The Asian Development Bank (ADB) has identified the Nepal-India digital payment corridor as a major untapped opportunity that could substantially boost trade, tourism, and remittance flows between the two neighbouring countries, according to a report released earlier this week.

In its report titled 'Advancing Digital Payments in Nepal: Infrastructure Upgrades and Policy Development for Enhanced Trade Facilitation', the Manila-based multilateral lender noted that billions of dollars move annually between Nepal and India through trade and remittances — yet the vast majority of these transactions continue to rely on conventional banking channels, despite rapid advances in digital payment infrastructure on both sides.

The Scale of the Opportunity

Nepali fintech expert Sanjib Subba, quoted in the report, said: 'The economic relationship between India and Nepal creates a digital payment opportunity that remains largely untapped,' adding that interoperable payment infrastructure could generate significant efficiency gains for businesses and consumers in both countries.

The ADB 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 facilitating bilateral trade.

What Has Been Achieved So Far

In 2024, Nepal Rastra Bank — Nepal's central bank — and the Reserve Bank of India (RBI) 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 home payment systems to pay merchants in Nepal via QR codes from Fonepay or Khalti, two of Nepal's major digital payment service providers. According to the report, daily transactions grew from approximately 500 at launch to 2,000 by early 2025, representing a daily transaction value of NPR 6 million ($42,000) and cumulative transactions worth NPR 1.6 billion ($11 million) since launch.

In January 2025, NEPALPAY QR — a national digital payment system implemented by Nepal Clearing House Limited (NCHL) under the guidance of Nepal's central bank — was extended to tourists from China, Italy, South Korea, Malaysia, and Singapore, broadening its reach beyond Indian visitors.

The Reciprocity Gap

Despite these gains, the report flagged a critical asymmetry: while Indian citizens can make QR payments in Nepal at a standard charge of 1.95% per transaction, the reciprocal service enabling Nepalis to make QR payments in India remains pending. The primary obstacle, according to the report, is an unresolved dispute over commission structures.

In India, QR code payments are free of charge, creating uncertainty over who would absorb the service commission payable to Nepali banks when their customers transact 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 noted.

A Workaround and the Road Ahead

As the commission structure impasse persisted, 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 inaugurated during Nepali Foreign Minister Shishir Khanal's visit to India, where he and his Indian counterpart, External Affairs Minister S. Jaishankar, jointly launched the initiative — enabling cross-border remittance transfers for workers of both nations employed across the border.

The ADB has called for expediting the resolution of the commission structure dispute and adopting a UPI-like architecture to simplify cross-border transactions with India, Nepal's largest trading partner, in order to address persistent inefficiencies in bilateral trade payments. How swiftly both governments act on these recommendations will determine whether the corridor's potential is finally realised.