The Digital Payment Adoption on Local Small Businesses in Urban and Semi-Urban Areas of Kathmandu Valley

Abstract

The global financial ecosystem has been completely transformed by the quick development of digital technologies, especially with the emergence of digital payment systems, including point-of-sale (POS) platforms, mobile wallets, internet banking, and QR code payments. The adoption, use, and effects of digital payment systems among small and medium-sized businesses (SMEs) in the Kathmandu Valley's urban and semi-urban districts are examined in this study. Data were gathered from 103 small enterprises using a mixed-method approach that included structured questionnaires, interviews, and observations. Results show that although digital payment usage is dominated by platforms like eSewa and IME Pay, infrastructural and digital literacy constraints continue to cause discrepancies across urban and semi-urban locations.

The findings show that using digital payments has a major positive influence on both operational and financial performance. These benefits include increases in sales volume, operational effectiveness, customer satisfaction, record keeping, and payment security. Transaction cost decrease is still less noticeable, though. The survey also shows that service-based organizations are more engaged in digital payment training, and companies with modest turnover have higher adoption rates. The Kruskal-Wallis H test reveals that while digital payment usage has a substantial impact on all operational and financial performance measures, digital payment intensity has a considerable impact on operational efficiency, customer satisfaction, and record maintenance. These findings underscore the importance of targeted interventions to enhance digital literacy, improve infrastructure, and foster trust in digital payments, especially in semi-urban regions, to bridge the digital divide and promote inclusive financial growth.