The government has stated that it will preserve interconnection in all types of transactions by establishing a ‘national payment switch’ through the budget of the upcoming fiscal year, which will be implemented in the following fiscal year.
The National Reserve Bank has also set an objective of boosting financial transactions through electronic means in order to promote the government’s Digital Nepal Framework through the fiscal year 2077/78 monetary policy. According to the monetary policy, a national payment system would be built in order to facilitate the payment system by retaining records of electronic transactions conducted within the country’s borders.
Currently, the National Reserve Bank is preparing to integrate electronic transactions via QR code as well as card and non-card transactions in the national payment switch. It has been assigned to Nepal Clearing House Limited (NCHL) the job of developing the national payment switch.
Additionally, the NRB is ready to transfer the responsibility for payment operation, regulation, and monitoring to a clearing house following the completion of the switch construction.
Nepal Clearing House is a cooperative payment facility controlled by Nepal Rastra Bank, a bank, and a financial institution. It was established in 1996. By way of Connect IPS, it has been delivering payment-related services for some time. In this institution, Nepal Rastra Bank owns a ten percent stake, with the remaining ninety percent held by other financial organisations.
What is a national switch, and how does it work?
The nationwide switch will capture all types of electronic financial transactions and information that take place within the country of Nepal. The current situation is that records and information pertaining to electronic payments are being leaked outside of Nepal. According to Bam Bahadur Mishra, Deputy Governor of Nepal Rastra Bank, the payment systems of financial institutions will be interconnected through a single window.
The National Switch is being created, and transactions through ATMs and other digital payments will be handled by the same system once it has been completed. As Mishra explained to Nepal Press, “this will allow banks and financial institutions to interconnect and make payments through their own national payment cards.”
The information about Nepal will not be leaked, a one-stop system will be established, and money will be prevented from being sent overseas through ATM cards, according to the minister.
By way of illustration, Mishra pointed to the bus park at Ratna Park and explained that “every vehicle operating in the Kathmandu Valley comes to the bus park at Ratna Park and then travels to different destinations from there, so every payment-related transaction is connected to the national switch and permission is obtained from there.”
According to Nilesh Man Singh Pradhan, the Chief Executive Officer of Nepal Clearing House Limited, the system will be connected to banks, financial institutions, and payment service providers in the near future. “Companies that have been involved in payment-related transactions are connected to the switch through the one-door system. In order to facilitate integrated transactions, we are establishing a network of organisations that have been offering payment services through cards, as well as developing Nepalese-issued cards,” he explained.
Nepal will also have its own ‘Nepal Payment Card’ for card payments, which will include foreign card firms such as Visa, SCT, and UnionPay as well as domestic card providers.
In what year will the national switch be constructed?
Because the government is taking an active interest in the creation of the national switch through monetary policy and the federal budget, the company Nepal Clearing House Limited reports that its work is progressing quickly.
Since building of the necessary infrastructures for cards, non-cards, and national payment cards is nearing completion, the clearing house anticipates that the system will be fully operational by the end of the current fiscal year. Through the use of the ‘Connect IPS’ and the ‘NPI’, NCHL, a payment system operated by NonCard, has been offering services.
It has been stated that some more infrastructure would be added to this system, and that it will be built in accordance with international standards. According to Nilesh Man Singh Pradhan, Chief Executive Officer of Nepal Clearing House Limited, work is already underway to establish the technology, infrastructure, switches, networks, and connecting systems that will be required for the card to function properly.
Moreover, he stated that work on the third component, the Nepal Payment Card, is progressing at a rapid pace, and that the infrastructure for the nationwide switch will be soft-launched in the near future. “We have been delivering various non-card services on our own dime for some time. In addition to the construction of the essential infrastructure, technology, and switch for the Nepal Payment Card, some infrastructures are also being added to the non-card infrastructure. We want to complete all of the work by the end of the current fiscal year.”
It is necessary to improve the privacy and technological features of the system.
Because the government of Nepal, as well as banks and financial organisations, have made significant investments in the development of the national switch, it is expected that all of the world’s leading payment criteria would be utilised in the process. It is anticipated that the number of cyber assaults on banks and financial organisations in Nepal will reduce as a result of this.
According to reports, a stringent security system in accordance with international security standards will be implemented on the premises. It is stated by the NCHL that no matter how robust the system is, new types of cyber-attacks can develop, and as a result, the possible dangers will be examined on a regular basis.
This will be the one website where all of the e-commerce for the entire organisation involved will be conducted. Other than their own companies’ data, institutions linked with it will not have access to the data of any other companies. It is claimed that, upon the completion of the countrywide changeover, all transactions conducted through the electronic payment system will be kept confidential by the system. There will be no access to this system even by the Nepal Rastra Bank, which will transmit the essential information to NRB directly.