Digital Banks - Nepal

Nepal

In Nepal, the Digital Banks market market is anticipated to witness a significant increase in net interest income, projected to reach US$57.74m in 2024.
This growth is expected to continue with an annual growth rate (CAGR 2024-2028) of 10.41%, leading to a market volume of US$85.81m by 2028.
When compared globally, in China is projected to generate the highest net interest income, amounting to US$969,200.0m in 2024.
Nepal's digital banking sector is experiencing rapid growth, with a surge in mobile banking users and innovative digital payment solutions.

Key regions: United Kingdom, Japan, China, United States, Brazil

Definition:

Digital Banks refer to the emerging market for purely digital banks that offer financial services via online and mobile platforms. Unlike traditional banks, digital banks also known as neobanks, do not have store-based branches and instead rely on technology to deliver their services. But in contrast to digital-only direct banks, which focus on providing traditional banking services in an online format, the digital banks/neobanks covered in this analysis prioritize cutting-edge features and a modern user experience.
Digital Banks offer a wide range of financial products and services, including savings and checking accounts, credit cards, personal loans, and investment products, among others. They aim to provide a more convenient, accessible, and user-friendly banking experience by leveraging technology such as mobile apps and artificial intelligence. They also provide a digital identification and onboarding process, often via smartphone.
The Digital Banks market is growing rapidly as consumers increasingly demand more convenient, digitally focused financial services. Neobanks/Digital Banks are able to offer these services at a lower cost compared to traditional banks, as they have lower overhead costs and a more efficient operating model.
However, digital banks face challenges in building trust and establishing their reputation in the financial services industry. They must also navigate the complex regulatory landscape and comply with the same rules and standards as traditional banks.
Overall, the Digital Banks market represents a growing and exciting opportunity for financial services providers to deliver innovative and convenient solutions to consumers.

Structure:

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income as well as the number of ATMs.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Bunq, Tomorrow, and Revolut.

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Analyst Opinion

Amidst the backdrop of the Himalayas, Nepal is experiencing a significant shift in its banking sector with the rise of Digital Banks.

Customer preferences: Customers in Nepal are increasingly gravitating towards Digital Banks due to the convenience and accessibility they offer. The younger population, in particular, is driving this trend as they are more tech-savvy and prefer seamless digital banking experiences. The ease of conducting transactions, checking account balances, and making payments online are key factors influencing customer preferences in the country.

Trends in the market: One of the notable trends in the Digital Banks market in Nepal is the collaboration between traditional banks and fintech companies to offer digital banking services. This partnership allows traditional banks to leverage the technological expertise of fintech firms to enhance their digital capabilities and reach a wider customer base. Moreover, the introduction of innovative products such as mobile wallets, digital lending, and online investment platforms is reshaping the banking landscape in Nepal.

Local special circumstances: Nepal's geography, characterized by mountainous terrain and remote rural areas, presents a unique challenge for traditional banking institutions to establish physical branches across the country. Digital Banks are bridging this gap by providing banking services through online and mobile platforms, making financial services more accessible to the unbanked population in remote regions. Additionally, the government's push for financial inclusion and digitalization is further propelling the growth of Digital Banks in Nepal.

Underlying macroeconomic factors: The growing internet penetration and smartphone adoption rates in Nepal are fundamental macroeconomic factors driving the expansion of Digital Banks in the country. As more people gain access to the internet and mobile devices, the potential customer base for Digital Banks expands, creating a conducive environment for digital banking to thrive. Furthermore, the increasing focus on promoting a cashless economy and reducing reliance on physical currency is accelerating the adoption of digital financial services in Nepal.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.