Digital Payment Adoption and Its Economic Impact on Local Businesses: A Case Study of Lalbandi Municipality, Nepal

Abstract

Digital payment systems are rapidly transforming financial transactions in Nepal, yet their adoption in semi-urban areas remains uneven. This study aims to examine the extent of digital payment adoption, its determinants, and its economic impact on local businesses in Lalbandi Municipality. Primary data were collected from 120 businesses across sectors such as retail, grocery, restaurants, pharmacies, and services through purposive sampling. This study uses a mixed-method approach using a descriptive and analytical research design; the analysis is conducted using descriptive statistics, cross-tabulation, regression and correlation. The findings indicate that 72.5% of businesses have adopted at least one digital payment system, with QR-based platforms, particularly FonePay, being the most widely used. Businesses using digital payments reported improvements in sales, customer inflow, transaction speed, record-keeping, and reduced cash-handling risks. Key determinants of adoption include digital literacy, customer demand, and perceived usefulness. However, challenges such as unreliable internet connectivity, transaction fees, limited customer awareness, and security concerns persist. The study concludes that digital payments are enhancing business performance and facilitating economic transformation in Lalbandi. It recommends policy interventions for BFIs and NRB focusing on digital literacy, infrastructure development, merchant incentives, and institutional collaboration.