KATHMANDU, March 10: Banking experts and stakeholders have said that promoting digital finance system will help bring a large number of the country's population into the formal financial system.
Speaking at a talk program entitled "Digital Finance in Nepal: Understanding the role of Central Bank, Banking Institutions, Payment Service Operators and Payment Service Providers" in Kathmandu on Friday, they also urged everyone in the ecosystem to play a supporting role to build a robust digital financial system.
The event was organized by Society of Economic Journalist of Nepal (SEJON) in association with United Nations Capital Development Fund (UNCDF).
"Everybody in the ecosystem has a role to play in making digital financial system work," said Ahmed Dermish, digital financial ecosystem specialist at UNCDF's MM4P Programme. "The development of efficient electronic payment system can act as a catalyst to build such digital financial system."
Dermish also pointed out the need to change the behavior of people to get them onboard on the new system. "In order to change such behavior the product should be simple, convincing, and flexible," he said.
The Nepal Rastra Bank (NRB), the regulator of bank and financial institutions and payment service operators, expressed its commitment to create a favorable environment where the digital financial system will thrive.
"The central bank has already established separate payment settlement department and come out with policies like payment system development strategy and licensing policy for payment institution in order to regulate and facilitate digital financial system," said Padam Raj Regmi, assistant director of the NRB. "Similarly, we are in a process to introduce transaction limit for retail payment, oversight bylaws and framework and national payment gateway."
According to Regmi, the NRB has given license to two payment service providers, three payment service operators and letter of intent to 13 such firms which will offer financial services to those not served by the banking system. "Likewise, we are in process to offer letter of intent to 103 firms," he said.
Industry insiders also said the low banking penetration and advancement in telecommunication technology have set the stage ready for the digital financial system to prosper.
"The banking penetration is only 60 percent while 135 percent of the population has access to mobile phone," said Daniel D Shrestha, chief operating officer of IME Digital. "With the central bank introducing favorable policy, this is an ideal environment for the alternative digital financial system to thrive."
Anukool Bhatnagar, vice-president of Nepal Bankers' Association urged the banks and financial institutions to adopt the new technology to bring large section of the population into the digital financial system.
"Banks and financial institutions must invest in technology in order and use it for their own benefit as well as for their customers," he said.