Nepal Rastra Bank has now cleared the way for a digital wallet merger. Making new provisions into the Payment and Settlement Bylaw, 2077, the regulatory bank made it possible for companies to merge or acquire.
Earlier, the bank had called for the need for combined operation citing an exceedingly high number of service providers and the inability to meet the criteria set by the bank. Banks and financial institutions or corporates merging is common. However now, mobile payment gateways can also seek a merger in Nepal.
The bank has reasoned that the payment service providers have failed to fulfill the targets the bank has set. Besides, there are too many digital wallets competing in a small market in Nepal.
At the same time, the regulatory bank has halted issuing licenses for new payment service providers. Executive Director of NRB, Guru Prasad Poudel shared that the bank has not issued any license for a new electronic wallet company since 2021 AD.
He also said the bank will take necessary measures to ‘manage’ existing service providers.
As per the recent data, there are 28 PSPs and 10 PSOs operating in Nepal.
Check out: eWallets vs Mobile Banking Apps, Which One is Better?
NRB clears the way for digital wallet merger
It is noticeable that many service providers have not met the target set by the Central Bank. This is why, we have emphasized digital wallets merger to facilitate their sustainability,” he said. “This is not a contradiction, it is facilitation,” he added.
“The existing policy arrangement regarding the approval for a merger and takeover of the organizations that have permission to conduct payment-related activities, to bring in foreign investment up to the specified limit in such organizations will be reviewed”, the monetary policy for the FY 079/80 states.
NRB will also offer policy-level concessions to the service providers who move towards a merger.
In the amended Payment and Settlement Bylaw 2077 (first amendment 2080), the provision has been added that organizations that have received a license to perform payment-related activities can merge/merge or acquire each other. Under this, only payment system operators and payment service providers of the same nature can merge.
For merger or acquisition, the board of directors of the respective companies should get the authorization by passing a resolution in the annual general meeting or special general meeting. It is stipulated that the integrated business should be completed within 30 days of receiving the final approval of the merger.
But even after the process of the merger has begun, the regulatory bank terminates it if the companies provide credible reasons. However, it is also mentioned that if the organization does not conduct the integrated business within 30 days of receiving the approval of the merger or does not submit the application for the final approval by the specified date after receiving the theoretical agreement, action will be taken according to the Payment and Distribution Act, 2075.
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Digital wallets merger for a better market balance
As per the bank, Nepal has 28 payment service providers with licenses to operate at the moment. Meanwhile, only a handful have made any mark. eSewa and Khalti boast a duopoly in Nepal’s limited market but are also facing a stiff contest from mobile banking apps. However, interoperability among the fintech companies in Nepal has helped both sets of digital payment service providers coexist. Smartphone users can scan QR in digital wallets and pay for services via mobile banking.
The interrelationship does help each to sustain but it will only help those who have remained dominant. Many at the bottom are facing an existential threat. Also read: Khalti Integrates FonePay Scan to Aid Digital Payment
Would you be willing to see a digital wallet merger in Nepal? do you think that is the right choice for many service providers amidst their unlikely influence in the market? Do share your perspective in the comments below.