If the amount and number of electronic money transactions are any indication, the pace of digitisation in the country’s banking sector has gained new heights.
The Royal Monetary Authority (RMA) took the digitisation initiative in 2006 with implementation of Bhutan Electronic Clearing House to verify the legitimacy of documens and in 2007 cheque truncation system was introduced to facilitate digital interbank cheque settlement.
As of 2018, cheques worth Nu 64B was cleared and the settlement time reduced substantially to a single day.
Between 2010 and 2011, the central bank implemented the National Electronic Clearing System (NECS), which made transfer of loans, salaries, dividends and other associated payments to bank accounts.
As of June this year, 647,439 transactions were made through NECS amounting to Nu 6.5B among 41 user institutions.
The National Electronic Fund Transfer (NEFT) has also allowed account holders of one bank to transfer funds to account holders of other banks at a very short duration. The RMA settles the payment in a batched manner every hour. As of June 2019, NEFT has facilitated 105,141 transactions amounting to more than Nu 187B.
Until 2009, every bank operated its client terminal like the point of sales (PoS) machines, Automatic teller machines (ATM) on stand-alone basis. With the introduction of Bhutan Financial Switch (BFS) in 2011, inter-operability was made possible.
This means that clients of one bank can use the terminals like ATM of other banks. The BFS since its introduction enabled almost 10M inter-bank ATM transactions valued close to Nu 25B, excluding 44,005 PoS transaction worth Nu 128M.
Mobile banking, which the Bank of Bhutan first initiated in 2012 and Bhutan National Bank in 2016 also gained momentum with remaining three commercial banks also launching its App later.
MBoB, according to figure from RMA has over 100,000 users and carried out more than 40M transactions valued at Nu 70B. Similarly, MPay has enabled 334,846 transactions amounting to Nu 4.3B.
However, all these mobile Apps were functioning in isolation until 2017 when the RMA launched Bhutan Immediate Payment System (BIPS), a platform facilitating inter-bank mobile banking and internet banking in real time.
“The interoperability in tandem with availability of all basic services such as fund transfer, utility bills payment, loan repayment, mobile top-ups and QR code payment among others is a big success in digitising the banking system,” RMA governor, Dasho Penjore said.
Since its inception in 2017, a total of 1.2M transactions worth Nu 10.6B has been processed through BIPS.
The whole digitisation drive was inspired by His Majesty The King’s vision to leverage technology. His Majesty has been reminding the people that being small is an opportunity that makes the country smart. Technology, according to His Majesty The King, is an indispensable tool necessary to realize this aspiration.
In the Banking sector, the governor said that His Majesty has always emphasized on digitisation as a tool to achieve economic prosperity. “We have come a long way and achieved so much in a short time. But we also have a long way to go,” Dasho Penjore said.
The interoperability is now being taken into another dimension. “Domestic electronic payment is at high standard, international payment gateway, allowing Bhutanese to receive fund transfer from third countries, was also launched during the BEFIT,” he said.
The inter-connectivity of Bhutan Financial Switch and National Financial Switch of India, the governor said would complete the cycle of interoperability within the region.
Under this project, Rupay cards issued by commercial banks in both India and Bhutan could be used in ATMs and PoS terminal of both countries. This is expected to ease travelers from both countries. The card would be launched by the Indian Prime Minister Narendra Modi during his visit to Bhutan.
The use of RUpay card could help the central Bank build the country’s foreign currency reserve.
To this effect, the RMA is required to be certified under the data security standards. The governor said that this is again expected to broaden the RMA’s scope of integrating electronic payments with other parts of the world.
GIFT and E-Pems, a perfect marriage
Barely a month since its launch, the e-Pems, which was an finance ministry’s initiative to digitise government expenditure and payment system, has recorded 17,923 transactions amounting to more than Nu 3B.
The e-Pems is expected to promote transparency and accountability. Further, the governor said that a reliable database would be available to the policy makers, legislators and institutions such as the Royal Audit Authority to examine government expenditure.
Under this system, all service providers to the government agencies should be registered and payments could be directly made to individual accounts.
There are instances where private entities have to rely on the accountants to write cheques. This would no more be the case, should e-Pems prove a success.
For example, a supplier registered on e-Pems can directly bill the government agencies and money would be electronically transferred to the individual account after verification.
However, all e-Pems transactions have to be routed through the BoB since most of the government agencies maintain their account with BoB.
The launch of Global Interchange for Financial Transaction (GIFT) in March this year has resolved this issue. GIFT enables e-Pems transaction to other banks too besides facilitating bulk payment and real time payment settlement. “This is a perfect marriage,” Dasho Penjore said.