Banking has never been so easy

KATHMANDU, APR 13 -

Banks are getting tech-savvy, cards (debit/credit) are replacing cash in people’s wallets and mobile banking is taking financial services to the unbanked mass.

According to the Nepal Rastra Bank (NRB) data, banks and financial institutions (BFIs) have distributed a total of 3.02 million cards—2.99 million debit cards and 33,868 credit cards. In the 13-month period since January 2012, banks issued 333,200 debit cards—meaning 855 debit card issuances every day on an average.

Thanks to banking and telecommunications services convergence, fund transfers and payments through mobile phones are now possible in Nepal. Mobile banking and branchless banking are the latest buzzword in domestic financial market.

Even in mobile banking, there has been major advancement. With the introduction of “Fonepay”, a service offered by F1 Soft International, inter-bank fund transfers and merchant payments have been possible through mobile phones. “Fonepay’ also enables receiving remittance through mobile phones.

“We have partnered with 37 banks and financial institutions for providing mobile banking service,” said F1 Soft Chairman Biswas Dhakal, adding nine banks are already involved inter-bank transactions, while rest of the clients will also get this service from May 1.

Sunrise Bank is one of the banks partnering with F1 Soft. “We have partnered with F1 Soft for inter-bank fund transfer,” said Anish Tamrakar, head of the bank’s card division. “This will help customers of different banks to make transactions through mobile phones,” he said, adding the bank expects to start the service by April.

Hello Paisa is another company that has enabled banks to provide mobile banking services. The company helps bank clients in paying bills, sending/receiving money within Nepal, receiving money from abroad, and purchasing airtime for their mobile phones or making merchant payments.

These are some examples of how technology is changing the face of banking and has enabled rural people to get banking service.

Difficult topography and limited availability of resources and infrastructure in rural areas make it virtually impossible for banks and financial institutions (BFIS) to provide their services through conventional banking. And, it is where mobile banking, branchless banking and smart cards technologies come handy for BFIs to expand their services.

Ever since the country saw adoption of the core-banking system—which enables banks to provide any branch banking service—in 1990s, there has been a massive transformation in the way banking is done in Nepal. “Now, banking has entered into the phase of cashless banking,” said NIC Bank CEO Sashin Joshi. “Although it is still in its infant stage, this will take a massive leap in the next five years.”

Payment of utility bills through mobile phones is one example of how banking has changed. Just before the emergence of mobile banking, branchless banking service through Point-of-Sales (PoS) machines became popular rural areas. Now, almost all banks have started the branchless banking service. Mobile banking is also a part of branchless banking which takes place through mobile phones. Both branchless and mobile banking services have enabled rural people to make banking transactions even without their physical presence at a bank branch.

In 2011, Siddhartha Bank introduced smart card for employees of the Food for Work Programme of the World Food Programme. It was the first electronic cash delivery system. Under this facility, each worker were given a smart card storing personal identity details which enabled beneficiaries to receive food ration and cash for their work.

Nabil Bank (then Nepal Arab Bank) was the first to introduce credit cards in Nepal. Himalayan Bank then introduced ATM card service for the first time in 1995. Use of debit/credit cards is increasing with the rise in the number of BFs. People are avoiding withdrawing cash through cheques. Himalayan Bank CEO Ashoke Rana said total annual ATM transactions stand at Rs 7 billion.

Debit card uses would not have grown to this level without the contribution of Smart Choice Technology (SCT), which started in 2001. SCT launched the shared services network among BFIs, enabling people to withdraw cash from ATMs of any BFI in the network.

However, the number of debit cards account for just 28 percent of total deposit accounts with BFIs. There are a total of 10.76 million deposit accounts with BFIs as of mid-February.

“The number of debit cards issued is still low compared to the deposit accounts with BFIs,” said Joshi. Besides withdrawing deposits, debit/credit cards are also being for making retail payments. However, banks say there has been limited use of cards for shopping purposes. “This is due to the lack of awareness among people,” said Pankaj Rana, head of Kumari Bank’s card division.

For making payments, cardholders have to swipe their cards at PoS machines. But Rana sees the “emergence of technology that enables card transactions without swiping in the next five years”. With banking services’ availability in the electronic medium, hacking, theft and phishing have emerged as major threats to electronic transactions.

In the last one and half years, several cases of theft of money from depositors’ accounts emerged. And in most of the cases, fraudsters exploited weak security system of banks in collusion of bank staff to steal deposits.

In the most recent incident, cash was withdrawn from Nepal Investment Bank by using fake ATM cards. Similar case was seen at Himalayan Bank a few months ago. In both the cases, employees at card division were found involved in the theft.

But banks have started adopting security measures against ATM frauds. To avoid the possibility of bank staff getting involved in ATM fraud, Sunrise Bank has adopted a measure which requires cardholders to change their pin codes first to start using the service. “We have already introduced this system for new customers and will soon issue a notice to old customers to change their pin codes,” said Tamrakar of Sunrise.

With Himalayan Bank already introducing chip-based ATM cards replacing magnetic cards, other banks are also making preparations to adopt the system. Kumari, NIC, Sunrise and Siddhartha banks are all set to go for chip-based cards. Amid increased threat in electronic banking, the central bank recently introduced an IT policy, which seeks IT system audit, multilevel security for information, and IT back-up and recovery policy, among others.

What Bankers say

Standard Chartered Bank Nepal

Sudhir Sharma

Head of Card Division

Standard Chartered Bank Nepal offers the widest range of debit and credit card services. According to Sudhir Sharma, head of the bank’s card division, it offers card services such as Nepali-rupee Visa/MasterCard credit cards, prepaid NPR/USD cards, USD credit cards, Instant buy cards and Visa debit cards. The services are further divided into various categories. The bank, which started credit card service in 1997, is the number one credit card issuer with 12,000 credit cardholders so far, Sharma said. The bank has 45,000 debit cardholders. “With our wide product range, we are encouraging customers to make purchases using cards,” Sharma said. “This is why we have made it mandatory for our credit cardholders that they cannot withdraw cash more than 60 percent of their credit limit.”

The bank has 23 ATM counters across the country. Sharma said the bank also plans to come up with mobile banking service soon. “Since we want to make this service secure and efficient, so it may take some time,” he said.

Sunrise Bank

Anish Tamrakar

Head of Card Division

Sunrise Bank, which started card service in 2008 with SCT and in 2010 with Visa, has 57 ATM outlets across the country. According to Anish Tamrakar, head of the bank’s card division, the bank has so far issued 70,000 debit cards and the number is growing. Besides its own network, the bank has tie-ups with SCT and NPN, a network of Nepal Investment Bank Limited. “Our cards can be used worldwide,” Tamrakar said, adding the bank also plans to introduce credit card service in the next eight-nine months. Besides, the bank also offers mobile banking services. It is all set to partner with Fonepay to offer inter-bank fund transfer facility. “The service might launch by April-end,” Tamrkar said.

Kumari Bank

Pankaj Rana

Head of Card Department

Kumari Bank is one of the first banks to offer debit cards in the domestic market. The bank started issuing debit cards in 2005, and has so far issued 85,000 such cards. The bank has 37 ATM outlets across the country and is a member of the NPN network. “Of the total number of its accountholders, 70 percent hold debit cards,” said Pankaj Rana, head of the bank’s card department. Under its “M-banking” facility, the bank has been offering “Kumari Mobile Cash” service since 2010. The product enables even those who don’t have an account with the bank to make transactions through mobile phones. “Kumari Mobile Cash” also offers services like utility payment, bill payment and transfer of funds, among others. What makes this product attractive is customers can easily top-up their balance and use as per their convenience. The bank is soon coming with mobile banking service. It has tied up with Fonepay to offer inter-bank fund transfer service.

Siddhartha Bank

Ashish Sharma

Head of Payment Solution

Within three years of its entry in the domestic card market, Siddhartha Bank has become one of the prominent players. The bank offers a full-fledged card service, with can be availed within Nepal as well as abroad. The prominence of the bank is evident with the fact that it has issued around 50,000 debit cards, 500 credit cards and around 500 international cards. The bank also issues prepaid cards and has 50 ATM outlets across the nation. “Since we have partnered with both Visa and SCT, our cardholders can easily withdraw money from almost all banks ’ ATM counters,” the bank’s Payment Solution head Ashish Sharma said. The bank also provides mobile banking service named “m-connect”. The bank has tied up with Hellopaisa, which enables inter-bank transactions. “We started late, but we are going aggressively,” he said.

NIC Bank

Yunesh  Puri,

Head of Card Department

NIC bank started the card service in 2004 in partnership with SCT. In 2009, the bank started its own ATM service. According to Yunesh Puri, head of the bank’s card department, NIC has so far issued around 53,000 cards under SCT and around 33,000 cards under Visa. “We have around 150,000 accountholders. Going by this figure, the number of NIC card holders is pretty good,” Puri said, adding the bank plans to introduce credit cards as well. “Hopefully, we will come up with credit cards within the next fiscal year,” he said. Under mobile banking, NIC SMS banking facility which enables customers to check account balance. Puri said the bank is under testing phase for a full-fledged mobile banking service which will offer utility payment and recharge card purchase, among others. Puri said NIC plans to concentrate on rural areas with its “m-banking” aggressively.

Source: The Kathmandu Post