Nepal Rastra Bank (NRB) is exploring the promotion of mobile banking transactions that do not rely on internet services, citing increasing risks associated with online payment channels.
Highlighting the significance of Unstructured Supplementary Service Data (USSD), the NRB stated that this system would enhance the financial safety of digital payment users. Amid rising global cybersecurity threats, the central bank is working to expand USSD services, already utilized by several domestic firms.
USSD allows financial transactions through basic mobile phones without internet connectivity, utilizing a protocol from the Global System for Mobile Communication (GSM) network to connect with payment service providers.
According to the NRB, USSD is among the most widely used offline payment methods, promoting financial inclusion for marginalized and underbanked populations. However, a recent study report revealed that the limited USSD platforms currently in operation are often not user-friendly and can be costly.
Nepal ranks 109th on the National Cyber Security Index, highlighting its vulnerability to cyber threats. Recent incidents include data theft from online platforms, ATM fraud linked to compromised systems, and breaches involving SWIFT transactions.
In response to the growing cybersecurity challenges, the NRB’s Fourth Strategic Plan (2022-2026) emphasizes promoting digital payments and fostering innovation as key objectives for its Payment Systems Department.
The study also calls for improved coordination among the NRB, Nepal Telecommunications Authority (NTA), and USSD service providers to enhance financial inclusion. It suggests that mandating telecom operators to enable USSD gateways for banking services could boost adoption.
Despite the potential for digital payment growth, the NRB identified several challenges in implementing USSD payment systems. These include navigating regulations from various authorities (financial, telecommunication, and competition regulators) and ensuring users have the necessary literacy and awareness to operate USSD menus—particularly in rural areas where educational resources may be limited.
