Why Digital Banking and Online Payment in Nepal is Costing You More Than You Think – The Real Story Behind Transaction Fees and Taxes

Have you ever stopped to calculate just how much you’re spending on digital transaction fees in Nepal? Subash Bhattarai , an entrepreneur, shared an interesting aspect of digital transaction using his own personal experience in Linkedin and it quickly went viral. And we can call it a jaw-dropping insight. Here is what he wrote:?

"I do around 10 digital transactions every day, and each one costs NPR 11.3. That adds up to NPR 113 a day, NPR 3,390 a month, and over NPR 40,680 a year in just transaction fees! Honestly, using an ATM and cash would save me all this money, since ATMs are everywhere. Is this what digital banking in Nepal is supposed to be? I'll let the smart folks decide. Just do the math."

Let's do the math: Making just 10 digital transactions a day at NPR 11.3 per transaction costs you NPR 113 daily, NPR 3,390 per month, and an astounding NPR 40,680 a year! This raises a crucial question: Is digital banking in Nepal actually saving you money, or costing you more than you think?

The Hidden Costs of Digital Transactions in Nepal

With the growing popularity of digital banking in Nepal, platforms like FonePay, eSewa, and ConnectIPS have made it easier to go cashless. However, each transaction comes with a fee, making many people question whether using digital payments is worth it in the long run.

Chartered Accountant Umesh Rijal shares his frustration, saying, “I’ve stopped using online services that charge fees altogether. I prefer using cash unless absolutely necessary.” Like many others, he’s realized that these fees can add up significantly, making cash a cheaper alternative.

But why is this happening in Nepal? Let’s dive deeper into the cost structure.

Digital Banking Costs: A Nepal-Only Problem?

In countries like Australia, digital transactions are free of charge. You can use systems like PayID, which allows you to link your phone number or email to your bank account and transfer money without incurring any fees. This raises the question: why are Nepali banks charging customers so much for basic digital transactions?

Is the 13% VAT on Digital Transaction Fees Justified?

One major pain point is the 13% VAT imposed on every transaction fee in Nepal. As Kailash Panday rightly points out, the NPR 11.3 transaction fee doesn’t just go to the service provider—it’s inflated by VAT. He argues, “The government’s greed for charging 13% VAT on every small transaction is the real problem.”

How Much Are You Paying in Transaction Fees?

A closer look at these fees reveals how quickly they add up. As Sagar Kulung notes, even when you pay a small amount like NPR 50, you’re still hit with the same NPR 11.3 fee. For businesses and individuals who make frequent transactions, this becomes a heavy burden.

Compare this with India, where digital payments through Unified Payments Interface (UPI) are free—even across different banks. Some users in Nepal are now considering going back to cash because they feel digital payments don’t offer enough value for the money.

What Are Banks and Service Providers Doing?

Banks argue that these fees are necessary to cover operational costs, such as maintaining the digital payment platforms. Digital expert Mandip Dangol supports this, stating, “When I pay NPR 11.3, I know that the developer at FonePay is getting their salary.” But should customers have to bear the full cost of these operations?

Moreover, some banks and platforms like ConnectIPS charge less for peer-to-peer (P2P) transactions—around NPR 9 compared to NPR 11.3 on FonePay. Yet, as many commenters pointed out, the fees across platforms remain inconsistent and confusing.

Are We Moving Backwards?

With so many people frustrated by high fees, some are reverting to cash or even traditional banking methods like cheques. As Pankaj Panjiyar humorously puts it, “Digital banking in Nepal is like a digital thief, slowly eating away at your money in the name of service charges.”

Others, like Sushil Gautam, suggest scanning business QR codes, which often don’t incur fees. However, this solution still isn’t accessible enough to the average user, leaving many stuck with hefty fees for personal transactions.

The Way Forward: Lowering Digital Transaction Fees in Nepal

For Nepal to fully embrace digital banking and reduce cash dependence, the current fee structures need serious reform. Reducing transaction fees, removing VAT, and increasing transparency will make digital payments more appealing to customers.

In conclusion, while digital banking is convenient, it’s not always cost-effective in Nepal. If service providers want more people to adopt cashless transactions, they must rethink their pricing strategies. After all, why would anyone go digital if it costs more than using cash?

Final Thoughts: Is Digital Banking Worth the Price in Nepal?

Have you faced similar frustrations with high transaction fees? Share your experiences below and let’s discuss how we can improve Nepal’s digital banking landscape.