19th August 2025, Kathmandu
Nepal’s financial technology (FinTech) sector is at a pivotal moment, poised to transition from a localized success story to a global powerhouse.
Navigating Nepal FinTech Horizon
A recent insightful podcast, featuring a seasoned industry veteran, shed light on this exciting journey, offering a comprehensive view of the past, present, and future of FinTech in the country. The expert, with a rich background spanning banking, education, and FinTech, shared a unique perspective forged from working closely with bankers, regulators, and the vibrant FinTech community.
From Automation to True Digital Transformation
Nepal’s banking sector has a surprisingly long history with digital solutions. The expert noted that automation and digital transformation efforts began as early as the 1990s, with some banks even adopting Core Banking Solutions (CBS) before their Indian counterparts. However, this early success led to a “wrong calculation” around 2010, when the industry mistakenly equated CBS with full digital transformation.
Fortunately, the digital FinTech journey was revitalized by homegrown innovators. Pioneering Nepali companies like Fonepay, F1Soft, Khalti, and IME Pay emerged, providing crucial backend solutions and connectivity that paved the way for a more dynamic and interconnected payments ecosystem. These companies laid the groundwork for the modern FinTech landscape.
The Vision for a “New Mount Everest”: Exporting FinTech Expertise
A central and compelling theme of the discussion was Nepal’s ambition to create a “new Mount Everest” in the digital realm. This vision extends beyond domestic growth to exporting IT services and products on a global scale. The current IT service and product export base is estimated at $515 million, with FinTech contributing approximately $15 million. Informally, the true figure is believed to be much higher, potentially reaching $1.5 billion from two years ago.
Nepali FinTech companies are already making significant international strides. They are powering transport payments in Tanzania, supporting major bank payments and voice authentication in Bangladesh, and expanding into other African and Southeast Asian markets. This global expansion is a testament to the “borderless” and “credential-based” nature of digital solutions. The expert highlighted Nepal’s growing pool of skilled tech talent, proficient in key programming languages like C++, Python, JavaScript, and Go, who are “building for the world, not for Nepal.”
Solving the “Credit-Light” Economy with Digital Public Infrastructure (DPI)
While Nepal has excelled in creating a “transaction-heavy” payments ecosystem, the financial landscape remains “credit-light.” This means it has yet to effectively address the real economic problems of sectors like agriculture and MSMEs. To overcome this, the expert emphasized the need for a “leapfrog” approach through Digital Public Infrastructure (DPI), a modern equivalent of traditional public infrastructure.
The three core pillars of DPI are:
Digital ID (KYC): A robust national digital identity system, potentially enhanced with blockchain, to enable seamless and secure identity verification.
Interoperable Payment Rail: A unified payment system that ensures seamless connectivity and efficiency across all platforms.
Data Exchange Platform: A secure, consent-based platform for integrated data sharing, breaking down the current “silos” of data held by various government and private entities.
DPI would enable digital lending for “sachet-size” loans (small loans) by using alternate data sources, such as utility bills and mobile recharge history, to create credit scores for individuals without a formal credit history. This “statistical model” and “predictive analysis,” powered by AI and Machine Learning, is a proven solution, not “rocket science.”
The Role of Regulators: Catalysts, Not Barriers
The expert praised Nepal Rastra Bank (NRB) for its proactive stance in promoting digital payments. However, he stressed the need for a balanced “midway” approach to regulation—avoiding both over-regulation that stifles innovation and under-regulation that risks financial stability. The NRB’s release of a regulatory sandbox paper is a promising step.
A key challenge remains the talent gap within both banks and regulatory bodies. The expert suggested that investing in tech talent, such as data scientists and software engineers, is crucial to bridge the knowledge divide and facilitate a more informed and agile regulatory environment.
Future Frontiers: CBDC, Financial Inclusion, and Capital
The expert believes the NRB is actively studying Central Bank Digital Currency (CBDC), with a potential wholesale piloting by 2026. While the retail case for CBDC may be limited due to existing robust digital payments, wholesale use could enhance transparency and tracking.
On the topic of financial inclusion, the expert argued that FinTech’s role is not overhyped. Citing global models like Kenya’s M-Pesa, he noted that FinTech solutions were developed to serve the financially underserved. For Nepal, a “physigital” approach—combining physical agent networks with digital platforms—is key to reaching every segment of society.
For the “next big leap,” Nepal must embrace frontier technologies like AI-driven underwriting, blockchain for remittances, and embedded finance. This will require significant capital. The expert noted that while recent policies allow limited foreign direct investment (FDI) in payment service operators, more is needed to create significant excitement. The high valuation of Fonepay in Nepal is a positive signal, showing that promoters can successfully “cash out,” which is vital for attracting future investments.
The future of FinTech in Nepal is bright. By continuing to invest in talent, embrace strategic policy decisions, and foster a culture of innovation, Nepal can indeed scale its “new Mount Everest” and become a global FinTech hub.
For more: Navigating Nepal FinTech Horizon