The National Bank has closed the digital banking service called 'Orange Next', which has been operating for one and a half years, targeting regular customers who don't have time to go to the bank, those who adopt new technologies, Gen-G generation and migrant workers and customers in remote areas.

While other countries are making such services simple and easy, in Nepal, the service operation has been stopped because legal, procedural and regulatory provisions have not been made. The government has announced through the budget that it will establish a digital financial institution i.e. Neo Bank, which does not have a physical office, within this year. It is also supported by the monetary policy.

However, instead of regulating the necessary standards and laws, the National Bank has directly closed the Orange Next, which was launched by Lakshmi Sunrise Bank in the same concept. 65,000 customers opened accounts online and were doing banking transactions in Arrange Next. A deposit of Rs 17 crore was collected in it. Arrange Next, available on

mobile app, is a facility to open an account and do all banking transactions online. Although this has added a new dimension to the banking system, showing the reason why the regulatory provisions have not been made, the National Bank has instructed to stop the operation of the service, according to Lakshmi Bank and the financial technology company Phone Next. 

'We are the first bank to operate app-based online banking,' said Piyushraj Aryal, information officer of Laxmi Sunrise Bank, 'Rastra Bank is looking at various aspects including the potential risks of this product, compliance with laws. So this plan is now postponed. After understanding in detail, the National Bank gave the solution. The officials of the National Bank did not want to talk about this matter. 

Rastra Bank has given instructions to transfer all the accounts opened under 'Orange Next' to other accounts. But "Phone Next" says that it is technically complicated to transfer the account. Subas Sharma, director of Fonesoft, the parent company of PhoneNext, says that ArrangeNext is providing services to customers by relieving them from the hassle of going to the bank and filling out an eight-page long form and drawing a house map.

Instead of such maps, it is enough to put a 'location link'. This service has been launched in partnership with Lakshmi Sunrise Bank to increase financial inclusion and connect the new generation through digital means," he says. "The company has been working on it for two and a half years. This service was launched by Lakshmi Sunrise Bank on 25 January 2024.' 

Phone Next was providing 'Banking as a Service (BAS)' service to Lakshmi Sunrise Bank. It includes both technical and consulting services. Sanat Kumar Paudel, the chief executive officer of Phone Next, says that they operate a 24-hour call center and Nepali customers who are abroad often make inquiries over the phone in the middle of the night. According to him, customers of Orange Next did not have to go to the bank, because it was completely based on the 'digital-only' concept. 

According to him, customers of Orange Next did not have to go to the bank, because it was completely based on the 'digital-only' concept. In India, there are neo banks like Jupiter, Neo, Razorpay X operating. He has been providing services in partnership with licensed conventional banks.

The Reserve Bank of India has not issued separate regulations and licenses for digital-only banks. Complaints are sometimes heard that cyber attacks, customer data and savings are at risk as such banks do not fall under the direct monitoring and cyber security framework of the Reserve Bank. 

There are many large 'digital-only' banking platforms worldwide, not just in India. Brazil's Nubank is considered the most successful neo bank. Its market capitalization is over 60 billion and the number of customers is over 100 million. Founded in 2015, UK-based Revolt is planning to launch an initial public offering (IPO) by 2025. China's 'Vibank' and US's 'Cash App' are also digital financial service providers with large customer base.

In other countries like India, most of the Neo Banks have been operating in partnership with traditional banks. They do not have their own banking license. So they partner with licensed banks to hold customer deposits and provide other banking services. In this model the Neo Bank itself is not directly under the strict supervision of the regulator. If the partner bank fails or something goes wrong, the safety of the customer's money can be questioned.

Neo banks like Germany's 120six and Britain's Starling have been given a separate digital-only bank license just like traditional banks in their respective countries. To get such a license, one has to follow rules like fixed capital, deposit protection and anti-money laundering. Such rules have not been made in Nepal, but with the permission of Rashtra Bank, Bank and Phone Next have stated that they are working by making rules. 

In Arrange Next, transactions could be done only after account verification through video KYC. The company said that there is a risk that the video KYC will not be reliable with AI technology such as DeepFake, so the company is preparing to come up with a stronger solution in collaboration with AI engineers and designers. 

Arrange Next, you can open three types of accounts namely Elegant Saving, Remit Saver, Kids Saving. Innovative and gamified features like 'Save As You Pay', 'Expense Tracker', 'Personalized Notification' were available. "For example, in the Save As You Pay feature, every time an item or service is purchased through QR, the amount specified by the customer would be deposited in the flexi pot, it is like a digital wallet," said Poudel, Chief Executive Officer of Phone Next, "This service was launched with the aim of providing a gamified banking experience to the new generation." And adoption was also good. Some customers were also interested in loan facility but it was not available. The directive to stop the

service has been termed as a backward step by the Rashtra Bank by experts in the digital sector. Because, the government has mentioned in the budget statement that it will establish Neo Bank within the current financial year 2082/83. "The rural economy will be developed by expanding the reach of banks and financial institutions in remote areas," it is said in point number 327 of the budget statement, "digital, mobile and branchless banking services will be expanded." As mentioned in the budget in section 100 of the Rashtra Bank's monetary policy, it is said that legal and procedural arrangements will be made for the establishment of "Neo Bank" to expand financial access.

According to financial technology expert Vivek Rana, it is the responsibility of Rashtra Bank to see how safe the investment of savers is when banks use different applications. He says that instead of stopping the National Bank from moving forward with new concepts like Neo Bank, Digital Currency, Digital Bank, various measures should be adopted.

"There has not been a test to see whether digital-only banks will succeed in Nepal," he says, "the infrastructure needed for it has not even been built." Even if the regulatory body is to promote such new concepts, it has not even been able to make principles. He is of the opinion that banks should not run in gambling without making rules, standards and principles.

A year and a half ago, Fwansoft informed the Rashtra Bank about its product, but after months of physical monitoring, it was upset when it was instructed to stop operating the service. "Technology does not stop because legal and regulatory provisions are not made, or did we do something that should not be done?" asked Sharma, the director of Fwansoft, "If we have worked on a good idea, is it right for the regulator to stop it because there is no policy?"