According to the central bank's recently released Payment System Oversight Report 2024/25, a majority of licensed Payment Service Providers (PSPs) and Payment System Operators (PSOs) are failing to fully verify customer identities, prioritizing rapid market expansion over basic security standards.
The findings follow comprehensive on-site inspections of 16 licensed payment institutions and a targeted special inspection of IME Digital Solutions during the fiscal year 2081/82.
Institutions Under Scrutiny
-
Payment System Operators (PSOs): FonePay, SmartChoice Technology, and Gateway Payment Service.
-
Payment Service Providers (PSPs): eSewa, Khalti, Bipay, Nepal Digital Payment, iCash, FocusOne Payment, Transaction Service, Fintech International, Digi Pay, Nepal Paytime, Citi Wallet, Fast Money, Smart Card, and IME Digital Solutions.
In addition to wallet operators, NRB extended its oversight to six banking institutions operating high-value Real Time Gross Settlement (RTGS) systems: Himalayan Bank, Shangri-la Development Bank, NIC Asia Bank, Nepal SBI Bank, Gurkhas Finance, and Shine Resunga Development Bank.
Systemic Risks & Lack of Governance
Beyond compromised customer data, the regulator uncovered critical flaws across overall corporate governance, internal controls, and operational frameworks. NRB highlighted that several entities demonstrated gross negligence toward regulatory standards, exposing the digital ecosystem to severe systemic, operational, liquidity, and settlement risks.
Financial sector experts warn that failing to enforce compliance could jeopardize public trust and destabilize Nepal's broader digital financial ecosystem.
Central Bank's Stance
NRB warned that unverified user accounts not only facilitate illicit criminal activity but also compromise the privacy and security of legitimate users. The central bank has directed all payment operators to immediately overhaul their KYC processes, strengthen risk management protocols, and adhere strictly to regulatory compliance, signaling tougher enforcement actions ahead.
