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Nepal’s digital identity transformation fosters challenges

Nepal’s digital identity transformation fosters challenges

In striving to develop a comprehensive digital identity system, Nepal is embarking on a transformative journey, promising to overhaul the governance system, improve service provision, and drive economic development. This ambitious endeavor started in 2012 and aims to replace traditional paper-based citizenship certificates with biometric smart national ID cards that contain photos, personal data, and fingerprint biometrics. Major achievements under the project include the recent implementation of unique ID numbers assigned at birth and the issuance of millions of digital ID cards. Collaboration with Idemia has been instrumental in these advancements.

The next steps are likely to be challenging. Some digital security professionals and lawmakers have raised concerns about data privacy and safety, revealing problems related to storage access and handling sensitive personal information. Comparisons of data breaches with other countries like the breach of confidential information from India’s Aadhaar system as an example underscore the need for strong controls on security measures to avoid similar occurrences. Despite these hurdles, the government of Nepal is optimistic about the outcome of the project. Plans include scaling up distribution of digital ID cards countrywide and establishing a common biometric database which is expected to augment efficiency in service provision. Addressing current security concerns is crucial for ensuring the safe and effective implementation of Nepal’s digital identity system.

Nepal’s transition to digital identity

According to a World Bank report from last year, with the support of the Strengthening Systems for Social Protection and Civil Registration Project (SSSPCR) in Nepal, more than 97 percent of wards (local government units) have switched to online registration of crucial events such as births, deaths, marriages, and migration. Similarly, 3.5 million recipients of Social Security benefits now receive payments straight to their bank accounts. The digitization of civil registration and financial transfers has significantly improved the service delivery of Nepal’s local administrations.

Nepal’s transition to a digital identity system is a dramatic shift from traditional paper-based citizenship certificates to biometric smart national identification cards. Which integrates a photograph, personal information, and fingerprint biometrics. The collecting of biometric data for over 14 million citizens, which accounts for more than 90 percent of the eligible population, is a significant milestone in this journey. The government has already printed 3 million biometric ID cards, distributing 1.8 million to district offices and 350,000 to citizens.

International collaboration is critical to accomplishing these goals. Particularly, IDEMIA, a global pioneer in improved identification, has helped provide biometric technology and services. The collaboration with Idemia has permitted the development of a strong digital identification infrastructure, allowing the secure and fast issue of ID cards. This collaboration has enabled the implementation of advanced biometric systems, such as Automated Biometric Identification Systems (ABIS), which can process data from millions of citizens. 

Current scenario of the digital identity program in Nepal

The digital identity program in Nepal is progressing rapidly, with significant recent developments. One of the important updates is the implementation of unique ID numbers at birth, ensuring that digital identity starts from infancy. Mukesh Kumar Keshar, director of the Department of National ID and Civil Registration, confirms that approximately 2,000 unique ID numbers are assigned daily during birth registrations. This move aims to streamline access to government documents, including biometric national IDs.

Efforts to incorporate biometric data into civil registration and vital statistics systems are also underway, the government aims to use the same biometric technology and software for passport issuance, reducing the need for several biometric data collections. This integration is expected to increase efficiency and decrease duplication of effort.

In addition, the initiative has accelerated the manufacture and distribution of digital ID cards following a large enrollment drive. The government is developing a comprehensive strategy to promote widespread distribution and use of these ID cards, which will eventually be mandatory. 

The public concerns over national ID card implementation

The Kathmandu Post reported that the Nepali public questions the rationale behind the national ID card, which was introduced to integrate multiple identity documents. However, it seems that this attempt is not enough. Some people claim that even if a person has obtained this card as a digital solution to streamline several government services and prevent fraud associated with identity theft; its usefulness is still limited. For instance, people like Bharat Pokharel have expressed their frustrations after realizing that having such cards doesn’t mean anything before bodies like the Public Service Commission and local ward offices where citizens must present traditional paper form citizenship certificates. This disjointed implementation highlights the urgent need for legislative amendments and digital integration to make the national ID card truly functional and beneficial.

Research insights, challenges and concerns

A research study highlights that digital finance is a tool for financial inclusion in Nepal’s Madhesh Province.  Digital banking access, usage, and quality significantly have strong positive relations to enhance financial inclusion. Additionally, the study shows that there is a high rate of voluntary financial exclusion from finance by the people in Madhesh while it also indicates the potential to transition into QDA (Quality Digital Access) solutions.

A research study on the future and challenges of Nepal’s digital identity systems conducted shortly after its launch emphasizes the national identity project which aims to digitize information of citizens for better governance. The study recognizes political instability, inadequate infrastructure, limited education, and resource capacities as key challenges hampering the project since its inception in 2008. Despite gaining momentum, these issues pose significant obstacles to its successful implementation.

Research on the implications and challenges of national identity cards in Bhaktapur, Nepal investigates the collection of biometric data for national ID cards and their challenges. The study finds that effective government control and adherence to privacy safeguards, as mandated by Nepal’s Constitution, are key to the program’s success. It also emphasizes the need for central and local governments to collaborate to enhance efficient service delivery within Nepal’s federal framework.

Digital payment gateways transforming financial transactions in Nepal

Digital payment gateways in Nepal have changed financial transactions by providing secure and smooth services that reduce payment fraud risks. Leading platforms such as CellPay, eSewa, Fonepay, Khalti, Prabhu Pay, and Namaste Pay have emerged as critical stakeholders, streamlining how individuals, organizations, and institutions handle their finances. According to an IBS Intelligence report, the rapid digitalization of the payments sector is a major trend, fueled by the growing use of digital currencies, biometrics, and real-time payments. This shift toward contactless payment methods, particularly in the aftermath of the pandemic, has accelerated the expansion of the real-time payments business worldwide. Each of these platforms has distinct features and huge commercial networks, making digital transactions more accessible and efficient for the Nepalese people.

The progress in Nepal’s efforts towards a complete digital identity system can be seen through major achievements such as the identity of 14 million citizens using biometric data and collaboration with international identity technology provider Idemia. The country is making commendable strides towards enhancing its governance and service delivery. However, some problems of privacy and legislative changes need to be addressed for the succession of projects. Solving these issues is vital as it will securely see implementation. If successful, the digital ID system could significantly improve the administrative effectiveness of Nepal as well as its economic status.

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