Digital Payments Could Drive Bhutan’s Next Phase of Trade and Economic Growth

ADB’s latest report finds that strengthening Bhutan’s digital payment ecosystem is critical for boosting trade, financial inclusion, tourism, and MSME growth, but challenges such as unreliable infrastructure, regulatory gaps, and low digital literacy continue to limit progress.

A new report by the Asian Development Bank (ADB), prepared under the South Asia Subregional Economic Cooperation (SASEC) program with research support from Access Partnership Ltd., argues that digital payments could become a powerful driver of Bhutan's economic transformation. As the country looks to diversify its economy, strengthen trade, and improve financial inclusion, the study suggests that a modern digital payments ecosystem can help Bhutan overcome many of the challenges created by its mountainous terrain, small domestic market, and landlocked geography.

The report comes at an important time for Bhutan. After graduating from Least Developed Country status in 2023, the country faces growing pressure to boost competitiveness, attract investment, and create new economic opportunities beyond hydropower. Digital payments, the report argues, are no longer just a banking issue. They are increasingly becoming a key piece of economic infrastructure.

Building the Foundations of a Digital Economy

Bhutan has made significant progress in modernising its payment systems over the past decade. The Royal Monetary Authority has introduced key platforms, including the Bhutan Financial Switch, real-time interbank transfer systems, and a national QR code payment framework.

One of the country's biggest achievements has been its partnership with India's Unified Payments Interface (UPI), which allows Indian tourists to make seamless digital payments in Bhutan. This has improved convenience for visitors and provided valuable lessons in cross-border payment integration.

Digital transactions have grown rapidly, with mobile banking and QR payments becoming increasingly common. Businesses and consumers are gradually moving away from cash, creating a foundation for a more connected digital economy.

Why Better Digital Payments Matter

The benefits of stronger digital payment systems extend far beyond the financial sector. For businesses, especially micro, small, and medium-sized enterprises (MSMEs), digital payments can reduce transaction costs, improve record-keeping, and make it easier to access formal credit. Consumers provide faster, safer, and more convenient ways to pay for goods and services.

The report highlights that digital payments can also support Bhutan's trade ambitions. Faster and more reliable payment systems make it easier for businesses to participate in e-commerce, receive international payments, and engage with regional markets.

For policymakers, digital payments can improve government efficiency by supporting electronic tax collection, welfare payments, licensing systems, and other public services. Better payment systems can also increase transparency and reduce the costs associated with cash-based transactions.

Challenges That Still Hold Bhutan Back

Despite progress, the report identifies several barriers that continue to limit digital payment adoption.

One of the biggest concerns is reliability. Payment systems occasionally experience outages caused by technical issues, network instability, and insufficient backup infrastructure. Such disruptions can affect businesses, tourists, and consumers, undermining trust in digital transactions.

Connectivity also remains uneven. While internet and mobile coverage have expanded significantly, rural areas still face slower connections and higher costs. Smartphone affordability remains another challenge, particularly for low-income households.

Digital literacy is equally important. Many people, especially in remote areas, remain unfamiliar with advanced digital financial services. Limited awareness and concerns about fraud or cybersecurity can discourage adoption.

The report warns that unless these challenges are addressed, Bhutan risks creating a digital divide where urban populations benefit from new technologies while rural communities are left behind.

What Policymakers Should Focus On

The study views digital payments as strategic national infrastructure and recommends treating them with the same importance as roads, energy systems, and telecommunications networks.

A key priority is strengthening payment system reliability through better infrastructure, stronger cybersecurity measures, and backup systems that minimise service disruptions. The report also calls for improvements in internet affordability and connectivity, particularly in rural areas.

Another major recommendation is the introduction of stronger regulations covering consumer protection, data privacy, and cybersecurity. These measures would help build public trust while making Bhutan's payment ecosystem more attractive to investors and international partners.

The report also urges policymakers to simplify cross-border payment processes, modernise foreign exchange regulations, and strengthen regional cooperation. Such reforms could make it easier for Bhutanese businesses to trade internationally and receive payments from overseas customers.

A Roadmap for Inclusive Growth

Drawing lessons from countries such as India, Kenya, Brazil, Cambodia, and Pakistan, the report concludes that successful digital payment systems rely on reliable infrastructure, supportive regulations, interoperability, and strong public trust.

For Bhutan, the opportunity is significant. Better digital payments could help MSMEs grow, support e-commerce, increase tourism revenues, improve access to finance, and strengthen regional trade links. At the same time, they could enable more efficient government services and expand financial inclusion in rural communities.

Digital payments are not simply a technological upgrade. They are an economic development tool with the potential to support Bhutan's broader goals of diversification, competitiveness, and inclusive growth. If policymakers can address the remaining infrastructure, regulatory, and literacy challenges, digital payments could become one of the most important foundations of Bhutan's next phase of economic development.