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An Report on digitalization in banking in Nepal

Technical Report · June 2023

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Binod Acharya
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 i

REPORT ON
DITALIZATION IN BANKING IN NEPAL

A Research Thesis submitted to the office of Dean, Faculty of Management, in

partial fulfillment of the requirements for the Degree of Masters in Public
Administration, Tribhuvan University, Kritipur

Submitted by

Binod Acharya

Email : [email protected]

10, June 2023

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Declaration

I hereby declare that the thesis entitle "Digitalization in banking in Nepal " submitted to the
Central Department of Public Administration Tribhuvan University is entirely my original work
prepared under the guidance of my teachers. I have made due acknowledgements to all ideas and
information borrowed from different sources in the course of preparing this Report. The results
of this Report has not been presented or submitted anywhere else for the award of any degree or
for any other purposes. I assure that no part of the content of this Report has been published in
any form before.

Binod Acharya
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ACKNOWLEDGEMENTS
I would like to express sincere thanks to my thesis supervisors/ Teachers of Central Department
of Public Administration for his guidance inspiration and constant encouragements throughout
the study. Also my sincere gratitude goes to (HOD) for approving my proposal and giving me an
opportunity to conduct study on this topic.

I would like to express my appreciation to Ward secretary and to the all respondents who
cooperated kindly and providing required information during field visit. Also I would like to
express my great sense of gratitude to all my respected teachers of Central Department of PA for
their sincere teaching while I was student in the university.

I would like to express heartily thanks to my parents and other family members for their support
and encouragement and I also express my thanks to my friends who provided me the valuable
suggestions and help for this research work.

Binod Acharya
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TABLE OF CONTENTS

TITLE PAGE ................................................................................................................ i

DECLERATION ................................................................................................................ ii
ACKNOWLEDGEMENT ................................................................................................. iii
TABLE OF CONTENTS ...................................................................................................iv
CHAPTER I INTRODUCTION.......................................................................................... 1

1.1 Background of the Study ...................................................................................... 1

1.2 Statement of Problem ............................................................................................ 2
1.3 Objectives of the Study ......................................................................................... 2
1.4 Significance of the study ....................................................................................... 3
1.5 Limitations of the study ........................................................................................ 3
1.6 Structure of the study ............................................................................................ 3

CHAPTER II LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK ............ 5

2.1 Literature Review ...................................................................................................... 5

CHAPTER III RESEARCH METHODS .......................................................................... ..7

3.1 Selection of sample ............................................................................................. ..7

3.2 Data collection .................................................................................................... ..7

CHAPTER IV ANALYSIS AND RESULTS ................................................................... 8

4.1 Respondents’ Profile ........................................................................................... 8

4.1.1 Gender of Respondents ................................................................................ 8

4.1.2 Age of respondents ...................................................................................... 9
4.1.3 Distribution of Geography ........................................................................... 9
4.1.4 Educational Qualification of the Respondents ............................................ 10
4.1.5 Payment method of the respondents ........................................................... 10
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4.1.6 Satisfaction of the respondents ................................................................... 11

4.1.7 Profession of the respondents ..................................................................... 11
4.2 Findings of the study ........................................................................................... 12

CHAPTER V SUMMARY, FINDINGS AND CONCLUSION ..................................... 13

5.1 Summary ............................................................................................................. 13

5.2 Finding ................................................................................................................ 13
5.3 Conclusion .......................................................................................................... 14

REFERENCES .................................................................................................................. 15
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CHAPTER I : INTRODUCTION
1.1 Background of the Study

Digital Banking in Nepal is a new phenomenon to the traditional banking process.

Customers are becoming prone to getting convenient services from the bank. The
expectations of banking customers are changing where the customers expect to get every
banking service more conveniently. Banking and Financial Institutions, governments, and
customers are actively stepping forward for a seamless banking experience and solution.
The digital transformation and less paper-banking model over the traditional banking
processes have enabled banks to deliver customer-centric services.

Digital Banking is the automation of traditional banking that enables customers to access
banking services using online and electronic platforms. It is a digitized approach to
eliminate the foot visit inside a brick-and-mortar bank.

With the speeding information technology and innovation, traditional banking is shifting
towards a modern banking approach. Technology has become an integral part that facilitates
the banking structure, functionalities, customer-centric services, digital payments, etc. Even
though digitalization has been rapidly growing in Nepal remote area are yet not much
benefited by it. Since there are also very less educated people it is also difficult to make it
excess in remote area. The world is becoming a digitalization so for every bank and
financial institution there is an opportunity to move from traditional banking to online
banking where they can use the alternative channel for transactions like mobile banking,
internet banking, branchless banking, connect-IPS, electronic cheque clearing, mobile wallet
and so on.

At present, mobile banking and online banking services have become a must. Transferring
and receiving money is just one tap or click away. A study on online banking in Nepal
shows that there are 4 million mobile banking customers and 0.78 million internet banking
customers. Viewing and performing financial transactions online or with mobile has become
a normal ritual. Besides, this launch of Dollar Card for international payments is something
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that has eased the customers dealing with e-commerce. Nepal Government has also set out
Digital Lending Guidelines and the 2019 Digital Nepal framework for digital banking and
payments. All in all, good progress is seen in digital banking, but there are still challenges to
face.

The first challenge is to own a strong digital business plan. Banks in Nepal must understand
that simply engaging in digital marketing is insufficient; a well-planned digital strategy must
be drafted and practiced. The achievement in digital banking may look great for Nepal, but
it still has more steps and phases to cover; thus, avoiding complacency appears to be the
second challenge. Last and the most significant challenge is to focus on improving offline
customer service. This should always remain a top concern since one rude sentence or
unattained behavior of a bank employee can inspire the customers to leave and go to another
bank

Banks are pacing up with the new technologies to create a supreme customer experience.
With the implementation of Omni channel Digital Banking, customers can achieve seamless
and consistent interaction with any BFIs. Fastback is one of the comprehensive Mobile and
Internet Banking Solutions in Nepal. Fastback – Omni Channel Digital Banking Solution is
already in operation in Global IME Bank. Developed jointly by Smart Choice Technologies
(SCT) and Swift Technology Pvt. Ltd., Fastback enables customers to access banking
services in real-time and banks to stand ahead in the competition.

1.2 Statement of Problem

Security is one of the top most issues of digitalization along with technical issue. Having
efficient payment system is most. Also many miss have fraud miss use can be seen in the
market. To improve such impact of such critical case it is important to have secured digital
payments. Although 73% of people worldwide use online banking at least once a
month, more complex customer needs can be difficult to meet through digital banking alone.
Having an in-person banking relationship can help customers compare their options and find
solutions tailored to their needs, something which isn’t as easily achievable through self-
service.
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1.3 Objectives of the Study

This study aims to find out the overalls banking sectors and digitalization. Be it positive or
negative this study covers it all. Moreover, specific objectives are:
 To study affecting factors on digitalization
 To determine influence of demography on its use

1.4 Significance of the study

The main purpose of the study is to find out relationship between digital payments with
factor affecting it. It is also to create sense of belongingness in today’s current world. To
develop cashless economy in every minor sectors of every geographical area for best use of
technology is significant of this study. It completely depends upon awareness often
individual how much secure are each transaction and how safely he does his payments.

1.5 Limitations of the study

The study’s limitations often serve as an obstacle to an in-depth review of the subjectmatter
concerned. Major limitations of the study are listed below:

 Only urban areas being focus during study is definitely not going to cover overall
scenario. Since it ignores the rural areas, people living in it.
 The study will be based on more educated people’s opinions, views, responses in this
study. Opinions of the respondents have been taken as being true, which may not be
correct due to changing atmosphere of technology.

1.6 Structure of the study

The study is organized into sections: preliminary section, body of the report section, and
supplementary section, and has been further organized into five chapters i.e Introduction,
related literature, conceptual framework, research methodology, data analysis and findings.
The preliminary section consists of title page, acknowledgements, recommendation letter,
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and certificate of authorship, approval sheet, and table of content, list of tables and figures,
and executive summary.

Chapter 1 includes background of the study, objective for conducting research, settingscope,
significance and limitations of this study. Chapter 2 includes literature review. It discusses
about the theoretical concepts on the topic written in the textbook. Similarly, it also reviews
previous research, studies related to the subject and also reviews the articles published in the
newspapers, journals, magazines on the same subject matters. Chapter 3 deals with the
various methods that are used to conduct thus study. It contains research design, Source of
data, population, sampling procedure, data collection procedures. Chapter 4 presents the
results of the data analysis derived from statistical tests. This chapter includes descriptive
statistics and inferential statistics to describe the nature of the data and tests the hypotheses
developed earlier, respectively.

The final chapter presents the discussion of the findings in line with the literatures reviewed
summarizes the overall findings of this study.
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CHAPTER II

LITERATURE REVIEW

2.1 Literature Review

Today’s banking sector in Nepal has laid down greater emphasis on technology and
innovation. Banks began to use technology to provide better quality of services at greater
speed. The Internet Banking is becoming one of the fastest growing technologies that are
playing a significant role in the satisfaction of banking customers. Internet Banking and
Mobile Banking made it convenient for customers to do their banking from geographically
diverse places. Banks also sharpened their focus on rural markets and introduced a variety
of services, geared to the special needs of their urban and rural customers. The online
Banking services are changing the banking industry and are having the major effects on
banking relationships. At present many of the banks around the world have web presence in
form of Online Banking services, Support services etc. In the world of banking, the
development in information technology has an enormous effect on development of more
flexible payment methods and more- user friendly banking services. Electronic Banking
services are new and the development and diffusion of these technologies by financial
institutions is expected to result in more efficient banking system to users and also bankers.
Since last decade of 20th century, online banking affected more the traditional banking
system. Online banking is a modem tool in the hands of banks in order to provide banking
services to customers. The researcher has gone through the various literature in order to get
insight in to the research problem. At the same time, he has tried to find out the gaps in
research so as to bridge the gap through this research. The forgoing writing highlights the
earlier research work undertaken by eminent scholars.

“customer satisfaction through information technology in commercial banks” highlighted

that, bank account holders are somewhat satisfied with the services provided by their banks
and the banks should try to enhance their services in order the satisfy their customers in a cost
effective way with the help of information technology. Dr C. Paramasivan (2009). Kennedy
and Jacky (2013) note that the digital banking technology has greatly advanced there by
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playing a major role in improving the standards of service delivery in the financial
institution sector. Those days are long gone when customers would queue in the banking
halls waiting to pay their utility bills, school fees or any other financial transactions. They
can now do this at their convenience by using their ATM cards or over the internet from the
comfort of their homes. Banks prefer their customers to be more oriented towards the use of
digital banking or automation of services in order to use the staff more efficiently through
their branches, instead of performing routine operations.

The object of customer satisfaction may vary and may be related to different dimensions of
the multiple product / service provider experiences. The customer is satisfied if the
performance of the product / service is equal to his / her expectations (positive confirmation)
and he / she is not satisfied if the performance of the perceived product / service is less than
his / her expectations (negative confirmation). Kotler (2012) in defining Customer
satisfaction he says it involves customer creation, customer maintenance and retention. The
benefits and the security concerns of digital banking. According to him increased customer
loyalty, improved customer access, attracting new customers, offering of more services are the
primary drivers of online banking. Mishra (2005)

Today, the banking system in the country has become so technologically advanced that
almost all banking services are delivered through electronic platforms. Electronic banking in
North Macedonia has a relatively recent history of its development.

Electronic banking, also known as Electronic Funds Transfer (EFT), is simply the use of
electronic means to transfer funds directly from one account to another, rather than by cheque
or cash. You can use electronic funds transfer to:
• Have your salary deposited directly into your bank or credit union account.
• Withdraw money from your account from an ATM machine with a personal identification
number (PIN), at your convenience, day or night.
• Instruct your bank or credit union to automatically pay certain monthly bills from your
account, such as your auto loan or your mortgage payment.
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CHAPTER III

RESEARCH METHODS

3.1 Selection of sample

In this study, participation was driving factor for using this sample. It has been maintaining
and in different research work, thesis that 150 sample is suitable to test hypothesis. 20
sample pilot test on the spot with related customer. Sampling Technique; This research was
based on secondary data. Our research is based on Journals, Papers, Thesis, Books, Reports,
newspaper, etc. i.e. any form of publications. Thus, the major tool used in data collection
was secondary.
There are altogether 10 structured questions including multiple choice questions in the
research work. These were distributed among the general mass and needed information was
collected from them.
The question was asked to the everyday general customers who visit bank daily or all most
every day. Those customers who are not satisfied with the service or often complain about
technical expect and services are also included in this survey.

3.2 Data collection

The research methodology adopted was basically based on primary data via which the
recent and accurate piece of firsthand information could be collected. Secondary data was
used to support primary data wherever needed. The study included descriptive research and
involved the use of survey method. Primary data was collected with questionnaire survey
and was administered to obtain quantitative data.
Personal and electronic survey methods were used as the mode of administration. In
personal method, researcher interviewed with respondents. In electronic method, links were
sent to respondents using the internet as a medium to conduct survey.
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CHAPTER IV

ANALYSIS AND RESULTS

This chapter of the research paper includes the overall findings of the study that had been
carried out. The collected data were arranged and interpreted according to the relation
between independent and dependent variables. The data were arranged and computed with
the help of Microsoft Excel 2016. Those tools were really useful and had increased the
ability to understand the collected and presented data in the further parts of this report. The
data were analyzed in this parts show the impact and effects of the various factors affecting
the results. This has been sub-divided into various important sub sections according to its
analysis.

4.1 Respondents’ Profile

4.1.1 Gender of Respondents
In any study the gender plays a vital role in view of certain gender specific attributes which
influence the variables taken for the study. Hence, study of gender is imperative and is
classified as male and female. Table 4.1.1 describes gender wise distribution of
respondents.
Gender Frequency Percent

Male 41 27.33

Female 109 72.67

Total 150 100

Source: Field survey, 2022

Table 4.1.1 shows the gender distribution of respondents. It shows that the participation of
male respondents was more than that of female respondents in the sample size of 150.The
percentage of female and male respondents were 27.33 percent and 72,67 percent
respectively.
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4.1.2 Age of respondents

The age of the respondents is categorized into four groups as 16-20, 21-25, 26-30, 31
and above. The frequency distribution and percent composition of respondents’ based
on age group is in Table no 4.1.2.

Table 4.1.2 Distribution of Age Group

Age group Frequency Percent

16-20 20 13.33

21-30 70 46.67

31-40 50 33.33

41< 10 6.67

Total 150 100

Source: Field survey, 2022

In table 4.1.2, 21-30 years of respondents were highest in number which is 46.67
percentfollowed by 31-40 years that is 33.33 percent and 16-20 years and 31- above
are 13.33 percent and 6.67 percent respectively.

4.1.3 Distribution of Geographical

Sampling have been done in Urban and rural area.

Table 4.1.3: Distribution of College

Area Frequency Percent

Urban 40 26.67

Rural 110 73.33

Total 150 100

Source: Online and Field survey, 2022

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4.1.4 Educational Qualification of the Respondents

The qualification of the respondents is categorized into four groups as Under SEE, 10+2,
Bachelors and masters and above. Among them, bachelor’s level has the most number of
participationfollowed by Masters and above level.

The frequency distribution and percent composition of respondents’

qualification isdepicted in table below:
Education Frequency Percent

Under SEE 20 13.33

10+2 45 30

Bachelor 50 33.33

Master and above 35 23,33

Total 150 100

Source: Online and Field survey, 2022

From table 4.1.4 we can interpret that out of 150 respondents, large number is
represented by bachelor’s level respondents constituting 33.33 percent of the total
respondents.

4.1.5 Payment method of the Respondents

Method Frequency Percent

Credit/Debit 70 46.67
Card
Mobile Wallet 30 20

Internet Banking 25 16.67

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Mobile Banking 25 16.67

Total 150 100

Source: Field survey, 2022

From table 4.1.5 we can interpret that out of 150 respondents, large number is
represented by Credit/Debit card respondents constituting 46.67 percent
respondents and mobile wallet respondents constituting 20 percent of total.

4.1.6 Satisfaction of the respondents

The profession of the respondents is categorized into two groups as yes and no.

Satisfaction Frequency Percent

Yes 120 80

No 30 20

Total 150 100

Source: Field survey, 2022
From table 4.1.6 we can interpret that out of 150 respondents, large
number is represented are satisfied i.e. 80 percent and less number of
student are not satisfied i.e. 20 percent.

4.1.7 Profession of the respondents

The profession of the respondents is categorized into five groups as student, service,
farmer, businessmen and house wife.

Profession Frequency Percent

Student 55 36.67

Service 30 20

Farmer 10 6.67
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Businessmen 45 30

House wife 10 6.67

Total 150 100

Source: Field survey, 2022

From table 4.1.7 we can interpret that out of 150 respondents, large number is
represented by student level respondents constituting 36.67 percent of the total
respondents and businessmen 30 percent.
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CHAPTER V
Summary, finding and conclusion

The previous chapter was discussed about the data analysis to the objectives of this research.
This chapter includes summary of the findings and conclusion of the study. From the
findings and results, some information has been determined which will be valuable for the
general public understanding relationship between digital banking and customers. Hence,
this chapter contains some recommendations and suggestions for the further study.

5.1 Summary
Today many housewives are also inclined toward digitalization. Especially semi-literate and
people under SEE are found to be less knowledgeable about it although they used it on day
to day basis they are not found to be more conscious about security and technical error too.
Sometimes when the technical issue arises they are found to be questioning about service
rather where other age groups and other profession seen to be conscious about technical
issue. It is also very difficult to make people understand about such issue to the age group of
40 plus. It is very much familiar to make students and people of age group 16-30 understand
about digitalization. They are also well aware about security issue, intension, pin codes and
privacy of digital payment.

It has also been seen as inevitable part of economy in present and near future. Many
financial houses, shopping malls, business houses are seen to be using as QR scanner,
merchant payment. In fact, even small shop is seen using scanners and online payment as
most. This clearly shows more and more cashless economy in coming future. This
definitely makes our economy strong and partial.

5.2 Findings
The study was conducted among customers using digital payment and digital system from
different background like gender, educational qualification, age, geography. The main
objective of the study was to understand about overall digital payment system, factors
 14

affecting it, issue in it. This study intends to understand the factor affecting digitalization, its
growth and development, factor affecting it. We got in to the conclusion how age gender
and even academic qualification can be very significant in overall use of digitalization. It
includes online shopping, mobile top up, fee payment, bill payment, movie ticket porches,
airline ticket booking, utility payment and fund transfer.

The study recorded that male and female respondents were 72.67 and 27.33 percent
respectively. 46.67 percent of the respondents were between 21-30 years and 33.33 percent
of the respondents were between 31-40. According to record 46.67 percent Credit/Debit
card, 16.67 percent used mobile banking, 16.67 percent internet banking and 20 percent
mobile wallet.

This research attempted to know the sole reason regarding digitalization in banking in
today’s world. The study can be well expanded to the security issue awareness. A
nationwide research would mean even a greater view of the overall study which can
be well beneficial to understand cashless economy. The conclusion that has been
drawn from this research holds several practical implications. It suggests banking and
financial institutions to be more alert at specific on the security expect.

5.3 Conclusion
Banking and financial institution are most flourishing services in Nepal. Financial
institution is operating very well and introducing new services on everyday basis.
There is tough competition in the market among all 26 commercial banks and all other
financial institution. Also post Covid used of digitalization has been maximized then
in compare to past. Since there was no option in Covid customers learned digital
process and become more involved in it. This study is conducted to analyze factors
that affect the use of digital payment system. Today the use of debit/credit cards are
dominating the market. Since there is also international visa domestic card transaction
can be operated internationally.
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https://www.nicasiabank.com/quick-links/what-is-digital-banking-in-nepal-a-complete-guideline

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