NRB Flags Rising Security Risks in Nepal’s Digital Payments

Nepal’s rapid shift toward digital payments is creating new security, governance and compliance risks, according to Nepal Rastra Bank (NRB), which has warned that several payment service providers and operators are falling short of regulatory requirements.

In its Payment System Oversight Report 2024/25, NRB said on-site inspections found weaknesses in areas including customer verification under Know Your Customer (KYC) requirements. Such gaps can increase exposure to money laundering, financial fraud and cybercrime as digital transactions become more widespread.

During the review period, NRB inspected 16 licensed payment institutions and carried out a special investigation into another operator under close monitoring. The institutions reviewed included payment system operators such as Gateway Payment Services, PhonePay and SmartChoice Technologies, as well as providers including Khalti, eSewa, WePay, Nepal Digital Payment, iCash and other digital payment companies.

The central bank also found broader weaknesses in governance, internal controls and operational procedures. Most of the institutions reviewed did not fully meet regulatory standards relating to systemic risk, operational risk, settlement risk and liquidity risk.

The concerns come as digital payments continue to expand rapidly in Nepal, including across borders. During the review year, 993,582 cross-border QR transactions worth Rs 2.86 billion were recorded. Transactions between Nepal and India accounted for 981,654 transactions worth Rs 2.69 billion, highlighting the growing importance of cross-border digital payments.

The NRB findings suggest that as transaction volumes increase, payment companies will need stronger customer verification, internal controls and risk-management systems to ensure that the expansion of digital payments does not outpace the sector’s ability to manage security and financial risks.