Payments Regulation: PSO and PSP Licensing, Wallets and Digital Financial Services

Nepal’s retail payments market does not look like the market of a country with Nepal’s income per head, and the reason has little to do with regulatory permissiveness. A very large share of household income arrives from abroad and had to be distributed domestically to people who were never going to visit a branch. Remittance distribution built the agent network, the agent network built the wallet base, and the wallet base made QR acceptance economic for merchants who had never taken a card.

By mid-May 2026 NRB data showed more than 28.3 million wallet users, up from about 6.3 million in 2020, and over 30 million mobile banking users, up from about 11.5 million. Nepal’s population is in the region of 30 million. Accounts exceed people, which is the normal signature of multi-homing rather than of universal inclusion, and it is worth holding on to when reading market-share claims. Internet banking reached 2.43 million users and connectIPS 1.56 million, while debit cards nearly doubled to 13.9 million and credit cards remained a rounding error at 331,000.

The two licence types

The Payment and Settlement Act 2075 gives NRB authority over payment systems, and NRB exercises it through the Payment and Settlement Bylaws 2077 (first amendment 2080) and the Unified Directive on Payment Systems 2082, issued on 16 April 2026 and already amended on 24 July 2026. NRB’s own description of the directive lists its concerns as risk management, protection of customers’ interests, prevention of money laundering and terrorist financing, and interconnectedness and access.

The licence categories split along the wholesale-retail line rather than by technology.

	Payment System Operator	Payment Service Provider
What it does	Clearing houses, switches, card networks, inter-affiliation networks	Wallets, cards, domestic transfers, payment mediation for customers
Faces	Member institutions	End customers and merchants
Licensed as at 16 July 2026	8	19

The operator list is short and structurally important: Nepal Clearing House, Fonepay Payment Service, Nepal Payment Solution, SmartChoice Technologies, Gate Way Payment Service, and the three international card schemes, Visa Worldwide, Mastercard Asia/Pacific and UnionPay International. The provider list is longer and includes the consumer names, eSewa and IME Khalti among them, alongside Nepal Digital Payments Company and a tail of smaller wallets.

A non-bank institution may hold a licence for only one service type. That single restriction explains much of Nepal’s corporate structuring in the sector. Groups that want both switch economics and consumer distribution hold them in separate licensed companies rather than in one.

Foreign ownership limits

Payments is the sector where Nepal’s general openness to foreign investment collides hardest with a sectoral cap. Under the licensing policy effective 2 January 2023, foreign investment in a licensed payment institution is reported to be limited to 15 percent of total paid-up capital. A firm already operating in ten or more countries is exempted from the capital requirement and certain other conditions, which is how the international card schemes hold operator licences. Any company that takes foreign investment must convert to a public company within three years. Licences run five years and are renewable, promoter shares are locked for five years after licensing subject to NRB exceptions, and a security deposit equal to 1 percent of issued capital is required.

For a strategic investor this is close to prohibitive at the ordinary threshold. A 15 percent stake buys neither control nor consolidation, and the three-year public company conversion adds a governance and disclosure obligation that most minority investors would rather not underwrite. The realistic routes into Nepali payments for a foreign party are the ten-country exemption, available to a handful of global networks and nobody else; a technology or processing relationship that does not require a licence; or investment into a bank rather than into a payment institution.

We do not state the minimum capital figures. They sit in the licensing policy, which we could not obtain at primary level, and a capital threshold is exactly the kind of number that should not be taken from a summary. Existing licensees were reported to have until 16 July 2028 to meet the revised requirements, which implies the amounts were raised.

New supervisory guidelines

Three instruments issued in the last three years show where supervision is heading, and they are worth reading together rather than separately.

Cyber Resilience Guidelines, issued 27 August 2023, put operational resilience obligations on licensed payment institutions rather than only on banks. Targeted Financial Sanctions Guidelines, issued 11 August 2025, extend sanctions screening duties into the payments perimeter, a direct consequence of Nepal’s FATF listing and the point at which a wallet operator acquires obligations that look like a bank’s. Regulatory Sandbox Guidelines, issued 18 June 2026, create a supervised route for propositions that do not fit an existing licence.

The sandbox is the interesting one, because it is an admission that the two-category licensing model no longer describes the market. Merchant acquiring, buy-now-pay-later, cross-border collection for exporters and information technology firms, and payment initiation over open interfaces do not map cleanly onto operator or provider. Anyone building in those spaces in Nepal should assume the perimeter question is live and expect to have it decided administratively rather than by reading the directive.

The settlement infrastructure

Retail wallets settle on infrastructure that NRB either runs or licenses. NRB operates the Real Time Gross Settlement system directly, open Sunday to Friday with a shortened Friday session, which is where large-value and interbank settlement happens. Nepal Clearing House Limited, licensed as an operator, runs the electronic cheque clearing system and connectIPS, the account-to-account rail. Fonepay sits across QR acceptance.

That configuration matters to anyone assessing counterparty and operational risk in a Nepali payments business. A provider’s economics depend on rails owned by a small number of licensed operators, several of which are themselves owned by the banks that are the provider’s distribution partners and competitors. Interconnection terms are therefore a regulatory question as much as a commercial one, which is why the 2082 directive names interconnectedness and access as one of its four concerns. A new entrant that cannot obtain access on workable terms has a licensing-perimeter problem rather than a pricing problem, and the place to raise it is NRB rather than the counterparty.

Oversight and enforcement

NRB publishes a Payment Systems Oversight Report, the 2081/82 edition appearing on 4 August 2026, along with quarterly enforcement action reports and a monthly indicator return. Enforcement in Nepali payments has run to suspensions of specific services and directions to remediate rather than to headline fines, and the publication of enforcement actions is itself the sanction that licensees respond to in a market this concentrated.

The monthly indicator return is the series to track for market size, and it is published in both PDF and spreadsheet form. We do not reproduce figures from it here. The return’s access and usage sections are easy to misread, and where our reading of it conflicted with reporting of the same data, we have used the reported figures and said so.

What to ask first

The first question for a payments investor is which of the two licences the business model needs, and whether a single company can hold everything the model requires. Whether the model is permitted at all is usually answerable. Nepal’s one-service restriction, the 15 percent foreign cap and the five-year promoter lock-in are structural constraints that have to be designed around at incorporation, and they cannot be renegotiated once a licence application is filed.

Sources

1. Payment Systems Department — Acts, bylaws, directives and licensed institutions

   Nepal Rastra Bank · Accessed 26 August 2026 · Tier 2 — Official publication

   Supports: That the Payment and Settlement Act 2075 and the Payment and Settlement Bylaws 2077 (first amendment 2080) are the governing instruments, that the Unified Directive on Payment Systems 2082 was issued on 16 April 2026, and the existence of the cyber resilience, sandbox and targeted financial sanctions guidelines with their dates.

   Accessed 26 August 2026

2. Licensed list of Payment System Operators (PSO) and Payment Service Providers (PSP)

   Nepal Rastra Bank, Payment Systems Department · As at 2083/03/32 (16 July 2026) · Tier 2 — Official publication

   Supports: Eight licensed operators and nineteen licensed providers, and the identity of each.

   Accessed 26 August 2026

3. Payment Systems Department archive — amendment to the Unified Directive on Payment Systems 2082

   Nepal Rastra Bank · 24 July 2026 · Tier 2 — Official publication

   Supports: That the consolidated payments directive was amended within three months of issue, and the dates of the licensed-institution list, oversight report and monthly indicators.

   Accessed 26 August 2026

4. Publication of Licensing Policy for Institutions that Perform Payment-Related Work 2079

   Pradhan and Associates, summarising Nepal Rastra Bank policy effective 2 January 2023 · 2023 · Tier 6 — Professional or news source

   Supports: The PSO and PSP definitions, the 15 percent foreign shareholding cap, the ten-country exemption, the three-year public company conversion requirement, the five-year licence term, the five-year promoter share lock-in, the one-service restriction for non-banks, the 1 percent security deposit and the 16 July 2028 capital compliance date.

   Accessed 26 August 2026

5. Nepal Rastra Bank issues Integrated Directive on Payment System 2082

   Banking Sansar · April 2026 · Tier 6 — Professional or news source

   Supports: That the directive consolidates the 2081 directive with circulars and amendments and covers risk management, protection of customers' interests, prevention of money laundering and terrorist financing, and interconnectedness and access.

   Accessed 26 August 2026

6. Digital payments surge in Nepal as wallet users cross 28 million

   Peoples' Review, reporting Nepal Rastra Bank data · 17 June 2026, data to mid-May 2026 · Tier 6 — Professional or news source

   Supports: 28.3 million wallet users, over 30 million mobile banking users, 2.43 million internet banking users, 1.56 million connectIPS users, 13.9 million debit cards and 331,000 credit cards at mid-May 2026, and ten-month transaction volumes.

   Accessed 26 August 2026

7. Monthly payment systems indicators, Jestha 2083

   Nepal Rastra Bank, Payment Systems Department · Published 14 July 2026 · Tier 2 — Official publication

   Supports: That NRB publishes a monthly return of payment system access and usage indicators, which is the authoritative series for market size.

   Accessed 26 August 2026