More than one-third of adults in developing economies who paid a utility bill from an account did so for the first time after Covid-19, an indication of how the pandemic boosted the adoption of digital financial services, according to the Global Findex Database 2021 published by the World Bank on Wednesday.

Globally, 70 percent of adults have internet access. According to the report, 1 billion adults who have an account made no digital payments—including 540 million in India. And about 620 million adults who have an account still paid utility bills in cash.

In developing economies, 1.6 billion adults with an account made merchant payments only in cash—including 670 million in India.

Experts say that the future is digital, but not everyone is on board yet.

“Obviously, e-commerce has been growing from a financial perspective. Transactions through the digital system are expanding in a big way,” said Omesh Lal Shrestha, managing director of CAS Solution and Silver Lining.

"In Nepal, the number of digital payment users soared after Covid-19, and people are becoming more used to paying online," said Shrestha who is scheduled to speak on the topic "From Conventional Commerce to E-Commerce in Nepal" at the annual Daraz Summit 2022 on Sunday.

This year’s Daraz Summit aims to create a space for distinguished digital thought leaders to discuss the development phases of the e-commerce industry in Nepal, the prospects and challenges of business going digital, and the steps that the industry can take together to transform those challenges into opportunities.

According to the World Bank report, globally the share of adults making a digital merchant payment also increased after the outbreak of Covid-19. For example, in India more than 80 million adults made their first digital merchant payment during the pandemic.

In China, 82 percent of adults made a digital merchant payment in 2021, including over 100 million adults (11 percent) who did so for the first time after the start of the pandemic.

In developing economies, excluding China, 20 percent of adults made a digital merchant payment in 2021. These data point to the role of the pandemic and social distancing restrictions in accelerating the adoption of digital payments.

In developing economies like Nepal, there are still many challenges due to lack of postal addresses or house numbers which has made it difficult to make deliveries on time, Shrestha said.

Companies like Daraz have started its own logistics wing—Daraz Express—which is helping customers to get their goods from certain pick-up points, he said.

According to the World Bank report, in developing countries women are less likely to have an account than men. Nepal has double-digit gaps in the use of digital payments among account owners.

Shankar Uprety, CEO of Hamro Patro, said that in Nepal, financial decisions are mostly made by males, and as a result, there is a gender gap in the digital payment system as well.

There is a high number of male users making digital payments for electricity, internet, mobile and other services.

Uprety, who will be speaking as a panellist at the summit on the topic "Blending of the Marketplace and Commerce for Digital Economy", said that to make digital economy inclusive, there is a need to narrow the informal economy gap first.

“Unless women are provided with digital literacy and turned into users, the gap is not going to be reduced easily,” Uprety said. “The government can launch schemes for women on digital transactions to encourage the use of digital payment.”

There are significant gender gaps in Nepal where women say that they do not have bank accounts because a family member already has one, the World Bank report said.

In Nepal, 73 percent of unbanked adults have a mobile phone, the report said.

The report suggested that mobile phones could overcome some of the barriers that unbanked adults say prevent them from accessing financial services. For example, digital financial services could mitigate the problem of physical distance between financial institutions and their customers.

The Daraz Summit will be bringing on board major stakeholders and digital thought leaders from the government, financial institutions, education, service providers and the corporate and development sectors to provide their valuable inputs to address the financial needs and close the gender gaps in the digital market era.

Aanchal Kunwar, managing director of Daraz, said that the summit would focus on building trust among customers.

She says e-commerce alone is not something that affects customer experience, as banks, financial systems and government policy are also required to deliver the service.

“Summits like this will help stakeholders to come together to find better solutions and promote digital markets,” said Kunwar.

Some stakeholders say that lack of legislation has been hindering the rapid growth of the e-commerce market in Nepal.

“We have not been able to go for a fully digital economy as we still lack e-commerce laws,” said Santosh Pandey, co-founder of OHO Cake and Offering Happiness. “Laws are necessary to provide a clearer picture and to drive the industry,” he said.

Pandey will be providing his inputs on the topic "Blending of the Marketplace and Commerce for Digital Economy" at Sunday's summit.

The government has prepared a draft E-Commerce Bill that aims to create a facilitative regulatory environment for online trade in Nepal.

The bill, once passed into law, will regulate and facilitate the trade of goods, services and intellectual property rights using electronic means, and support the growing digital ecosystem.

Electronic commerce has been steadily growing in Nepal, and the extraordinary situation created by the stay-at-home order following the coronavirus pandemic highlighted its importance.

Govinda Bahadur Karki, joint secretary of the Ministry of Industry, Commerce and Supplies, said that the draft E-Commerce Bill had been sent to the Ministry of Law for its suggestions. “We are preparing to register the bill in Parliament soon,” he said.

Besides that, the Information Technology Bill is also in Parliament, said Karki. “These two bills, once ratified, will help Nepal move towards a digital economy.”

According to Nepal Rastra Bank, there were 62.64 million digital transactions worth Rs5.31 trillion during the month-long period from mid-April to mid-May of the current fiscal year.

"In Nepal, the ecosystem for e-commerce is being built with sellers in the marketplace getting educated gradually," said Pandey. "As logistics is improving, the number of digital payment options is also rising," he said.

“An increase in the number of platforms like Daraz, Pathao, Foodmandu and Bhojdeal, among others, is helping to generate 40-50 percent of our daily sales,” Pandey said, co-founder of OHO Cake and Offering Happiness.

Pandey said that the number of customers ordering goods from social media platforms is huge as compared to customers who download the mobile app of a particular company.

“One of the biggest challenges in e-commerce is increasing the footprint outside Kathmandu Valley because of logistic issues,” he said.

Sanjit Subba, CEO of Nepal Electronic Payment System, said e-commerce had grown in the last five years. “Covid-19 pandemic was the key driver.”

Subba will be speaking on the topic "From Conventional Commerce to E-Commerce in Nepal" at the summit.

He said that e-commerce had empowered local sellers, which is important for the economy and a big step forward for the digital economy.

“Though the number of online shoppers making digital payments has increased, many customers are still sticking to cash on delivery,” Subba said.

According to the World Bank report, 620 million adult account owners made utility bill payments in cash worldwide, and more than 1.6 billion account owners in developing economies used only cash for merchant payments.

Digitalising cash payments is not simply a matter of incentivising account owners to use an account, however.

Financial infrastructure—enabled by actors such as governments, telecommunications providers, payment processors and financial service providers—also is needed to create an environment in which safe, affordable and convenient products and functionality are widely available, the report said.

“There is a need to do more to make less cash transactions,” said Subba. “To make digital payment more inclusive, the government needs to expand the infrastructure to rural parts too,” he said.

“Besides, we have also not been able to increase trust among consumers,” Subba said. “Unless a customer gets the product as expected and with a hassle-free return policy, it will be difficult to garner customer trust,” he said.

Developing and enforcing clearer guidelines about effective disclosure and pricing transparency could help build trust in the financial system, and help account holders recognise the difference between legitimate fees that are part of the price of service and illicit fees or overly high interest rates, the World Bank said.