A cashless economy in the making

Majority of business houses and customers in the capital prefer the traditional cash culture

Except for some hotels and a few handicraft stores where PoS services was in operation for years, majority of merchants and customers in the country have decided to stick with the old cash payment system.
PoS (Point of Sale) is an alternative means of payment which provides people with the option to make payments through their debit or credit cards.
As a first step towards creating a cashless economy driven by electronically facilitated sales transactions, Royal Monetary Authority (RMA) launched the PoS (point of sale) system a week ago.
Earlier it was only Bhutan National Bank (BNB) and Bank of Bhutan (BoB) that provided the PoS facility and customers could do transactions through debit cards only at PoS terminals of the respective banks.
Starting July 12 any individual with a debit or credit card of any bank can make payments on any bank’s PoS terminals. This interoperability of PoS terminals is the second phase of the overall Bhutan Financial Switch project.
While the banks are optimistic about the success of PoS system, almost all the top restaurants and stores in the capital choose cash transactions rather than by debit or credit cards.
Top restaurants not very keen
Like in any other countries, Bhutanese fast-food joints although without any international franchise, enjoy significant customer base which entail volumes of cash transactions on a daily basis.
Even Swiss Bakery, the first Bhutanese fast-food joint opened in 1970 still accepts only cash even from tourist customers. “We don’t have any experience at all on how to manage the card payment system,” said Yeshey Choden, an employee of the four-decade old restaurant.
Yeshey also said, “cash is convenient and we don’t have any plans to set up the card payment system”.
One of the popular hangout places in the capital, Art Café, ranked number five from 41 restaurants in Thimphu by Tripadvisor.com also prefers cash to card payments. The café manager Chuki Gyaltshen said her customers are usually tourists and localities who normally pay in Ngultrum or US dollar and the shop has no plans to adopt the PoS system at all. Art Café, she said, earns about Nu 15,000 a day and transactions are all in cash.
Another famous food joint in town, Karma’s coffee rated second best in Thimphu, do not entertain bill settlements through cards. The restaurant caters to an impressive number of customer including tourists but checks are taken only in cash.
The commercial banks plan to target major grocery stores, corporations and fuel stations among others to set up PoS systems. However, some major departmental stores still carry out sales transactions by cash.
My Mart’s manager Yogita Subba said there was no need for PoS as BoB has an ATM inside the building. Therefore, transactions are done in cash as customers need to withdraw cash to make payments to the store.
A merchant fee charged by the banks for every transaction also discourages merchants and vendors to take advantage of the technology.
Yogita said, the banks instead of charging the customer’s account, charges certain amount against the mart for every transaction which is an overhead expense for the company. “So, cash is much convenient and better”, she said.
Talking to The Bhutanese, a finance expert said, “What many Bhutanese businessmen don’t seem to understand is that most customers who use cards especially credit cards will spend more, buy extra or bigger product than the one they would buy using cash”.
An expatriate in the capital said, “its one thing for a momo shop or street stall to accept cash only, but when a place is charging USD 10 or more for entrees and offering wine by the bottle, not taking credit or debit cards seems downright inhospitable”.
One of the departmental store owners in Changangkha area said the PoS system was unheard of in his shop. “I am not aware of it and nobody told us anything about it”, he said. The owner said cash is more convenient and even payments by cheques are a hassle.
A banker said the drawbacks are mainly due to lack of understanding of cash policy, lack of clarity in communicating content of policy, resistance due to prevailing cash culture, techno-phobia and infrastructure Lag.
Public utility companies and service providers
Speaking at the PoS launch on July 12, the finance minister, Wangdi Norbu, said the launch of the Point of Sale system would help achieve the government’s objective of improving its services towards the people. Lyonpo also reiterated on Lyonchen’s order that the government had instructed most of the organisations and the municipal offices that deal with cash transactions to set up point of sale terminals.
In the capital, 78 PoS have been installed at Bhutan Oil distributor (BoD) located at Motithang, several public utility companies, major hotels and handicraft shops among others.
A week after the launch, the PoS terminal at BoD outlets hardly elicited any interest from its customers. BoD officials said, a single day’s transactions at the fuel station works out to a value of more than Nu 0.6mn while the Lungtenzampa BoD takes in more than a million Ngultrums.
In the last seven days, the total transacted amount through the PoS terminal at BoD came to a petite Nu 4000. “Sometimes there are no customers at all for the whole day who actually opts to settle the bill with an ATM card”, said Tshering Wangmo of BoD.
Rinzin, a taxi driver in town who fuels his car for at least Nu 450 a day said it is much convenient to pay in cash and said it’s a hassle to process the payment through cards. The total cash transaction he makes in a month, just for fuel works out to more than Nu 15,000.
However, a corporate employee said “the PoS system is an ideal initiative by the banks. I needn’t drive around anymore to withdraw cash for fueling my car or buying supplies at a store”.
BPC conducted a trial run but currently haven’t implemented the PoS system as yet. BPC’s customer service division manager Tempa Dorji said, “we will be implementing it soon after the infrastructure and system is in place”. He added that the company needs to first wrap up its activities carried out through the old system in order to avoid confusions within the company.
When asked about the viability of the system, he said it will all depend on public awareness as many clients don’t seem to be familiar with the card payment system.

Banks are optimistic
The PoS terminals can process payments through either debit or cards. While debit transactions use the ATM network, credit cards use the VISA, Master Card and American Express among others.
BNB currently has 51 debit card PoS terminals and 48 credit card terminals across the country. BNB’s project manager Tapas Dutta said the company plans to set-up about a hundred additional PoS terminals annually.
While T-Bank currently has no PoS terminals, the operations head said the bank is currently in the process of buying some hundred PoS machines to be set-up across companies and business houses across the country.
Druk PNB (DPNB) is also into negotiations with Indian companies to procure PoS machines and will be deployed at major business organizations including schools and colleges where fees and other transactions can be processed through PoS terminals.
DPNB’s IT- Vice president Pradeep Khatri said, “this payment system will be very successful in Bhutan in the future as many other countries are adopting it”.
Senior card officer with the BoB, Tshering Choejur, said the bank has currently 148 PoS terminals across the country, 250 in stock and 30 PoS machine applications received. He said, the system will be a success and the bank shall also try to convince some ministries to adopt it as well.


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