Despite this realization, however, Nabil didn´t feel the pressure to diversify its service immediately, as the competition among commercial banks in those days was not as rife as it is today.
But as time went by, some high-ranking officials of the bank started becoming emulous of the card services being provided by banks abroad. "We were not being envious of them. We were just concerned about why only Westerners should have the privilege of using those pieces of plastic," Binay Kumar Regmi, who used to and currently heads the card section of Nabil Bank, told myrepublica.com, reminiscing about the old days.
This sentiment wouldn´t remain confined among a few officials in the bank, and it soon found its way into the board room of the company. In June 1993, Nabil finally decided to act on that sentiment and started issuing its own credit cards, marking the advent of plastic money in the country.
Within the next one year, the bank was able to issue around one thousand cards, mostly to people belonging to the "elite class." But apart from the crème de la crème of society, the chances of others laying their hands on this payment tool were rare, primarily because the selection criteria used by banks for handing out cards were so stringent.
First of all, clients applying for the card needed to have a strong financial background. On top of that, it was also mandatory for the “wannabe credit-card holders” to have an account in the bank. "Only people who had a sound balance were issued cards," Regmi said, without revealing how much amount was considered “sound” back then by his bank.
Nabil may have been the forerunners, but close on their heels followed another. In fact, Nabil´s monopoly was to last less than half a year, because Himalayan Bank started issuing credit cards in November of 1993.
Standard Chartered Bank Nepal also started issuing credit cards in April 1997. But it was not content with merely climbing aboard the credit-card bandwagon. Within eight months of penetrating the market, it created a tectonic shift in the sector, by issuing cards to non-account holders. In other words, no cash guarantees were required to get credit cards from the bank.
This policy instilled confidence among the not-so-high net-worth individuals who also wanted to use these cards but who had been barred from doing so by the banks. The sluice gates had been pried free. And with that, to stay in the game, Nabil and Himalayan were forced to follow Standard Chartered´s suit.
Today anyone earning a minimum of Rs 8,000 can apply for a credit card that has a credit limit of at least Rs 15,000. Although only a handful of banks issue these cards and although their interest rates are quite high--varying from 2.25 percent to 3 percent per month, depending on the bank--the credit card sure has given some respite to the many who face a cash crunch every now and then. Around five banks, including Himalayan Bank, Laxmi Bank and Nepal Investment Bank, have issued around 30,000 credit cards in the country.
The convenience provided by cards had proved itself a bankable quality and soon banks also started issuing another form of cards--debit cards. And with that, the floodgates were now lifted off their hinges. These cards were first introduced in the country by Nepal Investment Bank in September 2003. In less than a decade, around 55 different commercial banks, development banks and finance companies have issued around 550,000 units of these cards.
The introduction of these cards has not only made it possible for the general public to withdraw money round the clock, but has also made shopping a much more convenient affair. To encourage the use of plastic when shopping, instead of cash, around 2,500 card-swapping point-of-sale terminals have been installed so far in various shopping centers around the country. And this effort seems to be paying off.
According to Nabil, which has issued more than 60,000 debit cards so far, retail purchase now makes up 15 percent of debit card transactions, while the rest goes to withdrawing money from ATMs. This figure used to hover at around three percent when the bank first started issuing debit cards in 2004. In the case of credit cards, retail purchase now makes up 75 percent of the total transactions.
"As people get used to the plastic money (both credit and debit cards), the usage of these cards for the purpose of making purchases will gradually go up, reducing cash transactions," said Sudhir Sharma, head of Standard Chartered Bank Nepal´s credit card and personal loan section. He´s not overstating the case either. With the public now having gotten so used to these cards, using them is no longer just about emulating foreigners. Plastic is well on its way to becoming the only preferred currency of convenience.
rupak@myrepublica.com
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