CSIT Department

Bhaktapur Multiple Campus

Doodhpati,Bhaktapur

A Report on Case Study of Status of E-commerce and Electronic

Transaction Act in Nepal

Submitted By
Santosh Kunwar
3rd year/6th Semester
Exam Roll No:. 23267

Submitted To
Rachana Nyaichyai
Contents
Objectives .................................................................................................................................. 1
History........................................................................................................................................ 1
Present Status ............................................................................................................................. 1
Business model ...................................................................................................................... 1
Market Analysis ..................................................................................................................... 2
Challenges .............................................................................................................................. 2
Electronic Transaction Act ........................................................................................................ 3
Objectives of Electronic Transaction Act 2063 ..................................................................... 3
Scopes of the Electronic Transaction Act 2063 ..................................................................... 3
Major provisions of the Electronic Transaction Act 2063 ..................................................... 3
Major computer-related crimes and punishments .................................................................. 3
Conclusion ................................................................................................................................. 4
References .................................................................................................................................. 4
Objectives
1. To study about the present status of E-commerce in Nepal.
2. To study about Electronic Transaction Law of Nepal.

History
E-commerce is relatively a new concept in context of a developing country like Nepal. The
development in e-commerce in Nepal started in the late 1990s with the establishment of
business-listing website ,”Thamel.com” with an aim of globalization and digitizing the
business of the shops located at Thamel. In 2000, munchahouse.com, now changed into
muncha.com was launched by Muncha House, the first-ever online department store in
Nepal, located in Balkumari, Ason.

Several e-commerce businesses gradually began to operate. NepBay.com, now known as

Thulo Market, was founded in 2007 (as an online directory of goods and stores in
Kathmandu), as were Foodmandu (2010), Sastodeal (2011), Urban Girl (2012), now known
as UG Bazaar, Daraz (originally launched as Kyamu in 2013 and acquired by Alibaba Group
in 2018), and many other significant businesses.

A solid foundation has been established for the development of e-commerce in Nepal with
the 2009 introduction of eSewa, the country's first payment gateway, as well as additional
payment services like Khalti, IME Pay, and many others.

Present Status
The e-commerce industry is growing rapidly and offers significant potential for businesses
and consumers in Nepal. The COVID-19 pandemic accelerated the growth of e-commerce in
Nepal, as more people turned to online shopping to avoid physical stores.

Business model
Several e-commerce businesses with different models are running in Nepal, each with its own
unique characteristics and advantages. Some of the models are:

• B2C (Business-to-Consumer) Model : Under this business approach, things are sold
directly to consumers. E.g. Daraz, Sastodeal etc.
• B2B (Business-to-Business) Model: This model involves selling products or services
to other businesses. E.g. Alibaba
• C2C (Consumer-to-Consumer) Model: this model is where business acts as a
platform for consumer-to-consumer transactions. For E.g. HamroBazaar, eBay etc.
• Subscription Based Model: This model involves customers paying a recurring fee to
access a product or service. It generally includes non-physical products such as
movie, songs etc. Cinemaghar is the OTT platform for watching Nepali movies.
• Drop shipping Model: With this strategy, things are sold without any physical
inventory being held. Instead, a third-party provider is used by the vendor to deliver

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 the goods to the client. It is blooming e-commerce business in Nepal. They use social
media for marketing their product and receiving orders from the consumer.
• Social Commerce Model: This model involves using social media platforms to sell
products directly to customers. Examples of companies using this model include
Instagram, Facebook, and Pinterest. Facebook and Instagram has a separate dedicated
section in the app called ”marketplace” that generally is mixed model of B2C and
C2C.

Market Analysis
With relatively little internet penetration in rural regions, online activity is centered in
Kathmandu and a half-dozen other major cities, but this is changing as more people use
mobile phones to access the internet. Online business activity is still relatively rare, although
the market is expanding. Several companies use the internet to communicate with
international partners. Digital and online commercial activity has increased because of the
COVID pandemic, and this trend is predicted to continue.

From the online shopping portals to food delivery and ridesharing , e-commerce has several
areas of impact. E-commerce websites for consumers in urban areas, particularly the
Kathmandu Valley are burgeoning. Online food delivery website foodmandu is popular with
both expatriates and local residents, with competitor foodmario offering similar service.
Sastodeal and Daraz are emerging online shopping portals. Over the pandemic, a number of
eCommerce service-providers have also extended their services to include grocery and food
delivery services, such as the ride-hailing service Pathao.

E-commerce is still in its early stages in Nepal, but it is expanding swiftly. Transfers using
credit/debit cards, transfers from e-banking websites, and transfers through digital wallets are
all on the rise, particularly in cities. Therefore, Nepalis without a dollar account are unable to
transact in foreign cash.

Challenges
Although e-commerce is a fast expanding sector in Nepal, it still confronts a number of
obstacles that could slow down its expansion. Some of the main obstacles to Nepalese e-
commerce include:

- Internet Access: Despite recent advancements, Nepal's internet connectivity is still

quite low, with only 36% of the population having access. This reduces the pool of
possible customers for online retailers.
- Market size: Compared to other nations, Nepal has a comparatively small population,
which may put a cap on the size of the potential market for e-commerce companies.
- Poor Logistics Infrastructure: The high charge of delivery of products and also the
delay in deliveries has been a prime concern in context of Nepal.
- Lack of Trust: Many Nepalese consumers are still wary of online transactions and
prefer to buy goods in physical stores where they can see and touch the products
before purchasing. This lack of trust can be a significant barrier to the growth of e-
commerce.

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Electronic Transaction Act
The exchange of electronic records and data utilizing various electronic mediums is referred
to as an electronic transaction. Electronic records and a legitimate digital medium are
included in the transaction. In a nutshell, an electronic transaction is the internet-based
exchange of any sort of electronic record.

Objectives of Electronic Transaction Act 2063

Following are the major objectives of ETA 2063.

- To frame legal provision for authentication and regulation of electronic data.

- To make a reliable date generation, communication, and transmission.
- To regulate electronic transactions activities.
- To create a secure and authentic means of electronic communication.

Scopes of the Electronic Transaction Act 2063

- Creation and use of digital signature
- Control cyber and computer-related crimes.
- Protection of intellectual property (IP)
- Protection of confidentiality
- Regulations of an electronic transaction by establishing regulating bodies – such as
- Office of Certificate Control (OCC)
- Certificate Agencies (CA)
- Subscribers

Major provisions of the Electronic Transaction Act 2063

- It has the provision relating to electronic records and digital signature.
- It has the provision relating to dispatch, receive an acknowledgment of electronic
records.
- It has the provision of few regulating bodies and their functions, rights, and duties
such as :
▪ Office of Certificate Control (OCC)
▪ Certification Agencies (CA)
▪ Subscriber
- It has the provision relating the use of digital signature and certificate.
- It has the provision relating to government use of the digital signature.
- It has a provision relating to the computer network and network services providers.
- It has the provision relating to computer-related crimes and punishments.

Major computer-related crimes and punishments

- Pirate/ Destroy/Alter computer source code
- Unauthorized access in the computer system
- Damage to computer and computer system
o Up to 3 years of imprisonment, or up to 2 lakh fine or both

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 - Distribution of electronic materials in electronic form – Not to publish the prohibited
materials which are prohibited by prevailing laws, the materials which may create
jeopardy in social harmony, spread hate and jealousy, materials which may create
harassment to women trafficking, pornography materials.
o Up to 5 years imprisonment or up to 1 lakh or both
- Disclose of Confidentiality
- Deform false statement by parties at the time of the electronic transaction
o Up to 2 years imprisonment or 1 lakh fine of both
- Display and submit false license for electronic means
o Only display 1 lakh fine
o Display + submit and perform = 2 years imprisonment or 1 lakh fine or both
- Non-submission of prescribed statements
o Up to 50,000 fine
- Computer fraud
o Compensate claim amount
o Fine up to 1 lakh and 2 years of imprisonment or both
- Computer fraud
o For abetment fine up to 50,000 and up to 6 months imprisonment
- For accomplice
o Half of the main convicted

Conclusion
The future of e-commerce in Nepal looks promising, as the industry continues to grow and
expand, driven by increasing internet penetration, changing consumer habits, and government
support. The government needs to formulate laws that governs the several e-commerce
companies regarding the quality of service. Government need to develop internet
infrastructures and increase the internet reach in rural parts of Nepal

References
1. https://english.onlinekhabar.com/rise-of-e-commerce-in-nepal-a-pioneer-
explains.html
2. https://deltacreation.com.np/blog/start-your-own-ecommerce-business-in-nepal/
3. https://www.trade.gov/country-commercial-guides/nepal-ecommerce
4. https://www.sharegyannepal.com/electronic-transaction-act-2063/