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Although financial institutions offer electronic and other forms of payment services, people still preferred cash transaction, forming 63 percent of transaction volume in 2018. This is despite the value of banknotes and coins in circulation, as a percentage of GDP, has remained constant over the last three years.

Cash transaction still preferred over digital

Although financial institutions offer electronic and other forms of payment services, people still preferred cash transaction, forming 63 percent of transaction volume in 2018.

This is despite the value of banknotes and coins in circulation, as a percentage of GDP, has remained constant over the last three years.

In the payment system report, the Royal Monetary Authority (RMA) noted that the penetration and success of modern electronic payment products and services is concentrated to a large extent in Thimphu, Paro and Chukha and mostly to those citizens who already have access to formal banking channels.

The benefits of modern electronic and online payment systems, as per the RMA, are yet to reach all sections of the society and be accepted across the country. Doing so, would promote digital finance and banking in the country.

In the past, ATM and PoS of banks were operated on a stand-alone basis and customers could withdraw only cash from ATMs belonging to the card-issuing bank. However, with the Bhutan Financial Switch (BFS), a centrally hosted financial switch, interoperability of ATM and PoS transactions among commercial banks in Bhutan were enabled.

Today, there are over 246 ATMs and 779 POS terminals across the country. Of the total ATMs, more than 41 percent (101) are BoBL terminals and remaining 59 percent BNBL’s (56), T Bank (20), DPNBL (22), and BDBL (47). Of the 779 POS terminals, 84 percent (656) is owned by the BoBL.

“But deployment of ATM and POS are hugely concentrated in Thimphu, Chukha and Paro with more than 45 percent of POS and 35 percent of ATM instituted only in Thimphu,” the report states.

The report also states that despite an increasing effort of the banks to increase the distribution of stand- alone ATM terminals across the country and its wide coverage, ATM transactions authorised through the BFS still dominate the payment system (63 percent in volume terms) in 2018.

Bank wise BFS data from 2015 to 2018 show that BoBL has availed the highest number of ATM transactions (68 percent out of total BFS issuer transactions) from other banks’ ATMs.

Any bank customer in Bhutan using ATMs can withdraw cash from any other bank terminal up to Nu 30,000 to Nu 40,000 a day without being charged if withdrawn from the issuing bank’s terminal. However, certain fees are levied if the cardholder uses an ATM terminal of another bank.

From 2015 to 2018, BoBL cardholders have paid the highest amount of interchange fees amounting to Nu 43.76 million followed by BNBL cardholders amounting to Nu 15.28 million. In terms of receipt of acquirer transaction fees for acquiring other banks’ ATM transactions, BNBL has received the highest amount (Nu 21.99 million) followed by DPNB (Nu 16.27 million) despite having lesser number of ATM terminals compared to BoBL.

The report also states that on an average, one ATM terminal is serving 1,472 cards and deduced that the strategic locations of the ATM terminal played a crucial role.

Simultaneously, the PoS handled 14,979 transactions valued at Nu 45.89 million in 2018, up from 6,789 transactions valued at Nu 17.54 million in the previous year. In June 2017, PoS facility was introduced at various fuel stations mainly to promote its usage and to minimise the conventional cash-based transactions.

“Despite the effort of RMA to keep the 24X7 uptime of the BFS network, there is still decline of transaction triggered by technical issue such as network and switch error and business declined due to customer’s action of inserting invalid PIN and invalid account number,” the report stated.

The National Electronic Funds Transfer (NEFT) System, which was implemented in December 2011 facilitates fund transfer to other banks but is available only in Thimphu.

The system, according to RMA has been gaining popularity over the years especially in terms of transfer of large value fund from one bank to another participating bank.

From 2011 until 2017, most interbank transfer through NEFT has as occurred between BNBL and BoBL with T bank joining in from 2018 onwards.

The total value of interbank settlement on account of NEFT remitted in 2018 amounted to Nu 38B, an increase of 8 percent from 2017. BNBL has consistently been the highest remitter meaning that the account holders of BNBL has transferred fund out to one of the other commercial banks, majority to BoBL.

A comparative analysis conducted on the volume of transactions effected through cheque versus NEFT, NECS, POS, and BIPS from 2015 to 2018 reveal that for the first time a tipping point was achieved in 2016. This means,for the first-time in Bhutan, volume of electronic and online payment instruments surpassed paper-based instruments. 

Tshering Dorji

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