In its report 'Advancing Digital Payments in Nepal: Infrastructure Upgrades and Policy Development for Enhanced Trade Facilitation' released earlier this week, the Manila-based lender said billions of dollars move annually between Nepal and India through trade and remittances, yet most transactions continue to rely on traditional banking channels despite rapid advances in digital payment systems.
"The economic relationship between India and Nepal creates a digital payment opportunity that remains largely untapped," the report quoted Nepali fintech expert Sanjib Subba as saying, noting that interoperable payment infrastructure could generate efficiency gains for businesses and consumers in both countries.
The report recommended strengthening cross-border payment infrastructure, regulatory alignment, payment system interoperability, and market integration to reinforce Nepal's digital payment ecosystem and enhance its role in trade facilitation.
It also called for broader development of the digital payment system through measures to strengthen domestic infrastructure and institutional capacity, along with an implementation framework that emphasises coordinated governance and stakeholder engagement.
In 2024, Nepal Rastra Bank, Nepal’s central bank and the Reserve Bank of India signed regulatory terms of reference to facilitate the integration of Nepal's National Payments Interface with India's Unified Payments Interface (UPI).
Since March 2024, Indian travellers have been able to use their own payment systems to pay merchants in Nepal using QR codes from Fonepay or Khalti - two of Nepal's major digital payment service providers.
"This implementation has shown promising growth, with daily transactions increasing from approximately 500 at launch to 2,000 by early 2025, representing a total daily transaction value of NPR 6 million ($42,000) and cumulative transactions worth NPR 1.6 billion ($11 million) since launch," the report said.
Besides Indian tourists, NEPALPAY QR became accessible to tourists from China, Italy, South Korea, Malaysia, and Singapore in January 2025. NEPALPAY is a national digital payment system and brand implemented by the Nepal Clearing House Limited (NCHL) under the guidance of the country’s central bank.
"While these represent important achievements, the reciprocal functionality enabling Nepalis to make QR payments in India and other countries remains pending, highlighting continued challenges in achieving fully bidirectional payment integration," the report said.
While Indian citizens can make QR payments in Nepal (with a standard charge of 1.95 per cent per transaction), the reciprocal service for Nepalis in India has been delayed primarily due to unresolved issues surrounding commission structures.
In India, QR code payments are free of charge, creating uncertainty over who would bear the service commission payable to Nepali banks when their customers make payments in India.
"This situation highlights how differences in fee structures and regulatory approaches between countries can impede the implementation of otherwise technically feasible cross-border payment solutions," the report said.
The ADB has therefore called for expediting the resolution of commission structure issues for Nepal-India QR payments to enable the already-developed reciprocal payment functionality for Nepalis in India.
As the unresolved commission structure issue has continued to delay QR payment services for Nepalis in India, the two countries launched a cross-border online fund transfer service in early June, enabling customers to directly transfer money to bank accounts in either country.
The service was launched during Nepali Foreign Minister Shishir Khanal's visit to India, where Khanal and his Indian counterpart, S Jaishankar, jointly inaugurated the initiative, enabling cross-border online remittance transfers for workers of both countries employed across the border.
The ADB report also called for adopting a UPI-like architecture to simplify cross-border transactions with India, Nepal's largest trading partner, to address significant inefficiencies in bilateral trade payments.
