KATHMANDU, Aug 11: Nepal Rastra Bank (NRB) has warned of growing security challenges in the country’s rapidly expanding digital payment sector, citing weak compliance and governance among service providers.
Unveiling its Payment System Oversight Report 2024/25, the central bank said payment service providers (PSPs) and payment system operators (PSOs) have failed to adequately follow regulatory guidelines. On-site inspections revealed that many institutions were not properly verifying customer details under Know Your Customer (KYC) rules, raising risks of money laundering, financial fraud, and cybercrime.
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During the review period, NRB inspected 16 licensed payment institutions and conducted a special probe into one operator under close watch. Gateway Payment Services, PhonePay, and SmartChoice Technologies were among the PSOs examined, while PSPs included Khalti, eSewa, WePay, Nepal Digital Payment, iCash, FocusOne Payment, Transaction Service, Fintech International, DG Pay, Nepal Paytime, City Wallet, Chito Paisa, and Smart Card.
The report highlighted widespread lapses in governance, internal controls, and operational procedures. NRB concluded that most institutions had failed to meet standards related to systemic risk, operational risk, settlement risk, and liquidity risk.
Meanwhile, cross-border QR transactions surged during the year, with 993,582 transactions worth Rs 2.86 billion. Of these, payments between Nepal and India accounted for 981,654 transactions totaling Rs 2.69 billion, underscoring the growing scale of digital cross-border settlements.
