NRB Tightens Regulations for Payment Service Providers: What It Means for Consumers and Agents

Kathmandu, Nepal: The Nepal Rastra Bank (NRB) has introduced amendments to the Integrated Directives on Payment Systems 2080, significantly strengthening the regulatory framework for payment service providers (PSPs) and their authorized agents. These changes aim to enhance accountability, transparency, and consumer protection in Nepal's rapidly growing digital payment ecosystem.

Key Provisions of the Amendment

1. Transaction Limits and Reporting:
   PSPs can now set daily transaction limits for their authorized agents. These agents must maintain detailed records of all transactions, with PSPs required to submit quarterly reports to their boards and semi-annual reports to the NRB. The aim is to ensure that high-volume transactions are monitored to prevent fraud, money laundering, and unauthorized activities.

2. Appointment of Authorized Agents:
   PSPs must conduct thorough background checks on potential agents. This includes verifying business and personal credentials, ensuring no criminal records, and confirming a clean slate with banking institutions. Agents must also declare their non-involvement in money laundering or terrorist financing.

3. Prohibition of Sub-agents:
   Authorized agents cannot appoint sub-agents, streamlining accountability and reducing risks associated with multiple layers of representation.

4. Consumer-Centric Rules:
   Agents are prohibited from charging additional fees to customers for services, such as utility payments and wallet funding. All transactions must be conducted through wallets, ensuring transparency and traceability.

5. Monitoring and Compliance:
   PSPs are required to maintain separate transaction records for merchants and agents. They must also submit details of the top 100 agents with the highest transaction volumes to the NRB every month.

6. Penalties for Non-compliance:
   Agents not adhering to these directives must be regularized or their agreements terminated within three months, ensuring swift implementation of the new rules.

Interpretation and Impact

For Consumers:

The directive is a step toward greater consumer protection. With agents prohibited from charging extra fees and required to adhere to strict compliance standards, customers can expect more reliable and cost-effective services. Transparency in transactions and mandatory reporting will also build trust in digital payment systems.

For Agents:

Authorized agents face increased scrutiny and stricter onboarding criteria, including criminal background checks and financial history assessments. While this adds layers of compliance, it professionalizes the role of agents, potentially raising the quality of service provided.

For PSPs:

Payment service providers now shoulder greater responsibilities, from monitoring agents to ensuring compliance with NRB’s directives. The requirement to analyze transaction patterns and report high-volume agents monthly introduces a significant administrative burden. However, this could deter fraudulent activities and elevate the credibility of the entire payment ecosystem.

For the Digital Economy:

These regulations signify NRB's proactive approach to supporting the digital economy while mitigating risks associated with unregulated digital transactions. By enforcing stricter controls, NRB is creating a safer environment for the adoption of cashless payments, which could accelerate Nepal’s journey toward a digital economy.

Conclusion

The revised directives demonstrate NRB’s commitment to fostering a secure and transparent payment system in Nepal. While these changes may initially pose challenges for PSPs and agents, the long-term benefits of a robust and reliable digital payment ecosystem outweigh the transitional difficulties. As the digital payment landscape matures, consumers and businesses alike stand to benefit from these reforms.