If you are into FinTech, you might already know about the upcoming Card Payment Switch of Nepal. Well even if you’re not, fear not, I’m here to discuss about it. So without further ado, let’s get into all the information about Nepal’s Card Payment Switch and its benefits for the overall economy.
Nepal’s Card Payment Switch Overview:
What is a Payment Switch?
Before getting to the main news, first, let me give you a preface of a Payment Switch. So basically, it’s a software system that connects payment mediums and financial institutions to route electronic payments. You can say, it’s the middle agent between a payment gateway and financial institutions. And that way, a Card Payment Switch does the same thing for all the card transactions.
National Payment Switch in Nepal
Nepal Clearing House Limited (NCHL) is the operator of the National Payment Switch under the initiative of Nepal Rashtra Bank (NRB). NPS does all the routing and settlement of retail transactions to ensure interoperability of card and non-card-based payments within Nepal. It includes Retail Payment Switch (RPS) for handling retail (non-card) based transactions and retail instruments, whereas National Card Switch (NCS) includes card switch and domestic card scheme. RPS includes NepalPay Instant, NepalPay QR, NepalPay Request, and such which you can see on the ConnectIPS app. It is already active from November 2021 while the card payments switch is under development for the time being.
Acquirement of NePS by NCHL
NCHl has already acquired Nepal Payment Solutions (NePS), which was the operator of VISA-based EMV cards in Nepal. NCHL has been operating national payment systems related to non-card-based infrastructures for the last 15 years, whereas, NePS has been providing card processing services for the last 11 years. This is the first Payment Service Operator (PSO) merger in Nepal. With this merger, NCHL is swiftly developing a national Card Payment Switch as well as a domestic card scheme under NPS. Now NCHL has a paid-up capital of over NPR 1.07 billion with a total reserve of NPR 1.44 Billion.
What can we expect with Card Payment Switch?
Right now, Nepalese BFIs (Banks and Financial Institutions) are using payment switches of foreign companies like VISA, Master Card, and Union Pay. So, that’s why your Debit/Credit Card comes with one of the aforementioned branding. So, we can say, Nepal is using a non-domestic intermediary for the time being with routing fees going outside of the country. And the operation fee is high which is incurred upon the bank customers, through annual card charges and such. So, having a domestic card payment switch will reduce the routing fees and make it cheaper. BFIs will provide NEPALPAY Debit/Credit cards, which will incur lesser annual charges. Plus, it will ensure the data stays within our country.
“The establishment of national payment switch infrastructure and rollout of NEPALPAY card is expected to become a significant stride in Nepal to reform and consolidate the entire payment ecosystem,” said Neelesh Man Singh Pradhan, chief executive officer of the NCHL. For this NCHL has collaborated with ACI Worldwide to pioneer payment cards in Nepal.
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Use case of NEPALPay cards
NEPALPAY cards can be then used in both ATM booths and Points of Sale, once they come into operation. Plus, currently, your Debit/Credit card switches through international payment gateways and thus, you are charged in dollars per transaction which is evident on Appstore, Google Playstore, Netflix, YouTube, Spotify, and such. So, we may finally see the billing done in Nepali Price Rupees (NPR). And that is likely to reduce the overall operational and card fees as well. In this way, it will be win situations for both BFIs and customers alike.
Nepal’s Card Payment Switch Launch and Availability
The Card Payment Switch and Domestic Cards were scheduled to arrive in Q4 of 2024 but it’s still not here. We might see it launching somewhere in 2025.
