National Payment Switch to be built within next fiscal year, Nepal’s own payment card being constructed
KATHMANDU: The government has said that interconnection will be maintained in all types of transactions by constructing a ‘national payment switch’ through the budget of the coming fiscal year.
NRB has also taken the goal of encouraging financial transactions through electronic means to support the government’s Digital Nepal Framework through the monetary policy of FY 2077/78. The monetary policy states that a national payment system will be established to facilitate the payment system by maintaining records of electronic transactions within Nepal.
NRB is preparing to include electronic transactions through QR code, card and non-card in the national payment switch. Nepal Clearing House Limited (NCHL) has been given the responsibility of constructing the national payment switch.
NRB is also preparing to hand over the responsibility of payment operation, regulation and supervision to the clearing house after the construction of the switch.
Nepal Clearing House is a joint payment institution owned by Nepal Rastra Bank and a bank and financial institution. It has been providing payment related services through Connect IPS. Nepal Rastra Bank has 10 percent and other financial institutions have 90 percent shares in this institution.
What is a national switch?
All kinds of electronic payment transactions and information within Nepal will be recorded through the national switch. Currently, records and information related to electronic payments are leaked outside Nepal. Deputy Governor of Nepal Rastra Bank, Bam Bahadur Mishra, says that the payment system of financial institutions will be interconnected through a single window.
‘Once the national switch is built, transactions through ATMs and other digital payments take place in the same system. This will allow banks and financial institutions to interconnect and make payments through their own national payment cards, ”Mishra told Nepal Press.
“As a result, Nepal’s information will not be leaked, a one-stop system will be set up and money going abroad through ATM cards will be stopped,” he said.
Citing the example of the bus park at Ratna Park, Mishra said, “Every vehicle running in the Kathmandu Valley comes to the bus park at Ratna Park and goes to different destinations from there, so every payment related transaction is connected to the national switch and permission is obtained from there.”
Banks and financial institutions and payment service providers will be connected to the system, says Nilesh Man Singh Pradhan, Chief Executive Officer of Nepal Clearing House Limited. “Through the one-door system, companies that have been doing payment-related transactions are connected to the switch. We are building a system for integrated transactions by building a network for companies that have been providing payment services through cards and also to make Nepal’s own cards,” he said.
Nepal will also have its own ‘Nepal Payment Card’ for card payments and will also include foreign card companies like Visa, SCT and UnionPay.
When will the national switch be built?
As the government is looking at the construction of the national switch with interest through monetary policy and budget, its work is moving forward rapidly, says Nepal Clearing House Limited.
The clearing house expects the system to be completed within the next fiscal year as the construction of necessary infrastructures for cards, non-cards and national payment cards is in the final stages. NCHL, a payment system under NonCard, has been providing services through ‘Connect IPS’ and ‘NPI’.
It is said that some additional infrastructure will be added to this system and that it will be made of international standards. Nilesh Man Singh Pradhan, Chief Executive Officer of Nepal Clearing House Limited, says that work is underway to set up the technology, infrastructure, switches, networks and interconnection systems required for the card.
He informed that the work of the third component, Nepal Payment Card, is also progressing rapidly and the infrastructure of the national switch will be soft-launched soon. “We have been providing some non-card services ourselves. The necessary infrastructure, technology and switch for the Nepal Payment Card are being constructed, and some infrastructures are also being added to the non-card. We aim to complete all the work within the next fiscal year.”
Privacy and technical aspects to be strengthened
As the Government of Nepal and banks and financial institutions have invested very well in the construction of the national switch, it is said that all the world-class payment criteria will be used. Due to this, the incidence of cyber attacks on banks and financial institutions in Nepal is expected to decrease.
It is said that a strict security system will be built in compliance with international security standards. The NCHL says that no matter how strong the system is, new types of cyber-attacks can occur, so the potential risks will be tested from time to time.
The e-commerce of the entire entity involved in this will be done only in NCHL. Institutions affiliated with it will not have access to the data of companies other than their own. It is said that after the construction of the national switch, the transactions made through the electronic payment system will be kept confidential. Even the regulator Nepal Rastra Bank will not have access to this system and NCHL will provide the necessary data to NRB itself.