The seeds of e-commerce were sown in Nepal about a decade and a half ago. It has taken a bit longer for the fruits to be borne, but today we can see some of them. Offline shopping is still the popular option, but a lot more Nepalis are buying online today. The total annual online business in Nepal is now estimated to be Rs 10 billion, according to industry insiders who attribute this growth to the rising Internet population, a growing middle class, increasing mobile penetration as well as low levels of e-commerce activities. 

 

“Compared to the developed countries, Nepal’s e-commerce is still in its infancy. Its share in the national GDP is negligible at present but it has been growing,” says Amrit Man Tuladhar, CEO of Muncha.com, one of the country’s leading e-commerce websites which has been in operation since 2000. According to Tuladhar, the past couple of years have been particularly encouraging for e-commerce in the country. “Some unique websites have come up over the past couple of years,” he observes.

 

Thamel.com is perhaps the first e-commerce site in the country. It started online business in 1999 and today it is one of the major players. “We are probably the first company in Nepal to start online business with a dot com company name registered as Thamel Dot Com Pvt Ltd,” claims Rajesh Lal Joshi, CEO of Thamel.com.  

 

E-commerce in Nepal started through gift-sending and bill payment services through online portals. Today, it’s possible to buy almost everything online - new clothes, books, mobile phones, laptops, second-hand goods, jewelleries, home appliances, fresh vegetables and what not. One can even order one’s lunch online from home or office, thanks to the latest developments in e-commerce activities. There are a number of e-commerce companies offering these services. Airlines have started selling air-tickets online through these services. Banks are handling online transactions because people have started paying and receiving online, though the trend is low.

 

“In 2000, there were a couple of websites doing e-commerce. Today there are more than a hundred. Of them, over a dozen are active in the business,” says Tuladhar.   

 

Growing Popularity & New Trends

Today, the online market has expanded due to the increasing purchasing power of Nepali consumers. The trend is also on the rise because of the rise in the number of Internet users. “Online business is on a progressive path and the trend is evolving high with many players coming in the arena with their unique business models,” says Joshi.

 

The domestic e-commerce market has now expanded into various segments such as online shopping, e-banking, mobile commerce, electronic cash transfers and e-ticketing. Online markets are attracting buyers (and sellers too!) because they are time- and money-saving and are hassle free.

 

“Lately, Nepal has graphed a swerving online presence. The proliferation of various online business portals in recent years is enough to valibate the claim that  the presence of e-commerce is encouraging in Nepal,” says Asgar Ali, CEO of eSewa Fonepay.com.

 

Annual online transactions in Nepal are estimated to be around Rs 10 billion, although an official figure is not available. Dozens of online shopping websites have emerged since the inception of e-commerce in Nepal. Muncha.com, Thamel.com, Harilo.com, YesKantipur.com, Metrotarkari.com, Foodmandu.com, Bhatbhatenionline.com, etc. are some of the popular websites among Nepali online shoppers (see Box). Some of them sell their own products whereas others deliver from global sites such as eBay and Amazon.

 

According to industry insiders, Nepalis of the middle- and upper-middle class who have access to faster Internet have started enjoying shopping online.  They find it easy because on the one hand it saves time, on the other, it’s easy and reliable. “You don’t need to hang around shopping stores and malls wondering where a particular product is. With online shopping, all you need to do is find a product online, fill-in payment details and submit. That’s all to get your stuffs delivered at your home,” says Manish Shrestha, portal chief of Bhatbhatenionline.com.

 

E-banking

Lately, electronic banking or e-banking, as it is more popularly known, is getting popular in Nepal. According to the stakeholders, the use of e-banking has been increasing with the rising competition among the banks and financial institutions. “The trend of e-banking is growing,” says NRB Spokesperson Bhaskar Mani Gyawali, “The situation of e-banking in the country is satisfactory at present.”

 

Instead of opening a new branch, banks have started focusing on e-banking which is a cost-effective way to expand their services. For this, banks have adopted modern banking technologies such as branch-less banking, mobile banking etc. According to NRB, all 32 commercial banks in the country have started branch-less banking and mobile banking by mid-January 2014.

 

Banks’ customers are, however, yet to adopt online payment for the goods or services they buy on the Internet. Most online shoppers still prefer cash on delivery (COD) though all commercial banks provide e-banking services. “There is a lack of awareness among Nepalis about e-banking. An overwhelming majority still prefers COD though they have bank accounts,” shares Stebin Bajracharya of Harilo.com.

 

 

E-ticketing

Nepali air travelers are gradually getting used to e-ticketing, a good evidence of growing e-commerce in the country. Today, all private sector airlines currently operational in Nepal are selling their tickets online. According to the Airline Operators Association of Nepal (AOAN), all air travellers who have access to the Internet have started buying tickets online. “E-ticketing has become popular because it saves time,” says AOAN Spokesperson Ghanashyam Acharya, “Very few people reach the airline’s office to buy tickets these days.”

 

Agrees Prajwal Thapa, marketing director at Simrik Air. “Both foreigners and Nepali travellers buy tickets online for domestic flights.”

 

Nepal Airlines Corporation (NAC), the state-owned airline which is the only airline in Nepal that doesn’t offer e-ticketing has started preparations to start providing the service within 2071 BS (by mid-April 2015), according to an NAC official. “E-ticketing is one of NAC priorities for the new year,” he said.

 

Payment Options 

In the past, Nepali online shoppers were dependent on international payment mechanisms and merchants to purchase online. However, today there are few, but enough for the time being, online payment processing companies in Nepal, which allow online shoppers to pay their bills online, without any processing fees, in most of the cases.

Most of these companies allow the customers to send and receive money online, buy air tickets, pay utility bills, purchase mobile recharge cards, pay school college bills, Internet bills, subscribe to newspapers and magazines online; Some of these companies are eSewa and PayWay.

 

People can also pay for the goods they buy online through e-banking and debit cards. This trend has started but it is negligible at present. A majority of online shoppers still prefer paying cash on delivery.

 

“The online payment structure in Nepal is still being developed so we still do a lot of cash business.  We encourage our customers to pay online as much as possible given the options in Nepal which are basically bank to bank transfers or payment gateways who are tied to your bank account,” says Akshay Sthapit, CEO of Harilo.com.

 

Problems & Limitations

Though an Internet-based business, e-commerce in Nepal seems to be limited to the Capital valley. Some online business activities have been reported in places like Pokhara and Dharan but such activities are few and far between.

 

“There are e-commerce websites which provide their services across the country. But may be because of the lack of awareness, the online customers are mainly from the Kathmandu valley, mainly Kathmandu and Lalitpur. However, we do have customers from a few other cities as well,” shares Stebin Bajracharya of Harilo.com.

 

Lack of a clear policy is another problem and according to people in the online business, it is hindering the growth of online markets in the country. “There is no clear policy. The government has neither helped the domestic e-commerce market nor obstructed it,” says Joshi of Thamel.com. We don't have any act, law or regulation or government directives which allows conducting legal online financial transactions. Critics say that the Electronic Transaction Act without a single word on online payment is only half done.

 

According to Tuladhar of Muncha.com, Nepal’s e-commerce market is facing problems in the bill payment system. “The government can facilitate by establishing a central payment gateway. The central bank and concerned authorities should look into this issue,” he advises.

 

Lack of a regulator is another problem. At present, all one needs to do to run an e-commerce site is register a company at the Company Registrar’s Office. Once the company is registered, one can start the business. No one knows which agency is responsible for regulating the e-commerce business – Ministry of Finance, Nepal Rastra Bank, Ministry of Science and Technology, High level Commission for Information Technology or National Information Technology Centre? 

 

 

The Issue of Digital Signature

Although online transactions are on the rise in the country, the trend of acquiring authorized digital signature, which is essential for the business, has not started. According to Electronic Transaction Act 2008, all companies, which carry out electronic transactions must acquire digital signature from the Certified Authority (CA) licensed by the Office of the Controller of Certification (OCC). “Banks and financial institutions, remittance companies, and e-commerce companies among others are the kind of companies which should acquire a digital signature from a CA licensed by the OCC,” said Manish Bhattarai, deputy controller of the OCC, an agency under the Ministry of Science, Technology and Environment (MoSTE). 

 

So far, only one company, Nepal Certifying Authority (NCA), has acquired the license for CA from the OCC. “Though one company has been issued the license of CA, no company or individual has acquired a digital signature so far in Nepal from the CA licensed by the OCC. Electronic transactions carried out without a digital signature from a CA licensed by the OCC do not have legal validity,” claims Bhattarai. He also informed NewBiz that the OCC has drawn the attention of Nepal Rastra Bank regarding the issue of the BFIs not acquiring authorized digital signature.

 

Biplav Man Singh of NCA, however, claims that the issuance of digital signature has not started in Nepal because of the government’s negligence. “The government has issued the CA license to NCA but it has not provided the Root Certificate to us. Therefore, we have not been able to issue any digital signature. It has been a year since we have been issued the license,” laments Singh.

 

Digital signature is like an electronic locking system, which facilitates and regulate the authenticity of electronic transactions. It cannot be stolen or copied by any fraud, authenticates the identity of the sender of a message or signatory of a document and ensures that the document is unchanged. Nepal government introduced digital signature in financial transactions from February 2012. The MoSTE established the OCC to manage electronic transactions and use technology to reduce electronic crimes.

 

“Online transactions have been getting popular lately, but the question of security has always been there. A digital signature ensures secured, authentic and non-repudiation electronic transactions such as e-mail, e-commerce, e-banking and e-governance,” shares Bhattarai. 

 

Bhattarai informed NewBiz that OCC has already drawn the attention of the NRB to take action against BFIs for using digital signatures from unauthorized firms. At present, companies based in India and America are issuing digital signatures to local online transaction service providers, which is against the Electronic Transaction Act 2008. “Sadly, all BFIs providing internet banking service are using digital signatures issued by unauthorized licensors,” said Bhattarai.

 

Digital Agencies

With living standards and costs going up in developed nations, digital agencies and online business marketers from there gradually made headways into third world countries including Nepal looking for avenues to establish their offshore units. Today, there are many digital agencies or IT companies, as they are known in Nepal. 

 

While outsourcing their software to clients from developed nations, many of these digital agencies also tried to educate Nepali entrepreneurs for taking their businesses online. “It was very hard to find business persons who were willing to take their businesses online. My team struggled for a couple of years but our continuous efforts in educating entrepreneurs for going online bore fruits,” says Deepak Bhandari, Founder of Radiant Infotech Nepal—a digital agency that has been in the software production business for more than a decade now. 

 

With the operational costs relatively lower and prospects much brighter, Bhandari shares that small investment, consistency in work quality coupled with good communicative and technical skills and a willingness to adapt and upgrade to technological advances is all that is needed to thrive in the digital agency business. 

 

Along with taking Nepali businesses online, Nepali digital agencies compete in the global freelance market. “Competing in the global market is not an easy task unless you are ready to deliver outstanding products at relatively modest prices,” says Sanjeev Singh, Co-founder of Catmandu- a startup Nepali digital agency that mostly outsources its products. 

 

It’s not just Nepalis who are materializing their dreams via the Silicon Valley revolution offshoot; many digital agencies with foreign roots and international foot prints have established their offshore production in Nepal. India has been a major destination for software outsourcing in South Asia, but still Nepal has its own attributes to win over some share of it. 

 

“I took a fortunate trip just over a decade ago to India and other countries, looking for ways to reduce my growing software development requirements for clients in Melbourne. Even though it was a challenging time in Nepal, with the UN assisting in the path to a new democracy, I felt Nepal offered a unique opportunity. It was not saturating like India’s IT industry,” says Michael Simonetti, founder of AndMine, an Australian digital agency that has its offshore production unit in Nepal. 

 

Though the growing inflation and corresponding increase in the operational and other costs have been testing the offshore model, Simonetti still sees future in the model. Complimenting his view, Bhandari says that Nepal has bright scope in the digital agency business. He quotes an online report: “Over the coming years, outsourcers are expected to expand their operations quite substantially. Different survey reports have claimed that the growth of outsourcing will remain strong. Like India and other nations there is huge potential for Nepal also to grow in IT service outsourcing business”.

 

While Internet connectivity, working hours, political instability and power cut are the concerns of this sector, Deepak finds lack of any state mechanism to bring all financial transactions made by freelancer software manufacturer as a major problem for the growth of IT service outsourcing business. “Many freelancers are involved in this business without any legal registration. The government should seriously implement the plans it has made so far for the development of this sector along with bringing freelancers within the boundary of taxation.”

 

 

Brighter Prospects

E-commerce has brighter prospects in the country, according to industry insiders. The access of Nepalis to the Internet has been increasing. The new generation is very keen about online activities. “It seems the stage has been set for a rapid growth in online shopping as people find less and less time for physical shopping,” observes Tuladhar.

 

“We will soon see a Cambrian moment with online shopping and services once proper payment systems and delivery infrastructures are in place which is already happening.  When that happens, the change will be swift just like it was with mobile phones in Nepal,” concludes Akshay Sthapit, CEO, Harilo.com.

(With inputs from Chitra Raj Bhandari)