Nepalese citizens will be able to use India’s Unified Payments Interface (UPI) by May in hopes the real-time payments system will drive the country’s digitalisation of cash transactions and catalyse the process of financial inclusion.
The international arm of the National Payments Corporation of India (NPCI) – an umbrella body for retail payments and settlement systems established by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) – has announced that it is partnering two companies to roll out its UPI in its neighbour country.
The NPCI expects that the platform will ‘further the vision and objectives’ of Nepal’s government and central bank Nepal Rastra Bank (NRB).
UPI, which was launched in India in 2016, takes the form of a mobile app designed to send or receive money while eliminating the need to enter bank details or other sensitive information during a transaction. It enables P2P (person to person) and P2M (person to merchant) transactions and will allow ‘last-mile consumers in Nepal to reap the benefits of an open interoperable payments system driving immediate payment transfers between bank accounts and merchant payments in real-time’, according to the NPCI.
India has a population of about 1.38 billion, while its mountainous neighbour has about 30 million citizens. An estimated 67.3 per cent of Nepalis have at least one bank account, meaning that about one third of the population are unbanked, according to the Financial Access Report 2021 published by the NRB last August. This report also revealed huge gaps in the number of accounts between males and females, and in rural and urban areas. Male account holders outnumber females by almost two to one. There are 251 accounts per 1,000 inhabitants in rural municipalities compared to 1,930 in sub-metropolitan cities and 3,296 in metropolitan cities.
Nepal’s financial access challenges
The relatively high number of smartphone users in Nepal might serve as fertile ground for UPI’s growth in the country. Smartphone penetration reached 65 per cent in 2020 and the number of mobile-cellular subscriptions was equivalent to 131 per cent of the total population. In 2021 the number of mobile-banking users increased by 25.5 per cent compared to the previous year and reached 14 million. The number of internet banking users increased by 12.5 per cent and reached 1.2 million, according to the NRB’s most recent ‘Payment Systems Oversight Report’.
By 2021 India had become global leader in real-time payments, according to a report by the Economist Intelligence Unit, which refers to India as the prime example of the shift to modernise payments systems. According to the NPCI, UPI enabled 39 billion financial transactions in 2021 amounting to commerce worth $940 billion (about £721bn), which is equivalent to about 31 per cent of India’s GDP.
The NPCI states that it will work closely with Indian fintech Manam Infotech and Nepalese payment system operator Gateway Payment Service in order to deploy UPI in Nepal with all ‘functionalities and features’ presently available in India. “We are all set to launch the system after three months,” Anu Maity Shakya, marketing head of Gateway Payment Service, told the Kathmandu Post.
The move aims to enable cross-border remittances. Guru Prasad Poudel, NRB’s executive director, told Kathmandu Post that the system would give the Indian currency direct access to Nepalese banks. “Although we have not permitted the system on a reciprocal basis, it’s on a priority [list] of the central bank,” Poudel said. “Nepal currently imposes some restrictions on sending money outside the country.”
While the NRB makes no mention of UPI in its ‘Strategic Plan 2022-2026’, it does list a ‘digitalised financial ecosystem’ among its five priorities for the five-year period.
The central bank states that it has overseen ‘many’ payment digitalisation initiatives and aims ‘to motivate innovation and foster competition through interoperability of payment systems’. The NRB also lists seven ‘strategic pillars’, describing how effective oversight would ensure the ‘soundness’ of the payment system: ‘Regulations related to interoperability, agent network and new modes of digital payment will deepen financial inclusion, foster innovation and competition.’
FURTHER READING
‘India launches e-Rupi for “leak-proof” digital welfare payments’ – our news story (2 August 2021) on India launching acashless and contactless instrument for government welfare payments
‘State payments via QR code take step forward in rural India’ – our news story (28 August 2020) on a regional government (Andhra Pradesh) launching an initiative to promote digital payments and drive financial inclusion
In its first phase, this partnership will enable Indian consumers to make instant, secure and convenient UPI payments across various business stores in Nepal by using UPI-enabled Apps. Merchants acquired by the participating members of Fonepay Network can seamlessly accept UPI payments from Indian customers.
Bhutan has become the first country to adopt India's UPI standards for its quick response (QR) code. It is also the second country after Singapore to have BHIM-UPI acceptance at merchant locations.
The introduction of UPI in Nepal represents a monumental leap towards enhancing financial connectivity and economic cooperation between India and Nepal. By enabling secure, convenient, and instant payments across borders, this initiative promises to bolster commerce, tourism, and economic prosperity in the region.
Nepal's Fonepay Payment Service has partnered with India's NPCI International Payments to launch the cross-border payment service using quick response (QR) codes. According to officials, Nepal's central bank has introduced a retail payment switch to facilitate person-to-person transactions.
Unified Payments Interface, commonly referred to as UPI, is an Indian instant payment system as well as protocol developed by the National Payments Corporation of India (NPCI) in 2016. The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions.
(For Indian Citizens) To enable Cross-Border Payment (International Payment) in Nepal, Indian citizens need to open their PhonePe App or BHIM App or Google Pay and activate UPI International Payments feature.
Instant payments haven't taken off in the US yet. That's in part because the US economy is card-based. Banks make a lot of money on interchange fees and late payments, which means it's difficult to sacrifice profitable credit and debit cards for free instant payments.
Unified Payment Interface (UPI) was developed by the National Payments Corporation of India (NPCI) which was established by the Reserve Bank of India (RBI) and Indian Banks Association (IBA). It enables real time, person to merchant transactions, inter-bank peer to peer transactions.
Unified Payment Interface, commonly known as UPI, services are now available in multiple countries other than India. These include Sri Lanka, Mauritius, Bhutan, Oman, Nepal, France and UAE.
In Nepal, digital payments—led by mobile wallets like eSewa and Khalti—are catching on quickly. Their convenience is unparalleled; a few taps on your phone suffice for instant payments, even across long distances. Digital transactions make record-keeping and credit-building easier since they create a clear trail.
Simplified Transactions: UPI uses a UPI ID instead of bank account numbers and IFSC codes, simplifying the transaction process and ensuring a higher level of privacy. Multiple Bank Accounts: Users can link and manage multiple bank accounts from a single UPI-enabled app, making it easier to track and manage finances.
UPI (Unified Payments Interface): UPI is gaining traction as a convenient and interoperable online payment service in Nepal. It allows users to link multiple bank accounts to a mobile application, facilitating easy and instant fund transfers.
EBL is providing Speed Remittance facility through which EBL customer can remit fund from Nepal to branches of PNB India. This is an online fund transfer facility and modern concept in remittance service in the history of Nepal.
Add recipient information including their bank account in India if paying via ACH direct deposit or bank transfer. Enter your sending amount, and initiate a transaction. Pay for your transaction via your Nepal bank account or alternative methods like a debit card. Sit back and relax, and see your money travel to India!
NEPS (Nepal Electronic Payment System): NEPS is another initiative that contributes to the digital national payment gateway in Nepal. It facilitates electronic payments through member banks and financial institutions.
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