enhanced customer services, providing convenience to a customer, and its saves time. Digitalization reduces human error and builds customer reliability. In recent days banks are forced to invest heavily in digital technology to handle their competitors. Digitalization provides more way to reach potential customer, at the same time, help them to improve their services. Digitalization has changed the financial sector and its working condition.
Digitalization has given banks more innovative ways for reaching out to potential clients and this has helped them to enhance their services. Digitalization in the banking sector has brought about Internet banking and mobile banking, which has turned into the single greatest channel right now for reaching customers and for customers to be able to deal with their banking responsibilities themselves.
Various payment methods such as
- Electronic payment cards (credit/debit and charge cards)
- Mobile payments,
- Smart and loyalty cards,
- Virtual credit cards,
- Stored value card payment
Most commercial banks have online banking facilities in Nepal. Banking is providing the services such as Account information, fund transfer, balance inquiry, statement view and print, fixed deposit account opening, utility payment, credit card management, connect IPS/IPS, Fonepay, and Wallet. E-sewa and QR codes etc. are provided by the Banks through the online banking system.
According to the nature of work, it is necessary to develop and implement the idea of working from home. Nepalese customers still accustomed to traditional banking should be trained for increasing digital literacy.
Digital and Virtual Banking Technology are changing the entire design of banking globally. Nepal is also experiencing this form of change. People are getting used to electronic payments. Banks have introduced various choices and provide a range of digital and mobile-based payment services to their users globally.
A brief history of Mobile wallets/digital service providers in Nepal
- e Sewa.
- Khalti Digital Wallet. …
- IME Pay. …
- Prabhupay is also one of the latest digital wallet payment providers, owned by Prabhu Group.
- iPay Nepal. iPay is a service from muncha.com merchandise dealing with online shopping in Nepal.
Various payment methods are applied by the commercial bank and financial institutions as follows
- Internet banking,
- Mobile banking
- Card Service
- QR Payment
Digital banking involves high levels of process automation and web-based services and may include APIs enabling cross-institutional service composition to deliver banking products and provide transactions. It provides the ability for users to access financial data through desktop, mobile, and ATM services. Digital banking aims to make life easier for the customers of a bank. Digital banking enables a bank’s customers to access banking products and services via an electronic/online platform.
There has been competition amongst Banks and Financial Institutions (BFIs) to deliver modern banking services, the majority population in the country has no access to such services. The reason for this is the concentration of BFIs in urban areas. Modern banking services are available in urban areas only, with most people in rural areas being deprived of even basic banking services. Digital banking is just entering the growth phase in Nepal. The future of digital banking and payment in Nepal seems promising.
Ex-Deputy Director of Agricultural Development Bank (ADBL)