Telecom authority and central bank announce plans to regulate digital financial service providersIn an effort to facilitate and regulate digital payment systems and businesses in the country, the Nepal Telecommunications Authority and the Nepal Rastra Bank have signed a memorandum of understanding to work jointly to introduce regulatory policies for digital financial service providers.
In an effort to facilitate and regulate digital payment systems and businesses in the country, the Nepal Telecommunications Authority and the Nepal Rastra Bank have signed a memorandum of understanding to work jointly to introduce regulatory policies for digital financial service providers.
The agreement, signed on Friday between Governor Chiranjibi Nepal and Acting NTA Director Purushottam Khanal, is the first of its kind.
As per the agreement, a joint committee has been formed, which will now study issues affecting the digital technologies and financial payment systems in the country.
The move comes to the same week reports of Chinese businesses and tourists using unregistered mobile payment platforms WeChat Pay and Alipay surfaced. Central bank authorities have now taken a step to deal with technology-based transactions, which they said they have found difficult to deal with, despite them being aware of such payment modalities.
The regulatory authorities acknowledged that there are some pitfalls in regulations of both the central bank and the telecom authority when it comes to digital payment applications and technologies, officials present in the meeting said.
“Today’s meeting was in line with broadening the scope of the regulations through a proper information sharing mechanism,” director of the central bank’s payment systems department, Tek Kumar Dhakal, said. “In terms of digital payments, the central bank and the telecom authority must act interdependently and pinpoint and measure the transactions happening through unregistered platforms.”
When asked about the growing use of foreign payment platforms used by Chinese tourists and businesses to make or receive payments of goods and services they acquire in Kathmandu, Dhakal echoed other officials and said that regulatory authorities were aware of the underground digital transactions. The newly-formed committee, Dhakal said, would now work to build a mechanism to route such transactions to the legal and financial net.
As per the central bank’s directive, the regulator must approve all outbound transactions but when payments from one foreign account to another are made through unregistered digital channels, the money technically doesn’t enter Nepal.
According to economists, the unregulated use of such platforms will have a negative impact in terms of forex earning and balance of payment accounting.
“The tourism sector is considered to have a multiplier effect in terms of growth, income and employment,” Chandan Sapkota, an economist based in Tokyo, told the Post on Thursday. “If money is paid in China via WeChat, then we won’t realise those benefits here.”
Meanwhile, central bank authorities said they are reviewing the application of SwiftPass, the chinese mobile payment technology company, which supports WeChat Pay and Alipay and UnionPay. But until the company receives the licence to operate in Nepal, the transactions via WeChat Pay and Alipay are illegal.
Officials said they also identified their own duties that require coordinated efforts and strategies to aid the government’s ‘Digital Nepal’ campaign.
“We have recognised that there is a growing need to address technical and financial issues related to digital payment systems in Nepal,” Min Prasad Aryal, spokesperson for the Telecommunications Authority, told the Post.
In Friday’s meeting, officials also discussed issues impacting digital financial services including digital fraud control mechanisms, quality of networks and other technical issues.
According to Aryal, the committee will now study digital payment systems and reach of mobile financial services, identify the issues hindering their expansion and then recommend policies, bylaws and regulations to resolve the issues.