connect IPS ePayment System Go Digital Go Cashless

connect. IPS e-Payment System Go Digital, Go Cashless Benefits for Nepal Neelesh Man Singh Pradhan CEO, NCHL 2 nd May 2020

Agenda Digital Ecosystem and Cashless Society Digital Payments Indicators How does it benefit? NCHL Role – Nepal’s Cashless Journey

Digital Ecosystem & Cashless Society Digital Ecosystem Business Process/ Services Banking & Payments Telecomm unication Cashless/ Less Cash Society Cashless society is an economic concept or state where the financial transactions take place through transfer of digital information instead of physical banknotes or coins.

Digital Ecosystem & Cashless Society Payment Instruments Transaction Value Vs Volume Cash Mobile Wallets/ Stored Value Mobile Banking Internet Banking Cards (Debit/ Credit) Value Faster Payments (connect. IPS) Volume Value Vs Volume ACH Cheques RTGS/SWIFT

Digital Payments Indicators Inclusion • Number of customers enrolled. • Eg. No. of cards or mobile banking issued Transactions • Volume and value of transactions • No. of active customers Services • Onboarding of service providers/ business • What product or service can be purchased? Impact • Contribution towards economy • Impact on GDP

Digital Payments Indicators Currency In Circulation - GDP Ratio Norway Sweden New Zealand Denmark South Africa Brazil Chile Canada Indonesia UK Australia Turkey Korea Israel US Singapore Russia China Taiwan Eurozone Switzerland Thailand India Hong Kong 1. 5% 1. 8% 2. 3% 3. 4% 3. 6% 3. 7% 4. 1% 4. 2% 4. 7% 5. 4% 5. 7% 7. 4% 8. 5% 9. 0% 9. 3% 9. 4% 10. 1% 11. 4% 12. 5% 14. 7% 0. 0% 2. 0% 4. 0% 6. 0% 8. 0% 10. 0%12. 0%14. 0%16. 0% * Source: Central Bank Bulletins – 2017 Indicator for Impact § Measuring informal sector. § Shift toward digital transaction. Nepal Currency-GDP Ratio FY 2011 12. 1% FY 2012 13. 1% FY 2013 13. 6% FY 2014 13. 7% 14. 9% FY 2015 FY 2016 17. 0% FY 2017 16. 3% FY 2018 16. 3% 0. 0% 2. 0% 4. 0% 6. 0% 8. 0% 10. 0%12. 0%14. 0%16. 0%18. 0% * Source: NRB Apr 2019 Quarterly Economic Bulletin 9. 6% 2018 8. 1% 2011 Global Average of Currency to GDP Ratio (Boston Consulting Group – 2018)

How does it benefit? Economic Perspective • Reduction in Cash-to-GDP ratio – Savings on producing currency notes. • BCG (2019) estimates that a move to a cashless model would add about 1 percentage point to the annual GDPs of mature economies and more than 3 percentage points to those of emerging economies. – Due to increase in velocity of value transfers. • Increased financial transparency – could be a tool to fight corruption • Efficiency in reporting and reconciliation and better monitoring of the movement of money

How does it benefit? Customer/ Service Perspective • Eliminates business risks associated with cash (eg. theft, counterfeit currency) • Increased convenience for the customers and service providers. • Availability of services (commercial and non-commercial) are getting on -boarded on digital platforms. • Improves transaction speed. • Now becoming necessity during current pandemic situation, with huge opportunity to continue digital services.

NCHL Role – Nepal’s Cashless Journey NCHL Product/ Service Roadmap Consolidated APIs for transaction routing between payment systems and overlaying services. (45) Processing of MICR image based instruments including cheques, drafts, warrants (69) Gateway for ACH system for transaction processing of single and bulk RTGS (hosted transactions at central bank) (direct credit/ (33) direct debit) (93) Real-time retail payment system for bank account based transactions through alternate channels (82)

NCHL Role – Nepal’s Cashless Journey NCHL Approach Support NPS Implement & support SIPS based NPS. (Refer to NPS Development Strategy, Strategic Plan and Retail Payment Strategy of NRB) Hosted Model Hosted model for central infrastructures and participant systems thereby reducing the capital expenditure for the industry. Reinvestment Principle New systems implemented under re-investment principle from revenue/ cash flow of previous systems. Integrations Provide online/offline integrations for NRB, BFIs, other participants including service providers. Overlaying Services Additional facilitations to typical non-conventional service providers (creditors) for overlaying services Collaboration Collaborate with BFIs, PSPs, PSOs, and other institutions for ecosystem development

NCHL Role – Nepal’s Cashless Journey Non-Cash Transactions (NCHL Systems) Non-Cash Transactions Value in Billions Non-Cash Transactions Volume in '000 16, 873 64% CAGR 10, 445 5, 336 6, 547 15, 515 69% 11, 566 7, 054 239 524 69/70 70/71 71/72 72/73 73/74 74/75 75/76 429. 4 73/74 52. 2 74/75 Payout Data up to Chaitra 2076 48. 0 75/76 Revenue Collection 1, 224 2, 761 2, 122 3, 605 68/69 69/70 70/71 71/72 72/73 73/74 74/75 75/76 76/77 Go. N Non-Cash Transactions (Value in Billions) Go. N Non-Cash Transactions (Volume in '000) 5. 3 7, 498 5, 440 7, 322 2, 687 68/69 9, 220 CAGR 453. 7 81. 7 76/77 180. 0 160. 0 140. 0 120. 0 100. 0 80. 0 60. 0 40. 0 20. 0 - 166. 3 131. 2 48. 4 3. 1 73/74 0. 4 74/75 Payout 75/76 Revenue Collection 2. 1 76/77

Thank you