Digital wallet leaders IME Pay and Khalti merge to rival eSewa, begin DDA

KATHMANDU: In a significant development for Nepal’s fintech industry, two of the country’s leading digital wallets, IME Pay and Khalti, have agreed to merge, marking the first consolidation of its kind under new regulatory guidelines. The companies have initiated a Due Diligence Audit (DDA) to finalize the merger process, with plans to sign a final Memorandum of Understanding (MoU) upon its completion. Howerver, both of the wallet companies have already done the initial MoU for the process.

This move, aimed at challenging the dominance of eSewa, which holds an alomost 70% market share, could reshape the competitive landscape of Nepal’s digital payment sector.

The agreement was reached during a closed-door meeting held recently, where both companies committed to accelerating the DDA and ensuring compliance with regulatory requirements. Officials from IME Pay and Khalti confirmed that an initial MoU has already been signed, setting the stage for what could be a transformative shift in Nepal’s fintech ecosystem.

Khalti CEO Binaya Khadka affirmed the decision, stating, “Both wallet companies have agreed to conduct the DDA and other necessary procedures to ensure a clear path forward.”

A Strategic Response to Market Dynamics

Nepal’s digital payment industry is currently dominated by eSewa, leaving smaller players like Khalti and IME Pay to compete for the remaining market share. Khalti, with over 4 million subscribers, has carved a niche in mobile payments, including recharges, bill payments, and e-commerce transactions.

IME Pay, on the other hand, specializes in remittance services, leveraging its affiliation with the IME Group to facilitate cross-border transactions. Despite IME Pay’s higher paid-up capital of Rs 300 million compared to Khalti’s Rs 50 million, Khalti is believed to hold a larger share of the digital wallet market.

The merger is seen as a strategic effort to combine their strengths—Khalti’s extensive user base and IME Pay’s financial backing—to create a formidable competitor to eSewa. Industry analysts suggest that the consolidation could lead to enhanced services, greater innovation, and more competitive pricing, ultimately benefiting consumers. “This is a game-changer,” said a fintech expert based in Kathmandu. “It’s a direct challenge to eSewa’s monopoly and could spur much-needed competition in the sector.”

Regulatory Alignment and Industry First

The merger aligns with Nepal Rastra Bank’s (NRB) revised Transaction and Settlement Bylaw, 2077 (2020/2021), which permits consolidations among digital wallet providers. This regulatory shift, designed to foster stability and efficiency in the payment sector, has paved the way for IME Pay and Khalti to pursue their merger plans. If successful, this would be the first merger under the new framework, potentially setting a precedent for future consolidations in Nepal’s rapidly evolving fintech landscape.

Sources close to the negotiations revealed that the companies are working diligently to meet all regulatory requirements and finalize the DDA. However, key details, such as the name of the merged entity, remain undecided. Options under consideration include ‘Khalti IME Pay,’ ‘IME Khalti Pay,’ ‘Khalti Pay,’ or ‘IME Pay,’ reflecting the ongoing discussions about branding and market positioning.

Potential Impact and Future Outlook

The merger’s success hinges on the completion of the DDA and securing final regulatory approval. Once finalized, the combined entity is expected to offer a broader range of services, including improved cashback offers, seamless QR payment systems, and expanded remittance capabilities. This could significantly enhance financial inclusion, particularly in rural areas where digital payment adoption is still growing.

For Nepal’s fintech industry, the merger signals a maturing market where consolidation is becoming a viable strategy for growth and competitiveness. It also underscores the increasing importance of digital wallets in the country’s financial ecosystem, as more consumers and businesses turn to cashless transactions.

As the DDA progresses, all eyes will be on how IME Pay and Khalti navigate the complexities of integration, from merging their technological platforms to aligning their corporate cultures. The outcome of this merger could not only redefine their market positions but also influence the trajectory of Nepal’s digital economy in the years to come.