'Nepal’s banking future depends on AI, decentralised payments, and digital finance'

Emmanuel Daniel is a global thought leader, author and advisor on finance, geopolitics and their impact on business and society. He was recognised as a Top 10 Global Influencer in the ‘Fintech Power 50’ list for 2021 and 2022. As the founder of TAB Global, a research, publication and consulting firm established in 1996, Daniel has built strong connections with business and government leaders worldwide. Through platforms like The Asian Banker, Wealth and Society, The Banking Academy, and TABInsights, he provides valuable insights on financial transformation.

Daniel has advised both public and private institutions, winning accolades such as the Citibank Excellence in Business Journalism for Asia in 1999 and the Best Finance Conference award at the Asian Conference and Summit Awards in 2012 for ‘The Asian Banker Summit’. His expert opinions are frequently featured on BBC, CNBC and Bloomberg.

In his book ‘The Great Transition – The Personalization of Finance is Here’, published in 2022, Daniel explores how banking is shifting from platform-based systems to highly personalised financial services. He also discusses the roles of blockchain, cryptocurrencies and gaming in shaping the future of finance.

Recently in Kathmandu, Business 360 caught up with Daniel to hear his views on the challenges and opportunities of AI-driven banking. In this interview, he shares his insights on digital banking, financial inclusion, and how AI is transforming the industry. Excerpts:

In your book ‘The Great Transition’, you have discussed about the personalisation of finance. How do you see this trend playing out in emerging markets like Nepal where traditional banking still dominates?

The key themes in emerging markets like Nepal are financial inclusion, microfinance, and now, the rise of AI-driven financial ecosystems. AI is enabling end-users to create their own communities, build networks and develop products that are globally relevant, even with a minimal workforce.

For example, an IT company in Nepal can now serve the global market simply by taking on international projects and using AI to generate highly specific applications. The real challenge then becomes payments – how do these professionals get paid and how do they fit into global supply chains?

So, financial services must adapt. It is no longer about customers walking into a physical branch to conduct transactions. Instead, banks must integrate into digital ecosystems where their customers already exist. The AI-driven financial model is as crucial – if not more so – in emerging markets as it is in developed economies.

Nepali banks have started to adopt digital technologies. What could they learn from more digitally advanced banking sectors?

Interestingly, there is very little to learn from developed countries in this regard. Developed economies face a significant challenge: they have well-established legacy systems that they now need to dismantle to go fully digital. The transition for them is slow and painful. Nepal, on the other hand, has an opportunity to leapfrog directly into digitisation. But there is an important distinction to make – computerisation, digitisation and AI are three different things. Computerisation is just putting a computer on a desk. Digitisation means completely revamping backend systems for digital efficiency whereas AI takes digital systems further by adding intelligence, meaning and predictive capabilities.

Many Nepali banks still rely on legacy systems. Simply enabling digital payments does not mean true digital transformation. They need to think ahead to AI-powered banking.

“The future of banking in Nepal will be shaped by three forces which are AI-driven financial personalisation, decentralised payment systems and regulatory evolution that embraces digital finance. Banks that embrace these shifts will thrive. Those that resist will struggle to stay relevant”

Most financial institutions in Nepal still rely on legacy banking systems. How can they transition to digital banking without losing their existing customer base?

The truth is, customers have already transitioned to digital. Banks are the ones lagging behind. I once had a conversation with a local banker whose institution had around 190 branches. They were reluctant to move away from physical branches, arguing that older customers still needed them. My question to them was: How many of these customers do you actually have? And how much revenue do they bring in?

Banks need to balance emotional attachment to legacy infrastructure with the reality of profitability. A well-run, efficient digital banking system can offer lower-cost funding to customers, making financial services more accessible and inclusive. The real challenge for Nepali banks is to recognise that their role is shifting – from a brick-and-mortar institution to a digital-first community platform.

You have advised corporations and governments worldwide. What advice would you give to Nepal’s financial regulators to ensure a smooth transition to digital banking while maintaining financial stability?

My first piece of advice is this: Stop copying priorities from other economies. Nepali regulators often attend global banking summits, see what advanced economies are doing and try to implement the same policies in Nepal. That is a mistake. Nepal has its own grassroots ecosystem that must be understood and digitised according to local needs.

Take microfinance, for example. Some of Nepal’s most successful banks thrive because they are deeply embedded in local communities. They understand micro-businesses, the skills of their customers, and what types of financial products are most useful.

A great case study is the Grameen Bank in Bangladesh. They initially succeeded without technology, simply by lending to small groups of women and ensuring collective accountability. The key was lending against productive assets – like buying a bicycle to transport vegetables – not for luxury consumption.

I think Nepali regulators should focus on building policies that digitise grassroots financial ecosystems. They should also encourage banks to harness real-time customer data for smarter decision-making and create a collaborative environment between fintechs, banks and regulators.

The central bank itself needs to shift from a top-down enforcer to a dynamic, learning-oriented institution that grows alongside the banking sector.

Nepal has been cautious about cryptocurrencies. Given your global perspective, should we change our stance?

Many small businesses and entrepreneurs in Nepal are likely already using cryptocurrencies for international transactions – whether regulators acknowledge it or not. Take stablecoins for example. They are available 24/7, and are peer-to-peer, requiring no bank. Moreover, they are instant and borderless. This is the most powerful payment system ever created and it is already being used worldwide.

I feel regulators worry about three things. The first is price volatility which applies mostly to speculative crypto assets, not stablecoins. Then there is the issue of fraud, which exists in every financial system, not just crypto. The third factor is KYC (Know Your Customer) issues which are more traceable in crypto than in traditional banking.

What many regulators do not realise is that crypto transactions are more transparent than traditional banking. Every transaction is permanently recorded on the blockchain, making it easier to track fraud and recover stolen assets. The United States has successfully recovered stolen cryptocurrencies even a decade after the theft. Try doing that with bank fraud! Instead of outright bans, Nepal should consider a regulatory framework that enables safe and legal crypto use while mitigating risks.

Given everything we have discussed, where do you see Nepal’s banking sector in the next decade?

Nepal has a unique opportunity. Unlike developed countries, it does not have to dismantle legacy infrastructure. Instead, it can skip outdated models and move directly to AI-powered financial services. The other thing that Nepal’s banking sector can do is leverage mobile-first banking to reach rural and underserved populations. Finally, they could use blockchain-based solutions for payments, remittances and financial transparency.

The future of banking in Nepal will be shaped by three forces which are AI-driven financial personalisation, decentralised payment systems and regulatory evolution that embraces digital finance. Banks that embrace these shifts will thrive. Those that resist will struggle to stay relevant.

“Nepal’s banking future depends on embracing change rather than resisting it. The customer has already moved on – banks, regulators and fintech innovators now need to catch up. The goal should be financial inclusion, efficiency and innovation.

Any closing thoughts for Nepali banks, regulators or entrepreneurs?

Nepal’s banking future depends on embracing change rather than resisting it. The customer has already moved on – banks, regulators and fintech innovators now need to catch up. The goal should be financial inclusion, efficiency and innovation. If Nepal can leapfrog traditional banking and create smart, AI-driven financial systems, it will position itself as a leader in digital banking within the region. The real question is: Are Nepal’s banks and regulators ready to make that leap? As AI, digital banking and crypto reshape global finance, Nepal stands at a crossroads. Whether it seizes the opportunity or clings to legacy banking models will define its economic trajectory in the years to come.