Nepal Rastra Bank (NRB) has warned of growing security risks in the country’s rapidly expanding digital payment sector, citing weak compliance, governance and internal controls among payment service providers (PSPs) and operators (PSOs).
In its Payment System Oversight Report 2024/25, the central bank said on-site inspections found several institutions failing to properly verify customer information under Know Your Customer (KYC) requirements. Such weaknesses, it warned, could increase risks related to money laundering, financial fraud and cybercrime.
During the review period, NRB inspected 16 licensed payment institutions and conducted a special investigation into one payment operator under close monitoring. The inspection covered both payment system operators and payment service providers.
The report identified widespread shortcomings in governance, internal controls and operational procedures. Most inspected institutions were found to have weaknesses in managing systemic, operational, settlement and liquidity risks, raising concerns about the resilience of Nepal’s growing digital payment infrastructure.
Meanwhile, cross-border digital payments continued to expand rapidly. During the review year, Nepal recorded 993,582 cross-border QR transactions worth Rs. 2.86 billion.
Nepal-India transactions accounted for the overwhelming majority, with 981,654 transactions valued at Rs. 2.69 billion. The figures highlight the growing importance of digital payment systems in facilitating cross-border transactions.
NRB has emphasized the need for payment institutions to strengthen regulatory compliance, governance, customer verification and risk-management systems to ensure that the rapid expansion of digital payments does not create greater financial and cybersecurity vulnerabilities.
