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Banking and E-payment practices in Nepal

Kathmandu, Nepal.
12 December 2004

Vivek S. Rana
Chief IT/MIS
Nepal Bank Limited

In this presentation:
E-payment: Genesis and Status
Changing scenarios in Nepalese Banking
Case studies
Key components for success and barriers to e-payment
Suggestions and moving forward

regulatory standards e. local. manual banking Driven by International policies Driven by national political e. BPR. RTGS. Profitability dictated priorities.. Risk management.g. adopt new technology among staff embers. indifferent customer service Well educated and ready to Lack of awareness about IT. users .g.Nepalese banks contents of Transformation? TO FROM Limited space and staff Large space and staff at Branches requirement due to IT Selling of existing services Enabling innovation and without much of marketing development of new product and services High costs per transaction Reduced cost per transaction Domestic.

Why do we need E-payment? ƒ Competition has been redefined ƒ Redefined Equity – Servicing globally using local – Lower transaction costs competitiveness – Competitiveness in services – Factor mobility has become more fluid – Fast and efficient services – Operational excellence. – New business synergies customer intimacy and product leadership – Branding. image building and personality – Need to move up the value chain and become better process owners .

• Electronic payment systems • CVC • Cross Boarder transactions Audit. • Cost of obsolescence • Education strategies • Profitability • Training Infrastructure and Gaps • Productivity • Job enhancement • Portfolio management • Outsourcing policies • ALM • Data Centre management • Treasury • Data base administration • Credit/Investment • Web Design and Content • Risk Management management • Internet Banking Emerging Challenges in Nepalese Banks . security and controls • RTGS for fraud prevention and • ATMS/E-cards detection • Personnel Policies • Financial implications • Recruitment • Capital adequacy • Skills/Knowledge gap • Capital investments • Industrial relations IT Policies.

Reasons for using e-payment Solutions • Expected savings on time and efficient delivery mechanism • Maintain huge floats over 20.000 (20M) in seven to eight months • Contributes to the bank deposits and increased opportunities for investments Benefits • Some other key benefits are: ¾Improved Image and Transparency ¾Cost Reduction and better cash management ¾Better Decision Making ¾Process Efficiency ¾Centralised rate contract with de-centralised delivery schedule ¾Audit Trail ¾24 x 7 Availability ¾Price / Supplier behaviour forecasting ¾Supplier performance monitoring .000.

simplicity and Interaction Design adopted confidence for mobile devices and situations Open Menu: Log-In only We are where you are when needed . Mobile Internet Banking Access.

SMS Messaging and mobile banking Delivery of SMSC Requested (BANK) Information Through SMS Bank Data Servers BANK ENTERPRISE HOST .

CURRENT PRACTICES Certification Authority Merchant Server Customer Certificate Internet Certificate Server Server approval or rejection Certificate OVERSEAS of transaction Notification of Transaction ISP Server Certificate Authorization Notification of Transaction The Bank .

. Ramesh wife also has an account – Ramesh accesses his account through e-mail from Cairo.Internet Banking – Ramesh has an account in Kumari Bank. – Though the Internet he transfers money from his account to his wife’s account.Example: Convenience Management (Internet Banking) Customer Economy ƒ Kumari Bank offer . Egypt.

Current Size • On an average of 10/12 customer opening accounts at these branches • On an average of 20/25 new accounts being opened for payment of utility bills through SMS and Internet Banking • E-payment mechanism in the Banks is expected to Expected Growth grow at least at the rate of 10 – 12% per year . e-payment/banking in India (1 of 2) • According to current survey there are around 3 banks that are offering Internet Banking services.

E.Payment in Banks in Nepal (2 of 2) • As more utility companies to form strategic alliance with the banks. E-payment cannot cerate double book keeping • Electronic transaction Act for financial institutions to boost consumer and financial institutions’ confidence • Trust in the technology . Growth Drivers • Transparency in accounting systems of enterprises. these organisations can save up to 10 per cent. At present only Nepal Telecomm • If this purchase is made online. at a conservative estimate.

• DMZ • Firewalls implementation • Leased lines to the Utility company . Case Study 1: Kumari Bank Implementation Details Specifics • A relative new entrant in the Perceived Benefits Banking industry • IT as a financial integrator • THOUGHT DIFFERENTLY ! • Levering IT for the benefit of the • Customer consistently served and customers recognized across multiple channels • Develop a market niche for itself • Attract a sizeable new depositors/customers Size of systems Deployment • SMS RISC servers. Intel servers.

Business Executive • CBS systems integration WAP deployment – GPRS Implementation/Expected Growth • Online payments. IDS and IDP • Utility bill payment through IB. • 1000 + per year . Debit card. Case Study 2: Laxmi Bank Implementation Details Specifics • A relative new entrant in the Benefits Banking industry • Average 5 accounts/day • Innovators in the IT deployment • Completely retail • Younger generation. Oracle 8 • Watchguard • SMS Find transfer (being enabled) • Fireworks • DMZ 6 port. Intel. POS • Flex Q UBS.

com and muncha. • Tele Banking (statement. ATM NABIL Bank • Cautious market approach • CBS enabled with IB services • Online payments POS. VIS master cards. VISA. ATM.com • SMS account information • ATM and debit cards Laxmi Bank • SMS account Information • WAP access support with GPRS • Online payments POS. Some More Successful Implementations • Internet Banking and alliances with Kumari Bank thamel. MC Nepal Investment Bank • Internet Banking Ltd. a/c balance) • ATM. POS .

and are better placed to take advantage of e-payment services. Insurance. Travel agencies. Rural dwellers have disproportionate access to the Internet.Key Barriers to Success: One of the most significant is the issue of access to the Internet. In developing economies. Educate the market of the perceived benefits …Product lead approach … Getting other players to join in developing a critical mass of both users and suppliers in industries like – Education. rather than demand driven – It is supply driven first to create a market. Stock Ex – associated networks Hesitancy and Lack of consumer confidence trust dealing electronically .

. MOT than one’s personal threshold. Transactional Trust in E-transactions Trust in Control Trust in Other Party Mechanism Subjective Subjective trust reason Objective trust reason trust reason Objective trust reason EXTERNAL Trustor’s Transaction INTERNAL trust Potential Gain Trust in Other Party One’s level of transaction trust should be higher Source: Yao-Hua Tan and Walter Thoen.

Way Forward: Have clear objectives Identify obstacles Take action locally .

Identify obstacles: Lack of quality/ adequate fibre optical/high speed network Large segment of the network owned by former state monopoly thereby distorting bandwidth pricing and increasing dependencies High local levies and bank transaction charges Lack of supporting structures for digital signature/ security-stamp for all judicial/ quasi judicial purposes Limited E-security knowledgeable resources in country Actions for the domestic arena: Need to upgrade telecom infrastructure Level-playing-field for bandwidth providers and telecommunication companies Competitive transaction charges for online payment services Fiscal incentives for enterprises going for e-payment adoption Removing popular misconception on insecurity in online transactions .

Clear objectives: E-payment is destined to become a way of global transaction Nepal cannot be afford to be left behind in this race Government. enterprises and Institutions have to build a chain of trust Congenial policy environment and optimal resource allocation must be ensured . Apex bodies.

but the greatest risk of all is in not participating in it .Conclusions: There is no longer choice The forces of globalization have made this ONE world and ONE economy The costs of being left out are a permanent sentence to isolation and marginalization There are enormous benefits and risks in joining the global economy.

the END is in sight” -Jack Welch . “The rate of change outside the organization is much more than the rate of change inside the organization.