If things go as planned, come this May, Indian visitors in Nepal will no longer be required to carry paper money. They can simply make payments by scanning quick response (QR) codes.

The Gateway Payment Service Private Limited, a payment service operator, is all set to begin the cross-border payment system for the first time in Nepal based on interoperable and mobile first technology.

“We are all set to launch the system after three months,” Anu Maity Shakya, marketing head of Gateway Payment Service, told the Post.

The National Payment Corporation of India (NPCI) and International Payments Limited (NIPL), the international arm of National Payments Corporation of India, have joined hands with Gateway Payments Service and Manam Infotech to deploy a unified payment interface (UPI) in Nepal.

The system will enable payments for larger digital goods and boost interoperable real-time person to person (P2P) and merchant payment transactions (P2M) in Nepal.

The UPI is a real-time payment system that provides person to person and person to merchant transactions simply, safely and securely in India.

Industry insiders say that the move would provide a great relief to the Indians travelling to Nepal because there are restrictions on using high denomination Indian currency notes in Nepal. Since December 2018, Nepal allows use of only IRS100.

The government move to ban the use of high denomination Indian currency notes in Nepal had drawn criticism particularly from the tourism industry because Indian bills were widely used in Nepal.

However, according to Nepal’s central bank, the system is currently not on a reciprocal basis or Nepalis are not allowed to make payments through Bharat-QR while travelling to India.

“We have sought permission to allow digital transactions for Nepalis while travelling to India as well. We are waiting for the response from Nepal’s central bank,” said Shakya.

The system will enable an interoperability electronic payment network between banking and financial institutions and payment service providers to transfer money from any payment service providers in India to any banking and financial institutions and e-wallets in Nepal.

“UPI’s real-time payment infrastructure will help catalyse the process of financial inclusion in Nepal and will also create more opportunities for businesses. It will help modernise Nepal’s digital payment infrastructure and bring the convenience of digital payments to citizens of Nepal,” according to a statement issued by Gateway Payment Service Private Limited.

“Our system will be enabled in the apps of banking and financial institutions and payment service providers through the connection of ‘UPI Nepal’,” said Shakya.

With the system, the customer without displaying their bank account details can make bank to bank transfers and can make payment through payment service providers by using the ID and pin number, Shakya said.

The system mainly provides security without exposing the bank account details, Shakya said. “The system will also eradicate the closed system in the Nepali digital payment service as there is no wallet to wallet fund transfer option and not easy for bank to wallet transfer,” Shakya said.

According to Shakya, to make digital payment, it requires the account number of the receiver or mobile number and it only gets sent only after a one-time password (OTP) is generated. If OTP is linked with a bank account, there are higher chances data regarding accounts can get leaked. But the UPI system which creates virtual addresses will help in making payment without displaying bank account details, she said.

Customers taking mobile banking app service or wallet service are enabled with UPI identity, and customers will create an identity and they can make payment from the UPI identity or can be sent on mobile number. “The national identity can also be created in the country,” Shakya said.

Besides Nepal, UPI system is being operated in Bhutan, Malaysia, Singapore and the United Arab Emirates by cross-border payment agreement.

In 2021, UPI enabled 39 billion transactions amounting to commerce worth $940 billion which is equivalent to approximately 31 percent of India’s GDP, the company stated.

As of now, five banks have consented to join the system, she added.

Guru Prasad Poudel, executive director of Nepal Rastra Bank, said that the system would help ease cross-border payment. This system will give the Indian currency direct access to Nepali banks, he said.

“Although we have not permitted the system on a reciprocal basis, it’s on a priority of the central bank,” Poudel said. “Nepal currently imposes some restrictions on sending money outside the country.”

The Gateway Payment Service got operator’s licence in mid-February 2021 and was the first company in the country to get cross-border payment system operator licence. The company was running an e-commerce platform for card payment to merchants directly.

Transactions through digital payment systems have grown tremendously in recent years in Nepal, and the development and expansion of digital payment related infrastructure like real time gross settlement (RTGS), interbank fund transfer, payment card, mobile wallet, mobile banking and internet banking has played a significant role in the spread of online transactions.

Digital payments during the period mid-December to mid-January, the sixth month of the current fiscal year, amounted to Rs5.14 trillion with 54.56 million digital transactions, the highest single-month digital transactions on record.