Diwas Sapkota is chief executive officer of Fonepay, Nepal’s leading digital payment platform. He has served in key positions at the firm since its establishment in 2019. Prior to joining Fonepay, he worked in financial institutions like Everest Bank and Nepal Clearing House. The Post’s Subin Adhikari caught up with Sapkota to talk about the growth of digital payment service in Nepal and its challenges. Excerpts:

What is the current trend of digital payment in Nepal? What inspired F1Soft to launch Fonepay? How is Fonepay different from other digital wallets in the market?

Digital transactions have grown tremendously after the Covid-19 pandemic. In the last couple of years, we have seen a fourfold growth in terms of user numbers. Nepal Rastra Bank, the government and other financial institutions are also giving various incentives for digital payments. Therefore, many users are attracted towards digital payment systems.

Fonepay was launched in 2019 as a payment system operator (PSO). We are not a digital wallet, but we provide a platform for digital inter-bank transactions to digital wallets, traders and individuals. The digital wallets, which worked individually in the past, have got integrated through our platform now.

Who do you think are Fonepay’s competitors?

At present, there are 10 PSOs operating in Nepal. However, we are the market leader. Almost 90 percent of the financial institutions and digital wallets are integrated with our company. We are encouraging people to transact digitally by providing offers such as cash-back, gift hampers and a free Quick Response (QR) Code to traders. We are leading the entire ecosystem of digital transactions. Therefore, we have been able to build a strong network of 57 partners composed of digital wallets, banks and other financial institutions. We have more than 1 million merchants and 18 million individual users who are benefitting from services like interbank fund transfer, QR and utility payments.

Are you looking for a possible expansion of Fonepay?

Digital transactions are yet to expand beyond Kathmandu. There are various government organisations, businesses and individuals who need to be brought into the digital ecosystem. Moreover, we are also aiming to go international by developing products for foreign companies using local talents, and also by collaborating with them to localise the services and features already available in the international market.

The cost of mobile data is still high for the average Nepali. How has it prevented the public from switching to digital payment?

Obviously, the expensive mobile data, low internet penetration and unreliable network coverage is making the public hesitant to pay digitally, particularly while shopping. To help overcome this issue, we have recently launched the “offline payment” feature through which users can send a certain amount of money to the receiver even if they are offline during the transaction. We are hopeful of making it easy for customers up to some extent. However, the government must try to lower the cost of mobile data and the internet to promote the entire digital ecosystem.

The presence of digital payment in several sectors like public transport and government offices, which handle a high number of daily transactions, is still negligible. What are the factors preventing such institutions from going digital?

Such institutions handle a large number of customers every day, therefore, we also need to keep an eye on internet speed. Until there’s fast internet and seamless integration between payment partners and their systems, it will be tough to shift to digital payment at once. Along with digital payment, their accounting, billing and funds management systems should also go digital for effective operation. Making only payments digital while keeping other things manual is meaningless. But the increasing use of digital payment is creating pressure on them to shift to digital. It's a gradual process, and we can expect that a majority of them will go digital within a couple of years.

Is Fonepay operating in cross-border markets? Do you have a plan to go international?

Indian markets such as Sunauli and Jogbani see a large number of Nepali customers, so merchants prefer using the QR developed by Fonepay. This is due to the demand for a safe digital payment platform in these markets for Nepali buyers. It shows the trust and preference of the public for Fonepay’s product. We want to enter the Indian market through an official channel, or by taking permission from the Indian government. We want our products to be accepted by all financial institutions in India, and for that, we need support and favourable policy from the Nepal government.

Digital transactions also have some potential risks of fraud and scams. What are you doing to prevent such activities?

Fonepay is a leading promoter of digital and financial literacy. We have been creating and disseminating several educational videos and blogs on our social media to make users aware of the safe use of social media and digital transactions. The majority of those incidents occur through social media. Therefore, talking only about digital transactions isn’t enough. We are teaching the basics of safe internet and social media usage. We have also proposed that Nepal Rastra Bank create a fund into which all digital payment service providers and system operators would contribute a certain percentage of their income to launch awareness campaigns and financial literacy.

What are your plans for issuing an IPO?

We are working to issue an IPO within a year. If we succeed, we will be the first tech company in Nepal to be listed on the stock exchange. The IPO will give us additional funds for further expansion. Moreover, it will also strengthen our connection with the public. Being a listed company has both advantages and disadvantages. We will not be able to have an aggressive growth strategy if we go public. But, going public means we are going on a sustainable growth path, and that will add value to the entire ecosystem of digital payment in Nepal.