Digital transactions are transforming South Asian financial systems

Imran Khalid

Imran Khalid is a Karachi-based geostrategic analyst and freelance writer.

Across South Asia, a seismic shift is underway in how migrant workers send money home. The rise of mobile money and digital wallets is not merely reducing transaction costs; it is fundamentally reshaping the interplay between governments, financial systems and millions of unbanked citizens. This fintech-driven revolution is forcing central banks to overhaul regulatory frameworks, stabilizing national currencies, fostering financial inclusion and deepening economic interdependence across the region. As mobile money becomes the backbone of remittances, it is laying the groundwork for a more equitable and interconnected financial future in South Asia.

For decades, migrant workers in South Asia — particularly from Nepal, Bangladesh and the Philippines — have relied on traditional wire services like Western Union and MoneyGram to send earnings home. These services, while reliable, come with steep fees, often ranging from 6% to 8% of the transaction amount. For a worker sending $200 monthly, this translates to $12–$16 lost per transfer, a significant burden for families dependent on these funds for basic needs like food, education and health care.

In 2024, South Asia received over $150 billion in remittances, with Bangladesh accounting for $24 billion, Nepal $10 billion and the Philippines $39 billion. These figures underscore the scale of the remittance economy and the impact of high fees on vulnerable populations.

Enter mobile money platforms like bKash in Bangladesh, GPay in Nepal and GCash in the Philippines. These digital wallets, accessible via smartphones, have slashed transaction fees to as low as 1–2%. A $200 transfer now costs as little as $2, delivering immediate savings to families. In Bangladesh, mobile wallets like bKash have significantly increased their share of remittance transactions over the past five years, driven by widespread smartphone adoption and fintech innovation.

In the Philippines, GCash reported approximately 81 million active users in early 2025 with remittances playing a major role in its transaction volume. This shift is not just about cost — it’s about accessibility. By linking wallets to phone numbers, these platforms bypass the need for physical bank branches, reaching rural and unbanked populations who previously had limited access to financial services.

The surge in mobile remittances is forcing central banks across South Asia to adapt swiftly. In Bangladesh, the central bank has introduced guidelines to ensure interoperability among mobile money platforms, allowing seamless transfers between providers like bKash and Rocket. This fosters competition and keeps fees low while enhancing user convenience. Nepal’s Rastra Bank now closely monitors digital wallet transactions, as remittances account for roughly 25% of the country’s GDP. Sudden spikes in inflows can strengthen the Nepali rupee, potentially harming export competitiveness. To counter this, the bank has implemented dynamic foreign exchange interventions and is exploring a central bank digital currency to streamline cross-border payments.

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) has taken a proactive approach by licensing digital banks and integrating mobile money into the formal financial system. The BSP’s 2024 sandbox for blockchain-based remittance tracking has shown promise in enhancing transparency and curbing illicit flows, a persistent concern given the volume of informal transactions. However, these adaptations come with challenges. High remittance volumes can create currency volatility, complicating monetary policy. For instance, Bangladesh’s central bank has flagged concerns about “hot money” inflows — short-term capital movements driven by remittance surges — that could destabilize the taka. To address this, it is piloting a blockchain-based system to track and regulate digital remittances in real-time.

Central banks are also grappling with regulatory frameworks. Mobile money operates in a gray area between telecoms and banking, requiring new rules to prevent fraud and money laundering. Pakistan’s State Bank, for example, has tightened know your customer (KYC) requirements for mobile wallets like JazzCash and Easypaisa, aligning with global anti-money laundering standards. While necessary, such measures risk stifling innovation if overly restrictive, creating a delicate balancing act for regulators.

PhonePe and Paytm on the counter of a grocery store in Ahmedabad, India. The fintech revolution is transforming payments and remittances, and deepening regional economic ties.   © Reuters

Beyond cost savings, mobile money is revolutionizing financial systems by fostering inclusion. In rural South Asia, where bank branches are scarce, mobile wallets serve as gateways to a range of financial services. In the Philippines, GCash users can access microloans, purchase insurance and invest in mutual funds directly from their phones. In Bangladesh, bKash has partnered with microfinance institutions to offer small loans to rural women, empowering them to start businesses. In Nepal, over 40% of adults now use mobile money, compared to just 15% with traditional bank accounts, bringing millions into the financial fold.

Mobile money is also spurring innovation in financial systems. Fintech startups are partnering with telecoms to create cross-border remittance corridors, deepening regional economic ties. A 2024 partnership between bKash and India’s PhonePe, for instance, enables seamless transfers between Bangladesh and India, facilitating trade and investment. Similarly, the Philippines’ GCash has integrated with Singapore’s GrabPay, creating a digital payment bridge across Southeast Asia. These corridors are not just transactional; they are reshaping economic interdependence by enabling faster, cheaper and more transparent financial flows.

Governments are feeling the ripple effects of this revolution. Lower remittance costs mean more money reaches families, directly improving welfare. In Nepal, where remittances support one in three households, reduced fees have increased disposable income, boosting consumption and tax revenues. Governments are incentivizing digital remittances through tax breaks and subsidies for fintech adoption. The Philippines, for example, offers tax exemptions to digital banks that serve rural areas, encouraging expansion into underserved regions.

However, the rise of mobile money poses policy challenges. Governments must balance innovation with oversight to prevent fraud, tax evasion and money laundering. In Pakistan, authorities have cracked down on unregistered mobile wallet providers, citing risks to financial stability. Bangladesh’s government is exploring a national digital ID system to streamline KYC processes, but implementation lags due to infrastructure gaps. These efforts highlight the tension between fostering fintech growth and maintaining regulatory control.

The mobile money revolution is more than a technological shift; it is a catalyst for systemic change. By democratizing access to financial services, it empowers millions of unbanked individuals, from rural farmers in Nepal to urban vendors in Bangladesh. By stabilizing currencies and fostering innovation, it strengthens national economies and regional ties. And by forcing governments and central banks to adapt, it is laying the foundations of a more inclusive and resilient financial future.

Yet challenges remain. Regulators must navigate the risks of rapid digital adoption, from cybersecurity threats to currency volatility. Governments must invest in digital infrastructure to ensure equitable access, particularly in remote areas. And central banks must balance innovation with stability to harness the full potential of this revolution. As South Asia embraces mobile money, it is not just rewiring its economies — it is redefining its place in the global financial order.

The article appeared in asia.nikkei