More than a year after Nepal Clearing House launched the first phase of the National Payment Switch, it has not been able to introduce the second phase.

“The second phase of work has been delayed,” said Guru Prasad Poudel, executive director of Nepal Rastra Bank and chief of the payments department.

The second phase of work includes establishing a switch for the card payment settlement inside the country.

A global bid was invited and it is in the review phase, Poudel said.

It requires documents and international bidding on security, switch and card to establish a national card system.

Around a dozen bidders showed their interest and their technical and financial evaluations are being done which is getting delayed, he said.

The company has not reported any issues related to technical problems it has faced, according to Poudel.

“Once the evaluation work of the international bidder gets completed, it will not take time,” said Poudel.

Currently, domestic Visa and MasterCard transactions are switched through international payment gateways and the cardholders are charged in dollars per transaction.

But with the implementation of the national payment switch, the card payment switch will be made inside the country which will reduce the charges and make transactions faster and more convenient, the company said.

“We rolled out the first phase of retail payment switch under National Payment Switch using the system developed by us, but to roll out the second phase, we need to procure the system through bidding, which we are finalizing,” said Neelesh Man Singh Pradhan, CEO of Nepal Clearing House, a company involved in multiple payments, and clearing and settlement systems.

The banking and financial institutions also need to integrate the system card payment switch, Pradhan said.

“With the card payment switch system built in the country, the banking and financial institutions will provide Nepal paid cards instead of Visa, Master and Union pay cards which keeps the customer's data within the country and also helps in reducing the issuance and service charges of the payment cards,” Pradhan said.

Once the final selection of bidding companies is done, the company will start working with the technical partners and then, a date for the start of the second phase can be finalized.

The central bank handed the work of establishing and operating a national payment switch and operating a national payment card to Nepal Clearing House Limited (NCHL).

NCHL has 10 percent of the investment from Nepal Rastra Bank and 90 percent from other different commercial banks. The company needs to submit a progress report and any problems that occur to the central bank, said Pradhan.

The first phase of national payment switch came into operation in November 2021 by establishing a retail payment switch with Nepal Clearing House beginning service after getting the operational approval from Nepal Rastra Bank.

The payment gateway brings together banks and digital payment vendors, allowing them to transfer money. As part of the first phase, 29 banks (now 22) and financial institutions have been affiliated to the national payment switch.

Among those joining the system are 18 commercial banks, five development banks and six finance companies.

Payments made from bank accounts, e-wallets and quick response (QR) for retail transactions, except cards are included under the first phase.

Under this system, payment equipment including Nepal-Pay QR and Network QR as per Nepal QR Standard, Direct Debit Request-To-Pay and E-Mandate equipment, inter-connection between wallets, inter-connection through biller gateway for different payment and PSO settlement are available.

Being the prime infrastructure for retail payment, the switch provides real-time and non-real-time services and open banking API (application programme interface) which permits banks, financial institutions and non-banking institutions to share financial information with one another.

Nepal Clearing House has gone into service according to the directions provided by the central bank for quick response (QR) interoperability and service interoperability.

There are a total of 27 payment service providers (PSPs) and 10 payment system operators (PSOs) in the country.

The government has opened its doors to foreign investors to participate in Nepal's digital payment system under a recently-amended policy.

The revised guidelines issued on January 5 by the central bank allows foreign direct investment in payment service providers (PSPs) and payment system operators (PSOs) of up to 15 percent of the total capital.

Nepal Rastra Bank has also allowed PSPs to merge under the new policy. The central bank moved to increase the capital requirement for digital service and system providers to ensure that they have adequate cash resources.

The country made electronic payment transactions worth Rs4.14 trillion in the month of mid-December to mid-January, increasing from Rs3.69 trillion from the previous month of mid-November to mid-December.

The real time gross settlement increased to Rs2.70 trillion in the month of mid-December to mid-January from Rs2.43 trillion in the month of mid-November to mid-December.

The automated teller machine (ATM) transaction increased to Rs77.84 billion in the month of mid-December to mid-January from Rs75.22 billion from the month of mid-November to mid-December.

The wallet transaction increased to Rs18.26 billion in the month of mid-December to mid-January from Rs17.73 billion from the previous month of mid-November to mid-December.

The quick response (QR) transaction, however, declined to Rs17 billion from Rs19.34 billion in the month of mid-November to mid-December.