IMAGE VIA SHUTTERSTOCK
FOR MUCH of its history, digital finance in Nepal meant one thing: eSewa. Launched in 2009, when paying an electricity bill meant standing in a queue, the wallet grew up in a regulatory vacuum and became synonymous with cashless payments. Then, in 2017, along came Khalti: younger, sharper, armed with cashback and a cleaner interface. What followed looked like a standard disruptor story. Look closer, though, and something rarer emerges: a rivalry that has done more for Nepal’s digital economy than either company could have managed alone.
The puzzle of platform markets is that they tend towards monopoly. Network effects reward size: every new user makes the service more valuable for everyone else, and every new merchant locks in another set of consumers. By 2025 eSewa claimed 10.8m users (the most recent official figure) and 560,000 merchants, a dominant market share built on a decade of head starts and deep bank relationships. Khalti, with 5m users and a high cash-burn rate, should have been crushed. Instead it merged with IME Pay in 2025, creating a combined user base of 12.7m and a credible counterweight. The merger was part survival, part escalation—and entirely necessary.
Competition has forced both players to behave better than they would have in a quiet market. Khalti introduced points, rewards and youth-focused design; eSewa responded by improving its own interface and expanding into digital lending. The pressure spilled into infrastructure, too. QR codes—the physical stickers on shop counters that make wallet payments work—exploded from 282,000 in 2021 to over 2.3m by early 2024. Transactions nearly doubled in a single year, to Rs958bn. None of that would have happened with eSewa alone. Complacency is the natural state of the monopolist; rivalry is its antidote.
Yet the economics remain vicious. The Nepal Rastra Bank mandates zero merchant discount rate on QR payments—no fee for accepting digital money. That policy accelerated adoption but stripped wallets of their most direct revenue stream. eSewa’s reported profit margin stood at some 2.1% on revenue of Rs21.4bn —a slender return that leaves little room for error. Khalti, before the merger, was bleeding cash. The industry survives on subsidies: cashback campaigns that pay consumers to transact, and investor capital that expects future riches from data and lending, not from payments themselves. That may work in a market of 30m people. But the clock is ticking.
The main structural tension sits beneath the wallets. Fonepay, which processes 96% of Nepal’s QR transactions, is owned by the same group—F1Soft—that controls eSewa. The company that operates the neutral payment rails also owns the dominant consumer wallet. That is not necessarily sinister, but it is awkward. Commercial banks have complained that NRB’s rules force them to depend on third-party QR platforms, losing merchant data and revenue. The regulator’s defence—that separating payment system operators from service providers prevents concentration risks—rings hollow when the same corporate family sits on both sides of the line.
What saves the market from consolidation is exactly the rivalry that the NRB helped enable. By amending payment bylaws to allow mergers, the central bank let Khalti and IME Pay combine into a real challenger. By mandating interoperability through the NepalQR standard—one code for all wallets—it weakened the network-effect moat that protects incumbents. These are smart, countervailing interventions. They acknowledge that in small markets, concentration is inevitable, but that policy can decide whether concentrated power extracts rents or delivers inclusion.
The final question is whether Nepal’s fintech experiment can graduate from adoption to profitability. Cash remains king: currency in circulation hit Rs656bn in mid-2025, up 13%, and eSewa’s own boss puts digitalisation at just 5% of the economy. The wallet wars have been a success story of usage, not yet of business models. Yet that is why the rivalry matters. A genuine duopoly (even one born of necessity) forces product improvement, and gives merchants and consumers an escape valve. Nepal needs a fight rather than a winner. ■
