Advocate Alpana Bhandari, who holds an LL.M from American University, authored the article. The author is well-versed in Nepali corporate and banking law. The payment system in the global economy is entirely based on mobile phones. Currently, for payment purposes in Nepal and around the world, Apple Pay, Paypal and WeChat Pay, Alipay, and e-sewa or Khalti are in use.
The world is increasingly moving toward digital electronics, with more and more transactions taking place online and electronic payments on the rise. As digital wallets and mobile banking apps offer innovative solutions to conduct business more efficiently, the banking industry and technology have become increasingly intertwined.
As a result, an Internet E-Commerce Payment Gateway is a critical infrastructural component for ensuring that such transactions occur smoothly and securely over electronic networks. A payment company has been established in Nepal.
The Payment Clearing and Settlement Act of 2019 went into effect on January 1, 2019. These laws will lay the groundwork for payment clearing and settlement, with the goal of creating a secure and efficient national payments system that effectively contributes to the country’s financial stability and economic growth. Payment apps have the potential to assist the unbanked population in many parts of the world, potentially changing the landscape for the traditional banking industry.
In Nepal, it is necessary to have a payment-related business, such as pay online. According to Section 6 of the Payment Clearing and Settlement Act 2019, banks and institutions are exempt from forming a company, whereas others must.
1.WHAT EXACTLY IS A PAYMENT GATEWAY?
Mobile payment’ is a payment order sent from a digital device, such as a mobile phone.
To facilitate a payment transaction, a payment gateway is a service that transfers information between a payment portal (such as a website, mobile phone, or interactive voice response service) and the front end processor or acquiring bank.
In order for an online transaction to be processed, it must first pass through a Payment Gateway. Payment Gateways, in effect, serve as a conduit between the merchant’s website and the financial institutions that handle the transaction.
A payment gateway, in other words, is a payment processing service provided by a service provider that authorizes credit card or direct payment processing for businesses, whether they are online retailers or traditional brick and mortar establishments.
Payment gateway services can be provided to customers as a stand-alone service by the bank or by a specialized financial service provider.
Payment Methods:
For Authorization
Verifying the credit or debit card information of the buyer
Payment Clearing :
Transferring the transaction to the merchant’s bank. In this case, the consumer goes to an e-commerce website, chooses the goods or services they want, and then clicks the “purchase” button. Following that, a message is sent to the website indicating the consumer’s desire to buy and pay
Keeping track of all transactions for reporting purposes
2. What are the disadvantages of Nepal’s Payment Gateway System?
a. Cross-Border :
The law is silent on the International Gateway System. In Nepal, the Payment Clearing and Settlement Act 2019 makes no mention of a cross-border – international Gateway System. The world has shrunk to the size of a village.
The law does not specify how tourists visiting Nepal and from the international website Alibaba should pay using mobile apps such as Apple Pay, Paypal, WeChat Pay, Alipay, and what the procedures for registering foreign payment companies should be. The national payment system is the only thing mentioned in the law. Nepal Rastra Bank does not permit the sending or receiving of foreign currency in Nepal.
So, I am hopeful that if the NRB establishes a clear policy regarding international payments for Nepalese citizens, you will be able to conduct transactions using PayPal. Our own online payment services, such as e-Sewa or Khalti, will include the ability to load funds into a PayPal account.
We can simply sit back and wait for the Nepal Government and NRB to establish a clear policy regarding international payments.
b. The Dispute Resolution Mechanism is ineffective.
The appropriate resolution of the dispute is not mentioned in Section 44 of the Payment Clearing and Settlement Act 2019.Not all companies that provide payment services are banks. The bank has a security deposit on an individual. Banks are accountable in the payment system, and banks have the authority to supervise. If private companies are granted a license to operate a payment system, and the company becomes insolvent, the situation of being unable to pay may arise.The law is silent on how to deal with such a situation. The dispute resolution committee is mentioned in section 44.
The officer of the Ministry and the representative of the Auditor’s office are also members of the aforementioned committee. The technicalities of the dispute cannot be handled by such a committee.
It does not address the resolution of disputes between system participants in a payment system. If a system participant is dissatisfied with the panel’s decision, or if a dispute arises between a system participant and a system provider, or between system providers, the law does not specify how such disputes are resolved.
c. There is no mention of how cross-border payment supervision should be carried out.
The Payment Clearing and Settlement Act of 2019 makes no mention of supervision or how to gain access to payment systems that do not operate within the national system. It must be carried out within a global framework. There are connections between the various financial regulators in such cases. The safety or protection of customers’ funds in the event of a money transmitter’s insolvency is an important aspect of money transmitter regulation. General insolvency laws apply to funds in transit or held by such institutions, including funds held in anticipation of an institution’s insolvency. To put it another way, a public deposit.
For example, if the payment provider system fails and the service providers only accept money from service subscribers. It not only causes inconvenience to subscribers, but it also goes unregulated in the absence of a law. As a result, strict legislation must be enacted to protect subscribers’ rights and hold payment providers accountable.
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Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.
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