Interoperability in Nepal's Banking System: What It Means for You

A few years ago, sending money from your bank to a friend's wallet at a different provider was often impossible. Here's the plain-English story of how Nepal's National Payment Switch quietly fixed that — and where the cracks still remain.

Before interoperability, banks and wallets in Nepal operated as separate islands. The National Payment Switch (NPS) now links them through one shared hub.

What "Interoperability" Means in Plain Terms

Interoperability is a technical-sounding word for a very simple idea: different systems being able to talk to each other. In banking, it means that it shouldn't matter which bank, wallet, or card network you use — you should be able to send money to someone on a completely different platform as easily as sending it to someone on your own.

Think of it like phone networks. You don't need to be on the same mobile carrier as someone to call them; the networks are built to connect to each other. For most of Nepal's early digital payment history, banking and wallets didn't work that way. Interoperability is the ongoing project of making them behave like phone networks instead of separate, disconnected islands.

The Problem Before Interoperability

In Nepal's earlier digital payment landscape, most banks, wallets, and card networks built their own closed systems. A payment service provider like a wallet app, and a payment system operator like a bank's switch, each ran on their own infrastructure, and unless two systems specifically agreed to connect, their users simply couldn't transact with each other directly.

In practice, this meant that sending money from your bank account to a friend's wallet — if that wallet wasn't linked to your specific bank — often wasn't possible at all. Users frequently needed multiple wallets just to pay different merchants, or had to withdraw money as cash and redeposit it elsewhere to move funds between unconnected systems. Every new payment provider that launched added another closed loop to an already fragmented landscape, rather than making things simpler.

How NRB and the National Payment Switch Solved It

Nepal Rastra Bank's answer was to build shared, central infrastructure rather than asking every provider to strike individual deals with every other provider. That infrastructure is the National Payment Switch (NPS), operated by Nepal Clearing House Limited (NCHL) under NRB's mandate, with its first phase — the Retail Payment Switch (RPS) — going live in 2021 with dozens of banks and financial institutions joining at launch.

Rather than forcing every bank and wallet to build one-to-one connections with each other, the NPS works as a shared hub: banks, financial institutions, and licensed payment service providers connect once to the switch, and that single connection lets them reach everyone else on the network. This is delivered through a few key components:

The building blocks of Nepal's interoperable network

• NEPALPAY QR: a shared QR code standard so that scanning any participating merchant's QR code works regardless of which bank app or wallet you're using.
• Interbank Fund Transfer (IBFT): real-time transfers directly between different banks' accounts, without needing both parties to bank at the same institution.
• Wallet interoperability: wallet-to-wallet transfers, account-to-wallet loading, and wallet-to-account transfers routed through the National Payment Interface (NPI), so wallets from different providers can exchange value.
• NEPALPAY Request: a request-to-pay tool that lets someone request a payment from another user, who can approve it from whichever app they use.
• connectIPS: a fund-transfer and bill-payment layer built on the same shared infrastructure, letting a single login reach accounts across many different banks.

NRB's regulatory role here matters as much as the technology. Licensing multiple Payment System Operators (the companies that run the switching infrastructure, like NCHL, Fonepay, and SCT) and Payment Service Providers (the customer-facing wallets, like eSewa, Khalti, IME Pay, and Prabhu Pay) created the competitive, multi-provider market Nepal has today — but it also meant interoperability had to be actively engineered on top of that competition, rather than assumed.

Real Benefits: Sending Money Across Banks and Wallets Seamlessly

For an everyday user, the practical result of all this infrastructure is straightforward: you can generally send money to a friend, family member, or merchant regardless of which bank or wallet they use, often in real time, without cash changing hands anywhere in the process.

• One QR, any app. A shop only needs to display a single NEPALPAY QR code, and customers can scan it with whichever banking app or wallet they already have installed.
• Faster remittance delivery. Money sent from abroad can land directly in a recipient's wallet or bank account through the interoperable network, rather than requiring an in-person pickup.
• Fewer wallets needed. Because transfers can move between different wallets and banks, users no longer need to maintain five different apps just to be reachable by everyone they transact with.
• Real-time settlement. Interbank transfers through IBFT and the switch typically settle within seconds, compared to older batch-based clearing that could take a business day or more.
• Lower cost of building new services. Because a new bank or wallet only needs to connect once to the shared switch instead of negotiating dozens of individual partnerships, it's become cheaper for new, smaller providers to enter the market and still reach everyone.

Remaining Friction Points

Interoperability in Nepal is real, but it isn't complete. NRB's own technical documentation on the National Payment Switch acknowledges that not every scheme is fully interoperable with every other scheme yet — some payment system operators are connected through the switch, while others are still in the process of harmonizing their systems to reach that same level of integration.

Comparison to Other Countries: India's UPI

India's Unified Payments Interface (UPI) is often held up as the regional benchmark for payment interoperability, and the comparison is a useful one because the two systems solve the same underlying problem in slightly different ways.

The practical takeaway is that Nepal isn't trying to copy UPI outright — it's building interoperability across an already-diverse set of existing schemes, which is a more incremental path than India's single-protocol approach, but one suited to the market Nepal actually has. The planned NPI-UPI link is particularly significant for Nepal, since it would let travelers and remittance senders move between the two systems without separately holding both countries' payment apps.

What's Next for Nepal's Payment Rails

• Full card switch rollout. The National Card Switch and NepalPay domestic card scheme are expanding, aiming to reduce Nepal's reliance on international card networks for everyday domestic transactions and lower the foreign-currency costs banks currently pass on to consumers.
• Broader wallet-to-wallet coverage. More payment system operators are expected to complete integration with the shared switch, closing the remaining gaps between schemes that aren't yet fully cross-connected.
• Cross-border interoperability. The NRB-RBI cooperation on linking Nepal's National Payment Interface with India's UPI is a live, ongoing initiative, with a joint steering committee tracking progress.
• CBDC as a longer-term layer. Nepal Rastra Bank has described a phased rollout of a central bank digital currency, envisioned as a complement to — not a replacement for — the interoperable payment rails already in place.
• Clearer regulatory definitions. Ongoing policy discussions aim to settle how payment operators and providers are classified and regulated, which should reduce uncertainty for both providers and users as the network matures.

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