Nepali markets and digital transactions

2 weeks ago 20
Digital BankingPhoto by David Dvořáček on Unsplash

Digital transactions have become a dominant mode of financial activity in the Nepali street market, despite their wide concentration in urban society. The increasing number of subscribers to digital transaction apps, the number of various newly launched transaction apps, and the widespread use of QR codes are a few examples of the growing popularity of digital transactions.

These transactions are mostly popular among small-scale purchasers, such as street vendors and buyers. Due to its visible concentration among urban street buyers, its popularity is scaling up as it facilitates common people to save time and invest it in other activities.

Digital transactions, however, cannot be completed through a single platform; they involve various stakeholders to accomplish even a single sale or purchase.

Access to digital transactions

Vendors, buyers, financial institutions such as commercial banks, and digital mediators such as e-platforms to place orders and deliver goods and services are some major stakeholders. Each of them plays an independent but interconnected role in this transaction. For instance, buyers and sellers keep the transaction dynamics alive, and commercial banks and digital platforms for payment continue these dynamics.

Digital transactions in the street market are not limited to one particular socio-economic group, as various groups and institutions are taking an important part in it. Individuals with low and high income are the primary users of this form of transaction with users not discriminated against based on their earning variations. To elaborate, whether the supermarket or the small stall owner, both of these businesses utilise the same digital transaction platform to complete transactions. However, every business is using this form of transaction, there are still differences in the area of concentration. The urban areas of Nepal have comparatively more concentration of users in digital transactions as compared to rural areas

In terms of access to digital transactions, there is a huge social variation among users. Active users are predominant in urban areas. It is estimated that among 32 million people, only 1.61 million are active users of digital transactions. Rural dwellers share a negligible amount of this figure in Nepal. Although this number is shared predominantly by urban dwellers in major cities like Kathmandu, Pokhara, and Chitwan.

Meanwhile, dynamic features such as mobile banking and digital payment are hard to access in rural areas. Unreliable sources of income and a lack of technical infrastructure have significantly hindered this phenomenon. This is an unescapable instance of digital transactions being one of the leading transactions in the street market. 

The challenges

 redmangoanalyticsPhoto: redmangoanalytics

Although the number of urban street buyers has increased exponentially, digital transactions are still not accessible and affordable to all, even in urban areas. A reliable and affordable internet connection is crucial in these circumstances. The means of connecting people to this transaction are a mobile phone and the internet.

Since mobile phone internet is solely dependent on mobile phone networks and users have no alternative for this, they end up paying a high rate for mobile internet for this transaction. A normal 200 Mbps 3-month package costs Rs 3,300, and the yearly subscription is Rs 12,600. This may not be affordable for street vendors who earn around Rs 25,000 in city areas and Rs 8,000 in rural areas. This has discouraged the aspirants from participating in digital transactions in the street market.

Despite the popularity of digital transactions in the street market, other significant factors discourage potential users, such as inconsistent internet connectivity and the time taken for transaction completion. First, there are service centres that do not have updated apps. Then, the mobile network company’s network is expanding in line with the increase in customers.

During informal conversations with the users—both buyers and sellers—only 3 out of 10 users were able to successfully carry out a transaction on their first attempt. It shows that 70 per cent of users are still facing inconsistencies in internet connectivity, discouraging them from continuing to use this form of transaction. Digital transaction eases the mode of transaction but has many bottlenecks affecting the number of users it could reach.

It may raise the question: why do not people re-attempt the transaction? But the issue is that people do not want to spend more money just to complete the same transaction. They know that every time they re-attempt that transaction, they are losing from their perspective.

Along with the inconsistency in internet connectivity, people fear balance deductions from their mobile accounts. High rate of cost in internet packages offered by the network companies. Contributes to this. For example, NTC charges Rs 25 for 1 hour of use of a 500 MB data pack, while Ncell charges Rs 22 for the same package.

For a customer, one transaction costs Rs 0.25. Each transaction that fails adds to the cost, discouraging the users from continuing with this form of transaction. This is a problem that has been affecting user engagement towards digital transactions and needs to be immediately addressed by the regulating authorities.

Collaboration for fair data and effective subsidies

This problem is solvable, but neither the government nor the mobile network companies can solve it alone. They should cooperate, with the government formulating implementable policies and the mobile network companies adhering to these policies. For example, the policy must mandate that mobile internet providers develop a mechanism to ensure the amount of data provided to users matches their subscribed data plans. This technical concern requires government policy involvement as they formulate a regulation that measures consistent internet connectivity.

There are subsidies based on area (rural or urban), but not individually. The government should (re)form the policies that allow mobile network companies to receive financial subsidies, which motivate users to continue their transactions. Customer-targeted subsidies may be misused by stakeholders. This can be avoided by implementing guidelines that approve and verify the targeted consumers applying for the scheme. It would help ensure that the users of the digital transaction are low-income earners and meet the specified requirements based on the schemes. Additionally, mobile network companies should be audited to ensure they provide subsidies to targeted users.

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