Digital Transformation in the Heart of the Himalayas: A Story of Ambition and Adaptation

While the world’s tech hubs compete to build metaverses and roll out 6G networks, an equally exciting, albeit very different, digital revolution is unfolding in the heart of the Himalayas. The Nepalese government has announced an “IT Decade” (2024–34), backed by an ambitious goal to transform the country into a major information and communications technology (ICT) hub, export services worth Rs 3 trillion, and create 1.5 million direct and indirect jobs within a decade.¹This bold strategy, supported by a budget of Rs 7.25 billion for ICT in the 2024/25 financial year and a comprehensive Digital Nepal programme, paints a picture of a nation that is actively building its digital future.²

However, these impressive figures hide a complex reality, which can be called Nepal’s “great digital paradox.” Official government sources proudly claim almost 100 percent internet penetration – 99.38%.¹At the same time, independent analytical reports such as Digital 2025: Nepal, present a more restrained picture: at the beginning of 2025, the share of active Internet users was 55.8%.⁴This discrepancy is not just a statistical quirk, but a key to understanding Nepal’s unique digital ecosystem. The high figure likely accounts for every active SIM card, including basic 2G/3G connections used primarily for voice calls and SMS, while the lower figure reflects the actual number of people actively using the internet. This gap between infrastructure coverage and meaningful usage is the main driver of the trend we call “Nepalization.”

“Nepalization” is not just a translation or superficial localization of global technologies. It is a fundamental redesign and rethinking of digital products and services to fit Nepal’s unique realities: its linguistic diversity (more than 120 languages), cultural idiosyncrasies (such as payment habits), and, most importantly, its infrastructural constraints – from the digital divide between urban and rural areas to logistical challenges in mountainous terrain and unstable electricity supply. In this article, we explore how this trend is playing out across three key sectors – e-commerce, fintech, and artificial intelligence – and how Nepal is creating its own model of tech development, forged in the crucible of real-world challenges.

E-Commerce: Building a Digital Marketplace on Dirt Roads

Nepal’s e-commerce market, valued at US$679.7 million in 2024, is showing strong growth, ranking 79th globally.⁵This rise is being driven by the proliferation of smartphones and the emergence of a younger, tech-savvy generation.⁴The market is home to both international giants like Alibaba-owned Daraz and local players like HamroBazar and SastoDeal.⁵However, the structure of this market is completely different from its Western counterparts.

The Platform Riddle: A Tale of Two Markets

Data analysis reveals a striking feature of Nepalese e-commerce. On the one hand, the WooCommerce platform accounts for the largest number of online stores at 65.5%. On the other hand, the category labeled as “Custom Cart” (custom platforms) generates a staggering 95.11% of the total sales.⁷This huge gap is due to the dominance of one product category: “Automobiles and Vehicles”, which accounts for almost 90% of all Nepalese e-commerce sales.⁷

These numbers suggest that e-commerce in Nepal is not a single monolithic market, but two parallel economies that barely intersect. The first is a mass consumer market for low- to mid-priced goods (clothing, home goods), powered by accessible and easy-to-use platforms like WooCommerce. The second is a niche, high-value market, likely B2B or B2C, focused on selling cars, motorcycles, and spare parts through custom-built platforms. This specialization may be driven by complex supply chains, the need to integrate specific financial instruments, or simply by the high cost of the goods, requiring a more complex sales process than a standard shopping cart. For global tech companies, this means that the one-stop-shop model may not work in Nepal. Success requires a deep understanding of and integration into these existing, powerful niche markets, which are driven less by consumer whims and more by the country’s real infrastructural and industrial needs.

Table 1: Unique Structure of Nepal’s E-Commerce Market (2025). Data Source:⁷

The Last Mile Problem and a Local Solution

The main infrastructure barrier to the development of mass e-commerce in Nepal is logistics, namely the last mile problem. The country lacks a standardized address system, which makes delivery extremely inefficient. Almost every delivery turns into a quest: the courier, having reached the desired area, is forced to call the client for precise instructions, which takes time and resources.⁸

It is this problem that has given rise to one of the most striking examples of “Nepalization” – the innovative Galli Map application. It was created not to compete with Google Maps, but to solve a specific local problem that the global giant cannot cope with.⁸The Galli Map team has created its own mapping system using cars with 360-degree cameras and drones to capture the smallest details of streets. More importantly, they work with local authorities to integrate official house numbers into their system. As a result, the courier receives not just a dot on the map, but a full address, GPS coordinates and a panoramic view of the street, allowing you to accurately find the right house.⁸Galli Map’s business model is also “Nepalized”: the company plans to sell its API to major delivery services such as Daraz, Pathao and Foodmandu, offering them a more accurate and cost-effective solution than their international counterparts.⁸

Cultural and financial adaptation

E-commerce in Nepal is also adapting to cultural and financial realities. The continued popularity of Cash-on-Delivery is indicative of the trust deficit in online payments that digital platforms are having to overcome.⁹However, the rapid growth of local fintech services such as eSewa and Khalti is changing this situation. More and more online stores are integrating these popular digital wallets, gradually accustoming consumers to cashless payments.⁵

Fintech: The Mobile Revolution Bypasses Bank Branches

While Nepal is catching up with global trends in e-commerce, it is ahead of them in fintech, making a classic “tech leap.” Instead of building an expensive and slow network of physical bank branches, the country has gone straight to mobile banking, which has become the main tool for financial inclusion.

The growth of this sector is staggering. The number of mobile banking users has grown from 6.48 million in 2020 to more than 20 million in 2023 – a three-fold increase in just three years.¹¹By mid-2023, mobile banking penetration reached 73%, while digital wallets reached 64%.¹²This explosive growth, catalyzed by the COVID-19 pandemic, has changed the country’s financial landscape beyond recognition.¹¹

Nepali Fintech Titans: eSewa, Khalti, and Fonepay

At the center of this revolution are not traditional banks, but flexible and innovative fintech companies that have created entire ecosystems of services.

• F1Soft International: The company can be called the godfather of Nepalese fintech. It was the company that developed two key products in the market – eSewa and Fonepay, laying the foundations of the country’s digital payment infrastructure.¹⁴
• in Sewa: Nepal’s first and leading digital wallet, launched back in 2009. Today, eSewa is not just a transfer app but a one-stop platform offering over 5,000 services, from mobile phone top-ups and utility bill payments to purchasing air tickets, government payments, and international money transfers through its subsidiary eSewa Money Transfer.¹⁰With over 9 million users and a vast network of 250,000 agents covering all 753 local government areas, eSewa provides access to financial services even in the remotest corners of the country.¹⁸
• Khalti: eSewa’s main competitor, offering a similar range of services, including bill payments, ticket purchases and ride-sharing account top-ups.²⁰Khalti’s unique offering is the Khalti Bazaar platform, which allows small businesses and entrepreneurs to sell their digital goods and services online using the wallet’s payment infrastructure.²³
• Fonepay: Unlike wallets, Fonepay positions itself as Nepal’s largest interoperable payment network, uniting more than 60 banks and payment services.¹⁵Its flagship product, Fonepay Direct, allows instant P2P transfers between accounts at different banks using only the recipient’s mobile phone number.²⁵Fonepay is the main driver of QR payments implementation in the country and is actively developing cross-border payments by integrating with the Indian UPI system and Sri Lankan LankaPay.²⁴

Fintech as a public infrastructure and driver of inclusion

The deepest manifestation of “Nepalization” in fintech is that these private companies have effectively taken over public infrastructure functions. For millions of Nepalese, eSewa, Khalti, or their bank’s mobile app, powered by Fonepay, are their primary interface with the government: paying taxes, electricity (NEA), and water (Khanepani) bills.¹⁶The government’s own e-government initiatives, such as the Nagarik App, also rely on payment gateways created by these private players.²Their agent networks in rural areas act as bank branches where there never were any.¹⁸

The success of national digitalization and financial inclusion programs is thus inextricably linked to the health and innovation of the private fintech sector. This creates a symbiotic but potentially fragile relationship in which public policy must support and regulate these key players without stifling the innovation that makes them so vital. The results of this synergy are impressive: according to the Nepal Rastra Bank and the International Finance Corporation (IFC), fintech innovation has been the main driver of the dramatic increase in financial inclusion, from 61% of adults using formal financial services in 2014 to 90% in 2022.¹²

Artificial Intelligence: Speaks Nepali and Saves Crops

In Nepal, AI is not an abstract science fiction concept, but a set of pragmatic tools adapted to solve key national problems. And the most fundamental adaptation is linguistic.

AI with Nepali accent

Rather than trying to build expensive base AI models from scratch, Nepalese developers are using an effective “glocal” (global + local) strategy. They take powerful, open-source global models and “retrain” them on local, Nepali data.

• Innovations in language:

• Wav2vec2-Xlsr-Nepali: Based on Meta’s global Wav2Vec2 architecture, this AI model was further trained on Nepali speech datasets. As a result, it achieved an impressively low Word Error Rate of only 5.97%, allowing it to convert spoken Nepali speech into text with high accuracy.²⁷
• Distilgpt2-Nepali: Similarly, this model, based on OpenAI’s GPT-2 architecture, was trained on over 13 million Nepali text snippets. It is able to understand context and generate coherent, meaningful Nepali text.²⁸

This approach allows Nepal to quickly build sophisticated, localized AI tools without the prohibitive time and resources required for basic research. It is a pragmatic and replicable model for other developing countries, demonstrating how cutting-edge capabilities can be built by standing on the shoulders of global giants.

Case 1: AI in Agriculture – A Farmer’s Digital Almanac

Agriculture, which employs two-thirds of Nepal’s workforce, faces serious challenges from climate change and low efficiency.²⁹Artificial intelligence offers concrete solutions.

• Precision farming: In pilot projects in Kavre district, the use of AI-controlled soil sensors has increased crop yields by 32%.²⁹
• Pest and disease control: Mobile apps use AI to analyze plant images for early detection of diseases and pests, reducing pesticide use and crop losses.²⁹The possibility of using large language models such as ChatGPT to provide farmers with instant advice on pest control methods is being explored.³¹
• Climate resistance: GeoKrishi’s platform provides data-driven advisory services to farmers to help them adapt to climate stresses.³²Machine learning models analyzing climate data were able to predict dengue fever outbreaks with 89% accuracy—technology that could easily be adapted to predict agricultural risks.²⁹

Case 2: AI in Healthcare – Reaching the Unreachable

Artificial intelligence is becoming a critical tool to bridge the huge gap in healthcare quality between urban centres and remote rural areas, where the shortage of health workers reaches 65%.²⁹

• Telemedicine and remote diagnostics: Mero Doctor app has conducted 50,000 remote consultations in Karnali province alone in one year.²⁹AI-powered tools are being developed that can use a regular smartphone to screen for cervical cancer or detect parasites in water and stool samples, delivering diagnostics to the most remote corners of the country.³³
• Maternity protection: In Rupandehi district, the use of AI-enabled wearables that alerted midwives to high-risk pregnancies reduced maternal mortality by 22%.²⁹

Table 2: Applied AI in Nepal – Practical Solutions for National Challenges

Conclusion: The Future of Technology Forged in the Himalayas

Nepal’s digital transformation story is a compelling case that the most successful technologies are born not from simple copying, but from deep local adaptation and solving real problems. “Nepalization” is not a sign of backwardness, but a testament to maturity and pragmatism. From Galli Map, which was created to navigate anonymous streets, to fintech ecosystems that have replaced bank branches, to localized AI models that speak Nepali and help farmers, it’s clear that the innovations that emerge from constraints are often the most sustainable and effective.

Of course, many obstacles remain in Nepal’s path. The digital divide between prosperous Kathmandu and poor rural provinces like Karnali is still vast.¹Digital literacy levels, while growing, need to be further improved to ensure that all citizens can use new tools safely and confidently.³Implementing new legislation in the areas of e-commerce, data protection and AI ethics is a complex and ongoing process that requires a balance between regulation and incentives for innovation.²

Yet Nepal’s journey is more than just a local success story. It is a potential model for dozens of other developing countries around the world. Its pragmatic, “glocal,” and problem-solving approach to technology adoption offers valuable lessons on how to harness the digital revolution for inclusive and sustainable development. Nepal is showing how to build a future in which cutting-edge technologies speak with a distinct local accent.d restore hope for the future of its citizens in their native land.

Alpha Business Media

A publishing and analytical center specializing in the economy and business of Nepal. Our expertise includes: economic analysis, financial forecasts, market trends, and corporate strategies. All publications are based on an objective, data-driven approach and serve as a primary source of verified information for investors, executives, and entrepreneurs.

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