A payment gateway is a merchant service that authorizes and processes credit card or direct payments for online merchants and traditional in-house businesses. It functions as an interface between the merchant’s website and a payment processing bank. The gateway encrypts sensitive transactional detail to ensure that information is passed securely between the customer, the merchant and the acquiring bank. The payment gateway in Nepal processes the transaction and sends all the information to the issuing bank for approval.
Once the payment has been confirmed by the bank, the payment gateway sends the approved transaction back to the merchant’s website and then the merchant informs the customer that the purchase has been successfully completed. The payment gateway in Nepal had gained popularity after the government of Nepal had promoted digital transactions instead of cash transactions to avoid COVID-19 infections.
How it works?
When a customer purchases a product or service on a website that is connected to a payment gateway, the gateway performs variety of tasks to process the transaction. Once the customer places their order on the merchant’s website, they choose to checkout or pay, and are then redirected to a payment page to enter their credit card/bank details. If the merchant is fully compliant with the necessary security standards the payment page can be generated on the merchant’s servers and the cart information is passed on to the payment application in a secure way.
The payment page where the transactional information is collected can also be generated by the payment gateway application itself. Nonetheless, the card and transaction details are gathered and stored on the secure database of the payment gateway even in Nepal.
In recent years there has been a substantial development in digital transactions with the help of payment gateways like esewa being the frontrunner accompanied by NetPay and IME pay. Online payment gateways have partnered with various banks today to ease the transaction processes. Due to which, customers of almost all of the listed payment service. Providers can buy recharge cards or top-up, pay telephone bill, electricity bill, internet bill as well as other utility bills, book domestic air tickets and many more. With the current pandemic scenario of the world due to the outbreak of COVID-19, digital payments are now at the pinnacle.
Scenario in Nepal
With respect to the country’s economy and monetary market. However even after 18 years from the point of inception of digital payment gateway
in Nepal, we are still in crawling stages whereas our neighbor India has moved significantly ahead towards cashless economy. While the system of digital transaction is undoubtedly efficient, fast and time saving, the road to the establishment of a thriving digital payment economy certainly has some legitimate challenges and concerns. Especially in a country like Nepal which is burden with its own problems.
What are the Challenges?
The overall user experience of users using the digital payment apps/websites mainly in terms of how easy and smooth it is to use dictates the number of consumers using it. User interface seems to be a major drawback as only tech savvy people feel comfortable and are more inclined towards using it. There is drastic improvement in the user interface of the payment gateway compare to the past. But it still has much room for improvement. Due to the hassle of finding their way through the difficult user interface many users opt-out and have reluctance to use the service.
The process of registering, loading balance to the digital wallet and steps for transaction is quite complicated. This has been a major hindrance in welcoming payment gateway wholeheartedly by the entire demographic. The recent integration of QR code for the transaction and payment has been a positive step towards simplifying the digitization process. Similarly, registration to these services should also be simple and one step method. Such that, the entire demographic should be easily be able to register to the service.
Digital financial transactions
The Government regulations regarding digital financial transactions have been strict for payment inside and outside the country which has been one of the drawbacks for digital payments in Nepal. The Nepal Rastra Bank has put limitations on transactions which has caused inconvenience and is the major factor contributing to demographics affinity towards cash transactions. The Government has set policies for payments like credit/debit card, internet banking, mobile banking and wallet payments. While NRB has asserted that it will promote mobile and internet transactions its proposed threshold limit on digital transaction doesn’t help its case.
The rise in the use of payment gateway mostly centralize in the major cities. While the rural area is still more accustomed to traditional cash transactions methods. The government should pay a major part in providing internet accessibility. And also, education to promote and achieve cashless economy in rural parts of Nepal. The already fragile digital payment system is more prone to be endanger through these strict regulations. As a result, it may eventually lead to the disruption of the economy. However, with the recent outburst of COVID-19, the government has temporarily eased some of its policies on digital transaction.
Slow user adoption is another one of the main challenges of mobile payment gateway in Nepal. People in Nepal are still accustom to the traditional methods of payments. They have the mentality that using cash and checks is the most authentic method of payment. Also, difference in the demographic also plays a vital role in slow user adoption. As, different generations have their own preferences of payments. Youths are more incline towards the use of digital payment systems. Whereas the older generations do not really approve of the concept of cashless transactions. Security also comes into play here as most people believe that online transactions are unsafe. Which interns puts more pressure on the Payment Gateway for zero error.
Here the payment service providers have to build trust with the demographic, educate them. And provide additional services to make them feel assured regarding their security concerns. Likewise, use of campaigns will be helpful in making people aware of the benefits of the digital platform.
Implementation of the National Payment Gateway would be a huge stride towards digitization of the National economy. National Payment Gateway is a similar to the existing Payment Gateway. But, will comprise payments to and from the government, international payments, including private digital wallets? And card transaction system under one payment gateway and will conduct regular monitoring of the digital payment system in Nepal. With this integrated system all kinds of governmental, international, private and social security transactions will be conducted digitally and monitored.
This system also has plans to distribute social security allowance. This system will greatly benefit the consumers because they can keep track of the real time payments. Also, tax reports and actual income and expense digitally. The system will deploy on September 2020. With its initial phase use for payments to the government. However, due to the recent pandemic it is suspend until further notice. When this system will implement then our country will take a huge leap towards cashless economy.
Even though digital payment gateway in Nepal came to the scene quite some time ago. It had always struggled to make a positive impact in the Nepali market. Government regulations and hesitance from the people to switch from the traditional cash payment methods. Because of, trust issue for it. But that has changed in the past couple of years with digital payments. Gaining a considerable spike especially after the Covid pandemic, where people are now more dependent on payment gateways.
No doubt Nepal is moving towards digital advancement, however, we are still lagging behind to the challenges. Overcoming these challenges will surely bring forth positive changes we wish to see towards our goal of cashless economy.