Guest Articles

May 3

Keyzom Ngodup Massally / Audrey Misquith

Can Superplatforms Transform Financial Inclusion in the Least Developed Countries? Emerging Insights from Nepal

Superplatforms like Google, Amazon, Facebook and Alibaba are transforming the global financial marketplace with “big brands, big budgets and big data.” As a “platform of platforms,” a superplatform holds immense disruptive power and can pave the way for a new-generation financial sector, one with smarter payment and lending models and wider outreach. In Nepal, where the smartphone penetration rate is 75% and poised to reach 90% by 2025, homegrown platforms such as F1Soft and the eSewa digital wallet are driving significant adoption. They’re doing this by providing:

  • A compelling use case for quick response (QR) codes to facilitate merchant transactions;
  • Incentives for consumers to engage in fully digital e-commerce transactions;
  • Aggregation of alternative data to facilitate credit access for the unbanked.

While challenges remain, local Nepalese superplatforms offer early insights into the potential to leverage this model to advance financial inclusion in the least developed countries. Let’s discuss the three elements of their approach in detail.


Enabling a digital ecosystem with QR code payments

In the least developed countries, a common use case for digital payments involves e-fund transfers at merchant point-of-sale terminals. QR payment codes, by contrast, are a form of contactless payments that enable consumers to pay for physical goods. They initiate a digital payment transaction simply by using a smart phone to scan a bar code—eliminating the need for costly merchant point-of-sale systems. QR payment codes have the potential to lower transaction costs, make digital payment transactions easy and intuitive for consumers and reduce the risk of keeping cash on hand for businesses.

QR payment codes are gaining popularity among merchants in Nepal. With approximately 10,000 QR acceptance points live across the country, Nepalese consumers use QR codes to buy milk at their local dairy cooperative, pay for groceries and even make donations. For example, Nepalese people digitally donated some US $10,000 for flood relief in the recently ravaged Bara district. Unsurprisingly perhaps, the F1Soft Fonepay network views merchant adoption of QR payment codes as a strategic imperative to encourage Nepalese consumers to adopt digital payments, and it has plans to acquire 40,000 merchants by 2020 with unified QR acceptance points to enable quick and easy digital transactions. It also brokered revenue-sharing partnerships with China’s Alipay and UnionPay in 2018, and built Fonepay’s interoperability with India’s Bharat QR, the world’s first interoperable QR code acceptance solution.


Driving consumers to adopt digital solutions through exciting e-commerce offerings

Led by F1Soft, the Nepalese e-commerce market is expanding at breakneck pace. With a current value of a little over US $25 million, the e-commerce market in Nepal is growing at an astonishing 300% annual rate. Spurred by F1Soft’s acquisition of a local retail chain’s e-commerce platform (now called eSewaPasal) in 2018, the online exchange of goods is increasingly accessible, affordable and convenient. That same year, the Chinese superplatform Alibaba Group acquired Daraz, an e-commerce business that operates in five South Asian markets including Nepal.

Despite these promising numbers, local, regional and global superplatforms continue to wrestle with the challenge of scaling up e-commerce marketplaces in predominantly cash-based economies. In Nigeria, for example, approximately 4 million customers of the e-commerce marketplace Jumia pay cash-on-delivery because they either do not have bank accounts or do not trust online transactions. Similarly, most e-commerce transactions in Nepal are still in cash. eSewaPasal is tackling this problem head-on by offering significant incentives, such as cashback and seamless integration with its payment network, to make digital transactions and last-mile delivery efficient and affordable.

The Nepalese agriculture sector may also benefit from the e-commerce market. While e-commerce platforms are typically thought of as connecting customers and merchants, new Mercy Corps research shows that these platforms can be helpful in connecting farmers and markets as well, potentially increasing farmers’ incomes by 50% or more. When they operate at scale, e-commerce platforms greatly reduce transaction costs linked with the aggregation and movement of goods and payments, and help farmers and micro-entrepreneurs reduce the opportunity costs associated with physical purchases. These incentives are particularly critical in Nepal, where 70% of livelihoods depend on agriculture.


Leveraging data for credit access

For the 45% of the Nepalese population that remains unbanked or underbanked, superplatforms could accelerate their access to finance – not to mention create new and innovative sources of capital. The traditional financial sector’s reliance on conventional, collateral-led lending and cumbersome documentation requirements has alienated most Nepalese, driving them to depend rather heavily on unregulated cooperatives and communal/family networks for their financial needs. With data as their core competency, superplatforms can help unlock new lending models to reach the unbanked and underbanked in Nepal. For example, mobile wallet usage and QR-enabled payments can generate alternate sources of data to better inform credit decisions. Traditional lenders can use the digital footprint thus generated to build financial identities for the unbanked, and undertake risk-based underwriting. Building on the communal networks that characterize the Nepalese financial marketplace, superplatforms can connect potential lenders and borrowers through person-to-person lending models, a form of crowdsourcing that is already popular in neighbouring countries like China and India.


Final thoughts

Emerging superplatforms are a harbinger of multiple digital opportunities and financial inclusion advances in Nepal. Rather than offering financial services directly, superplatforms serve as key enablers of digital financial services by interlinking components of a digital ecosystem to generate powerful data insights and streamline the customer experience. A low-income entrepreneur in Nepal with access to a smartphone can now advertise his/her products on Facebook, buy inputs and supplies on the affiliated e-commerce platform, and make and receive payments on his/her mobile money account, generating huge savings in time, effort and money. These transactions, in return, create a valuable digital footprint that can then be used to offer credit on more favourable terms than can be offered by unregulated capital providers.

But while Chinese superplatforms rode on millennials’ hunger for convenience, a mature smartphone market and the lack of a robust financial sector, Nepalese superplatforms will need to deploy different strategies. The challenging topography, the lack of an interoperable infrastructure, the unsophisticated smartphone and data-usage patterns and a traditional society that thrives on cash- and community-based networks are substantial barriers to the growth of superplatforms in Nepal. For QR-code–enabled payments to work seamlessly, an interoperable payment infrastructure is a prerequisite, which is a clear obstacle in the fragmented payment ecosystem of Nepal. Unclear street addresses in urban areas and challenging mountainous terrain in rural areas present delivery challenges and affect the customer experience. For the e-commerce business to get off the ground, these delivery challenges require urgent solutions. And since cash continues to be king among Nepalese consumers, convincing them to go digital will require significant marketing and digital literacy efforts.

Superplatforms will have meaningful impact on financial inclusion when the right enabling environment, characterized by an inclusive, market-based yet well-regulated ecosystem, is put in place. Therefore, the role of UNCDF in harnessing public- and private-sector partnerships to support an inclusive digital economy becomes more important than ever. It is tempting to extrapolate the triumph of global superplatforms to new and challenging markets, such as those found in the least developed countries. But as the case of Nepal is starting to show, the local context will play a significant role in shaping the value that superplatforms are able to provide.


The authors gratefully acknowledge the technical review of Schan Duff, Consultant at CGAP and Senior Fellow at the Aspen Institute’s Financial Security Program.

This article was originally published on the UNCDF blog. It is republished with permission.


Keyzom Ngodup Massally is the Regional Technical Specialist for the United Nations Capital Development Fund (UNCDF) in Nepal.

Audrey Misquith is a Digital Financial Solutions (DFS) expert at UNCDF in Nepal.


Photo courtesy of Aliska Bajracharya, communications lead, UNCDF.




Finance, Technology
digital finance, digital inclusion, digital payments, e-commerce, financial inclusion, fintech