The Age of the Digital Wallet

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The Age of the Digital Wallet

Following the trail pioneered by the likes of Paypal and Alipay, Nepali digital wallet services are carving a niche in the market.
In the mid-2000s, the British multinational telecommunication services provider Vodaphone launched a digital wallet M-Pesa in Kenya, targeting people who had no access to banking. In the initial stages, the company worked to microfinance loans in the rural parts of the country. In Kenya, the breadwinner of the family travels to the rural areas for employment opportunities, while wives work in the villages in the agricultural sector.
To send money to family members in the rural area, people had to travel home or send it through friends, relatives or bus drivers. M-Pesa was a boon to the Kenyan people, as they could deposit, withdraw and transfer money and pay bills with a new-found ease. A Massachusetts Institute of Technology (MIT) study in 2016 revealed the technology helped 194,000 Kenyan households get out of extreme poverty, and 185,000 women to move to business from farming. 
M-Pesa is an ideal example of a digital wallet, a technology that falls under the fintech umbrella. Financial technology or fintech in short, is the technology used to ease financial transactions through the digital medium. It competes with traditional financial methods and strives to improve the ease and efficiency of commercial activities through technology. Started from digital payments in the 1990s, fintech in the recent years has emerged as a disruptive force in the international financial sector covering areas including retail banking, fundraising, wealth management, lending, investment management and blockchain/cryptocurrency.  
Digital Wallets in Nepal
It has been estimated that only five percent of all transactions in Nepal are cashless. Further, bank cheques still dominate the cashless transactions in the country.  According to Amit Agrawal, co-founder and director at Khalti – a mobile wallet, there are only a little over a million subscribers of mobile wallets in the country.
Digital wallet service providers like Esewa, Khalti, and IMEpay have become popular among users in a short period.  Currently, Nepali users can use digital wallets for making payments to services such as mobile balance top-up, money transfer, purchase of movie tickets along with shopping bill, EMI, insurance and credit card payments. 
However, the domestic digital wallet providers are yet to start Near Field Communication (NFC) payment service. NFC allows users to connect their smartphones to point-of-sale (POS) machines to make payments.  
According to Sharma, Esewa has 900,000 users, of which, almost 500,000 are active users. He says the domestic digital wallets are yet to advance in different aspects to increase the number of users. “Twenty percent of mobile balance top-ups in the country happen via Esewa. Likewise, 15 percent of bills of Nepal Electricity Authority (NEA) are paid through the platform,” he mentions. “General people in Nepal are not aware of the existence and advantages of using digital wallets for transactions,” adds sharma. 
“Esewa was launched aiming to provide financial services to people with no access to banking and financial services. In recent times, the popularity of Esewa is growing in the rural areas too after introducing cash points to top-up the wallet,” Sharma adds.
Soon, Esewa will collaborate with retailers to ease bill payments. It is also introducing different insurance services for users. Yuvraj Thapa, CEO at Nepal Finsoft Company Ltd says customers refrain from topping up their digital wallets in Nepal because the companies don’t provide interest to users. “If customers need to use the wallet service, they top-up the account with minimal amounts. This has also hurt the growth of wallet businesses in Nepal,” he says.
Apart from digital wallets, several banks have also launched their mobile banking applications for money transfer and mobile balance top-up. 
Why Digital Wallet
It is said that only 40 percent of the population has access to banking in Nepal. With proper awareness, digital wallets can be a blessing for the people in rural areas. “In the rural parts of Nepal, people still travel a long distance to buy recharge cards and pay electricity bills. They have to spend money to travel to the market to buy recharge cards. If digital wallets are introduced in rural areas creating awareness among the people, their financial access will increase, which will lead to increased productivity,” shares Thapa.
“Keeping all the problems in mind, Finsoft is launching a digital wallet platform called ‘MicroFin 360’ focusing on the rural parts of the country. The amount deposited in the account will also bear interest after a certain time,” he says. Finsoft is a public limited company promoted by 34 different micro finances with an aim to provide modern banking tools and technology in the rural parts of the country. 
It is difficult for banks and financial institutions to enter every nook and corner of the country to open new branches. “So, it is necessary for digital wallet companies to go to the villages and remote parts of the country. We will be launching the MicroFin360 within the next three months,” he says. 
Like the M-Pesa in Kenya, digital wallets have the potential to positively impact the lives of Nepali citizens. Khalti has launched a special ‘Smart Chhori’ program aimed at empowering girls and young women in Nepal through financial knowledge and skills. As part of this initiative, 10,000 adolescent girls and women from across the nation will be trained in financial and digital literacy. The program is a free e-learning platform included in the Khalti app, where girls can learn about the basics of digital payments, online security and personal finance. Girls and young women from age group 15-35 years who have access to a smartphone and internet can enroll in the programme.
Meanwhile, Transparency International’s annual Corruption Perception Index, 2018, shows Nepal stands at 124 out of 180 countries in the corruption index.
“All the transactions are recorded if the government adopts digital payment system. Adopting a cashless economy will help the government to control corruption,” views Thapa.
Global Scenario
Digital wallet platforms such as PayPal, Alipay, American Express, among many other companies, have brought a paradigm shift in the banking and shopping habits of consumers. These platforms have been useful for credit card bill payment, bank account management, mobile balance top-up, bus and train ticket purchase, ordering of foods, ride-hailing services, and insurance policies.
PayPal, an American company that operates in over 200 countries, has 254 million active users. The platform accepts transactions in 25 different currencies, which helped it achieve success in the global arena. The digital platform has been helpful for users for shopping, paying bills, transferring money, among other services. In the global context, digital platforms such as PayPal are accepted for virtually every transaction, which makes the payment secure and recorded.
Likewise, AliPay, which has a strong presence in China, has almost 900 million users worldwide. AliPay has collaborated with 65 financial institutions including Visa and Mastercard, which has made transactions easier for its users. In the meantime, social media platforms such as WeChat have launched digital payment systems. WeChat Pay allows mobile payments and money transfer between contacts.
Platforms like Alipay, Apple Pay and Samsung Pay are super wallets as they can be connected with a debit/credit card for payments, according to Subash Sharma, CEO at F1 Soft International, a Kathmandu-based Nepali fintech company. “As super wallets are connected with the bank account, the spending behaviour of the users are recorded by the platforms. Banks only gets the information about the transactions,” he says, adding that this has been a subject of heated debate on the global stage in recent times.


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