ILLUSTRATION: KATMANDU JOURNAL
THE SHOPKEEPER in Kathmandu’s old Ason market lists the ways to pay without looking up from the till: eSewa, Khalti, Fonepay or any bank app. That last option—“any bank app”—reveals how one company has become the hidden backbone of Nepal’s economy. Fonepay, owned by the F1Soft Group, claims to handle more than nine out of every ten QR-code payments in the country (the central bank does not publish provider-level data). Its red-and-black stickers are displayed on about 1.7m shop counters. Its system connects more than 60 banks and financial institutions. In the fiscal year ending mid‑2025, company‑linked reports put total Fonepay‑related flows at roughly Rs3.6trn (about $24bn) in payments.
Now, as the company races towards selling shares to the public via the book‑building method, a big question hangs over everything. Is this a smart model for digital payments in the developing world, or a private toll road on the digital economy?
The growth numbers are stunning. Fonepay reported that in the year ending mid‑2025 it handled 140m bank‑to‑bank transfers worth Rs2.83trn and 300m QR payments worth Rs766bn. On a single day in March 2025, according to the company, it processed more than 1m shopkeeper QR payments—more than many countries see in a week.
Data from Nepal’s central bank shows a big shift. QR payments to merchants grew from 4.28m transactions worth Rs14.53bn in 2021 to 26.31m transactions worth Rs121.78bn in 2025. (And a wider trend away from cash is evident in ATM withdrawal volumes.)
Fonepay’s income has grown 61% year on year, rising from Rs206m in 2022 to Rs974m in 2024. By early 2026 it had Rs647m in cash reserves while its yearly operating costs were Rs500m‑550m. The company is highly profitable—or rather, it moves money very efficiently.
That success was not an accident. Fonepay made itself essential to Nepal’s commercial banks by weaving its QR code into every mobile‑banking app. A customer of any bank can scan a Fonepay QR; the shopkeeper needs only one code. This “works with everyone” approach created such powerful network effects that they now act as a shield against rivals.
The company has stated that its QR payment share is around 86% as of early 2026, though it briefly hit 97% in 2024. Even the lowest credible estimate—86%—would be a dominant position by any measure.
Three other licensed payment companies exist, but they remain far behind. ConnectIPS, which the central bank itself promotes, has grown but remains a distant second.
Calling Fonepay an “app” understates what it has become. It is the payment plumbing—the hidden pipes beneath every bank transfer, every QR scan, every digital‑wallet transaction that touches the banking system. Bank‑to‑bank transfers bring in 91% of its revenue; QR and online payments bring in just 7%.
Some commercial bankers have started to worry about this dependence. In late 2025 a senior bank executive asked: if other companies can offer QR services for free, why cannot banks do the same? The central bank defends its current rulebook, saying separate licences for different types of payment companies reduce risks and conflicts of interest. The practical result, as some analysts argue, is that Nepal has handed its retail payment system to a private company, very different from India’s public UPI system, which is run as a non‑profit entity under the Reserve Bank’s oversight.
The word “monopoly” has moved from tech forums into everyday conversation. One Nepali news investigation put it like this: Nepal’s digital‑payment sector has grown quickly, licensing more than two dozen companies, yet for most users and shops, real choice has shrunk. “Digital payments are everywhere,” the report said, “but the options feel limited.”
Another analysis noted that QR payments were promoted as “free” to encourage adoption. But that message has become detached from a market where sheer scale makes smaller rivals invisible. Last year the central bank introduced a framework for systemically important payment systems—rules that would likely apply to Fonepay—much like the tighter oversight later introduced for systemically important banks. The move was necessary. It also tacitly admits that Fonepay’s dominance is now a fact of life.
That fact is about to receive a stock‑market ticker. Fonepay has hired an issue manager and plans to sell 20% of itself to the public—Nepal’s first major fintech company to do so using a method that allows investors to bid on price. Shares have already traded privately at Rs1,300‑1,400 each, making a normal Rs100 face value appear old‑fashioned. Diwas Sapkota, the chief executive who was reappointed in April for a four‑year term, has stated that the company needed a method that reflected its actual worth.
The pre‑IPO deals are revealing. In 2025 the Khetan Group, a large old industrial house, was part of a Rs1.49bn deal that gave investors including Khetan a combined stake of about 22% (reports vary on the exact percentage for Khetan alone, ranging from 14% to 20%). That deal valued Fonepay at roughly Rs6.77bn ($45m). F1Soft retains a controlling stake. A credit‑rating agency has given the company a solid grade, meaning adequate safety and low credit risk.
The key question is what the IPO really means. One view sees a mature innovator: a profitable, fast‑growing company raising public money to expand regionally and build cross‑border partnerships. A central‑bank rule requiring all payment‑system operators to go public adds further pressure.
Another view is less flattering. The IPO looks like a chance for early investors to cash in on a dominant position. The Rs1.49bn stake sale in 2025 gave selling shareholders—including co‑founder Asgar Ali, who reportedly sold his stake—a return that owes as much to market power as to business genius.
Fonepay cannot be examined in isolation. It sits inside an ecosystem—F1Soft International—that also owns eSewa, South Asia’s first digital wallet and a leading player with about 10m users, as well as Foneloan, a digital lending platform. This ownership of payment pipes, consumer wallets and lending inside one group creates a risk: the ability to favour affiliated services over rivals.
F1Soft’s annual Bankers’ Meetup has become a major event, showcasing “groundbreaking innovations” to the top leadership of nearly every commercial bank in Nepal. The founder has built what may be the most important fintech business in South Asia outside India. Putting payment pipes, wallet market share and lending inside one private group raises questions that Nepal’s rules have yet to answer fully.
For everyday users, the arrangement appears excellent. No fees, works everywhere, instant settlement. The tea seller in Ason pays nothing to display a Fonepay QR; the customer pays nothing to scan it. But “free” hides a less visible shift in costs. Banks bear the expense of connecting and remaining connected to Fonepay’s network. A slice of transaction revenue moves from banks to the payment company. The shopkeeper, while paying no direct fee, gives up transaction data that could later be used for credit scoring, advertising or differential pricing.
More subtly, “free” kills competition. A rival that charges nothing cannot earn the money needed to build a competing system. A rival that charges a fee finds no shops willing to join. This barrier to entry defeats any old‑fashioned form of predatory pricing.
Fonepay’s ambitions now stretch beyond Nepal. A 2023 agreement with India’s UPI operator, live since 2024, allows Indian tourists to scan Fonepay merchant QRs using Indian apps such as PhonePe, Google Pay or Paytm, with instant settlement and automatic currency conversion. Since August 2025, users of Alipay+ from 11 countries—including China, South Korea, Singapore, Malaysia and Germany—have been able to pay across Fonepay’s 1.7m merchant codes. Last month, through an agreement with UnionPay International, Fonepay QR payments were enabled for Chinese visitors. A preliminary agreement with Sri Lanka’s national payment network adds another link. These partnerships make Fonepay the preferred gateway for incoming tourists, a sector that contributes about 8% of Nepal’s GDP. Each partnership deepens merchant dependence and builds an asset that no rival can easily replicate.
Placing payment pipes inside one private company creates risks that Nepal’s financial‑stability framework is only beginning to confront. A major outage—from a technical crash, cyberattack or liquidity freeze—would ripple through more than 60 financial institutions and affect millions of shop tills in real time. Data concentration is no less worrying: Fonepay sees transaction‑level information across a vast share of the retail economy, with few safeguards against commercial misuse. For shopkeepers, switching to another QR network is not merely technical: it means replacing that single laminated code attached to the counter. That psychological hurdle is as powerful as any technical barrier.
Other paths exist. ConnectIPS, promoted by the central bank, could be developed into a genuine public‑interest competitor. NepalPay, a QR standard developed by another group, has been adopted by several banks and wallets (including NIC Asia, IME Pay, Khalti) and is no longer unused, though it remains far behind Fonepay in scale. The central bank could listen to commercial banks and rethink its licence categories to allow banks to compete in QR infrastructure. Swarnim Wagle, the finance minister, has signalled government support for digital technologies—AI, start‑ups, 5G—in the upcoming budget but has said nothing about competition policy for payment systems.
Nepal has achieved something remarkable: a rapid, near‑universal shift from cash to digital payments that skipped card‑based systems entirely. Kathmandu is a “QR‑first” economy in a way that London and New York are not. The tea seller, the grocer, the pharmacist: all are part of a payment system that is impressively efficient. But efficiency is not the same as resilience. Market dominance is not the same as market health.
The IPO will deepen this trade‑off. Once Fonepay answers to public shareholders, the pressure to monetise its mountain of transaction data—or begin charging fees—will grow. Infrastructure that serves the public will increasingly be run for private profit. The central bank’s “systemically important payment system operator” framework provides a starting point for oversight, but Nepal needs a clear competition policy for digital payments. The central bank’s digital‑finance hub, launched in 2025, helps new start‑ups; it does not restrain a dominant player with a stated market share of around 86%.
The QR code that conquered Kathmandu is here to stay. But critical infrastructure should never be controlled by a single private company, however brilliant its record, whose first duty is to its shareholders. Fonepay built the pipes. Now it is time for Nepal to decide who sets the tolls. ■
