Nepalis are visiting ATMs less frequently as digital payment systems gain popularity.

According to the Payment Insight Report 2023-24 published by Nepal Rastra Bank, ATM users grew from 5.54 million in 2018-19 to 6.70 million in 2019-20, marking a 21 percent increase.

However, during the Covid pandemic, the year-on-year growth rate fell to 9.3 percent, with users rising to 7.32 million. This decline was attributed to a shift toward digital transactions as people stayed home.

Post-pandemic, ATM usage surged by 20.6 percent in 2020-21, reaching 8.84 million users, and grew further by 22.8 percent to 10.85 million in 2021-22.

However, the growth rate began to slow, dropping to 12.8 percent in 2022-23, with 12.24 million users, and further declined by 5.3 percent last fiscal year, totalling 12.89 million users.

“We have seen a declining growth rate in ATM usage,” said Kiran Pandit, acting executive director of the Payment Systems Department at Nepal Rastra Bank.

“This indicates a healthy adoption of QR code payment systems. People prefer QR systems for their convenience over ATM transactions.”

The report highlights the increasing popularity of person-to-person (P2P) and person-to-merchant (P2M) payment systems, which banks and financial institutions promote to reduce costs.

P2P payments enable fund transfers online or via mobile devices, often using the recipient’s mobile phone number. P2M services allow businesses to accept payments through QR codes, significantly reducing the need for cash or cards.

“The dominance of QR code payments has significantly minimised the need for physical cards,” the report stated. Other innovations like connectIPS, inter-bank fund transfers, cardless withdrawals, and payment gateways have further reduced the dependency on debit cards.

“Youths increasingly prefer mobile or internet banking over traditional payment methods like debit cards and cheques,” Pandit added. “Debit cards, however, are still one of the most preferred modes of payments [although at a decreasing rate],” the report said.

Credit card usage has also slowed.

While the growth rate peaked at 30.2 percent in 2019-20, it dropped by 20 percent in 2020-21 due to reduced shopping and travel during the pandemic.

Growth rebounded by 24.1 percent in 2021-22 but declined by 18.8 percent in 2022-23.

Last fiscal year, the growth rate fell significantly by 1.9 percent, with only 289,000 users.

The report attributed this trend to integrating e-wallets with e-commerce platforms like Daraz, reducing the need for credit cards.

Cheque usage is also on the decline. The number of cheques presented and cleared dropped from 12.29 million in 2020-21 to 11.97 million last fiscal year—a 4.5 percent decrease.

“The rising popularity of QR codes, faster payment systems, mobile banking, and e-wallets is driving the decline in cheque usage,” said Pandit. “We anticipate further declines as digital payment systems offer instant pay solutions.”

For business transactions, real-time gross settlement and inter-bank payment systems now enable instant fund settlements.

There are two forms of faster payment systems in operation: high-value payments and retail payments.

Faster payment systems include high-value and retail payments facilitated by networks like connectIPS, corporatePAY, Fonepay Direct, and InstaFund. Fonepay offers faster payment through Fonepay Direct and inter-bank fund transfer systems.

QR codes, one of the most convenient forms of digital payment, which facilitates instant payment and is available in most places, have witnessed exponential growth. The year-on-year transactions surged by 103.66 percent to Rs499.79 billion last fiscal year.

Its scan or transactions rose by 117.03 percent to 169.34 million in the review period.

Since Fonepay launched cross-border QR code payments with India in March 2024, Indian tourists and visitors have contributed significantly, with 134,701 transactions amounting to Rs321 million in just five months.

E-Wallet and connectIPS usage have also surged. Wallet users quadrupled from 6.27 million in mid-August 2020 to 23.46 million in mid-July 2024, while connectIPS users increased from 0.16 million to 1.28 million during the same period.

As of mid-July 2024, 35 institutions have been licensed as payment service providers.