Instant Payments Nepal: Rails, Fees, and the Lightning Network (2025)

Key Facts for Nepal

Primary real-time rails: connectIPS, Fonepay, NEPALPAY Instant.
Typical settlement times: Settlement occurs in real time.
Common limits: Varies by institution.

What “real-time payments” means in Nepal

In Nepal, real-time payments refer to instant, interoperable fund transfers processed and settled immediately. Systems like NEPALPAY Instant use Virtual Private Addresses (VPAs)—such as a mobile number—for transactions, while Fonepay facilitates QR-code payments. The scope is extensive, covering peer-to-peer transfers, consumer-to-government payments, and cross-border transactions with India via UPI. While systems operate under central bank directives, a formal legal definition is not publicly specified; it is generally understood to mean the irrevocable and final settlement of a payment obligation in real time (industry norm).

The country’s central bank, Nepal Rastra Bank (NRB), is the lead regulator for payment systems. Operations are managed by key entities including Nepal Clearing House Limited (NCHL), which runs the connectIPS platform, and Fonepay, which operates a major payment network. The sources do not identify any subsidiary clearing houses. While the specific messaging protocol is not detailed, the global standard for modern payment infrastructures is the data-rich ISO 20022 format, which supports advanced payment information and interoperability (industry norm).

Nepal’s system stands out for operationalizing the first full-scale, cross-border UPI deployment, placing it at the forefront of regional financial integration.

Payment Rail Overview

connectIPS

As a centralized, bank-linked system regulated by Nepal Rastra Bank, connectIPS facilitates real-time payments directly from user bank accounts. It is a trusted method for formal and larger-value transactions, including peer-to-peer transfers, bill payments, and government payments. While it is an established part of Nepal's payment infrastructure, its specific introduction date is not publicly documented.

Centralized and Regulated: It operates under the direct oversight of the central bank, which ensures a high standard of security and compliance.
Direct Bank Integration: Users link their bank accounts to the platform, allowing for direct fund transfers without needing an intermediate wallet.
Versatile Payments: The system supports a wide array of transactions, including peer-to-peer (P2P), business-to-consumer (B2C), and consumer-to-government (C2G) payments.
Real-Time Settlement: Transactions are settled instantly, providing finality and certainty for both individuals and businesses.

Pros: Its strengths include robust security, regulation by the central bank, and its capacity to handle large transactions effectively.
Cons: Adoption may be limited in rural areas where cash is still the primary transaction method.

Fonepay

Fonepay is Nepal’s largest payment network, built primarily around QR-code transactions made through mobile banking applications. It enables instant digital payments at a vast network of merchants and also supports direct money transfers. Recently, it operationalized cross-border payments by integrating with India's UPI system, though a specific launch date for the core Fonepay network is not provided.

QR-Based Payments: Its main function allows users to scan merchant QR codes for immediate, bank-to-bank payments.
Cross-Border UPI Integration: Indian travelers can use UPI-enabled apps to pay Fonepay merchants in Nepal, with automatic currency conversion.
Fonepay Direct: This feature provides a channel for instant and secure peer-to-peer money transfers.
FoneTAG: An offline payment solution that permits contactless "tap and go" transactions without requiring an internet connection.

Pros: The network's advantages include its massive merchant footprint, its pioneering cross-border payment corridor with India, and its offline FoneTAG capability.
Cons: The UPI functionality is currently one-way, and payments are limited to merchant QR codes, not personal ones.

NEPALPAY Instant

NEPALPAY Instant is an interoperable payment system that uses a Virtual Private Address (VPA), such as a mobile number or email, to simplify fund transfers. It runs on the National Payment Switch and is currently accessible through the connectIPS web interface. The system is designed to unify transactions between different banks and payment providers, though its introduction date is not specified.

VPA-Based Transactions: It uses simple aliases like a phone number for routing payments, removing the need to enter complex bank account details.
Interoperability: The architecture is built to function across all participating financial institutions, creating a seamless, network-wide experience.
Tiered Fee Structure: Transaction fees are based on the payment amount, with very low costs for small-value transfers.
Defined Transaction Limits: The system has clear daily and per-transaction caps for both web and mobile channels to manage risk.

Pros: Key benefits are its user-friendly VPA addressing, an interoperable framework, and a transparent, affordable fee model.
Cons: Its availability is currently limited to connectIPS web users, with expansion to mobile apps and other channels still underway.

Limits, Fees, and SLAs

Limits: NEPALPAY Instant sets daily caps at NRs. 2M (web) and NRs. 200k (mobile). Individual bank limits may vary; distinct corporate tiers are not specified.
Fee Structures: A unified fee model applies to both banks and PSPs for NEPALPAY Instant. No distinction is made between inbound and outbound transaction fees.
R2P Fees: NEPALPAY Instant fees are tiered: NRs. 2 (up to NRs. 500), NRs. 4 (up to NRs. 5,000), and NRs. 8 for higher amounts.

Compliance and Risk

KYC/KYB & AML

Nepal Rastra Bank (NRB) mandates strict compliance. Its Financial Intelligence Unit (FIU) oversees Anti-Money Laundering (AML) and Know Your Customer (KYC) rules, requiring institutions to use the goAML portal for reporting. These regulations are a core part of the country’s financial integrity framework.

Data Residency & Privacy

While payment operators maintain privacy policies, specific regulations governing data residency and cross-border data flows are not publicly detailed. The regulatory framework focuses more on financial crime prevention, with less explicit guidance on data localization or specific privacy mandates.

Fraud Controls

Regulatory oversight is centered on operational risk management. The Nepal Rastra Bank has issued Cyber Resilience Guidelines to bolster system security. This framework, combined with the new SIPS initiative, aims to improve the resilience of the entire payments ecosystem against disruptions.

Recordkeeping & Audits

The legal foundation for oversight is established in the Payment and Settlement Act and related bylaws. These acts empower the central bank to conduct inspections and supervision, implying mandatory recordkeeping and audit trails, though specific retention periods are not publicly defined.

Lightning Network Integration as a Solution

The Lightning Network is a second-layer protocol built on Bitcoin that processes transactions off-chain through a system of payment channels. This design makes payments faster and dramatically cheaper. While local RTP rails are effective within national borders, the Lightning Network can act as a global bridge, providing an interoperable settlement layer for instant, cross-border payments where domestic systems do not connect, thus expanding the reach of real-time finance.

While domestic rails offer real-time settlement, the Lightning Network matches this speed with sub-second finality. Its true advantage is economic and geographic. Transaction costs are fractions of a cent, far below the fees on local systems like NEPALPAY Instant. Most importantly, where local rails are confined by national borders, the Lightning Network provides a payment infrastructure with truly global reach, accessible to anyone with an internet connection.

Cross-Border Complexity: It bypasses traditional banking intermediaries, high remittance fees, and currency conversion delays, making small-scale international payments practical and affordable.
Scalability Constraints: By moving the bulk of transactions off the main blockchain, it can support millions of transactions per second, overcoming the throughput limitations inherent in many base-layer protocols.
Micropayment Infeasibility: Its extremely low fees make it economically viable to process high volumes of tiny transactions, opening up new models for content monetization, streaming, and gaming.

For organizations aiming to build truly global financial products, understanding the Lightning Network's architecture is no longer optional.

B2B Enterprise Use Cases

Supplier Payments – A business pays international suppliers instantly, sending funds directly from its wallet to theirs.
Business value: Eliminates correspondent banking delays and reduces cross-border transaction fees.
Merchant Settlement – A payment processor aggregates small customer payments and settles the total to a merchant instantly.
Business value: Provides immediate fund access and dramatically lowers processing costs for merchants.
Treasury Optimization – A corporate treasury moves funds between global subsidiaries in real-time to manage liquidity.
Business value: Achieves 24/7 global liquidity management with minimal settlement risk.
Global Payroll – A company pays its remote workforce or gig workers instantly to their personal digital wallets.
Business value: Offers instant, low-cost salary distribution for a distributed international workforce.
Streaming Royalties – A media platform pays artists a fraction of a cent for every second of consumption.
Business value: Delivers transparent, continuous, and direct compensation to content creators.

Cross-Border Transactions and Remittances to Nepal

Cross-border real-time payments are complex, burdened by regulatory approvals, cybersecurity risks, and infrastructure gaps. Reaching Nepal involves navigating intricate foreign exchange (FX) paths, where currency conversion and settlement must be managed between different financial systems. Traditional methods are slow and costly. Modern solutions aim to solve this by creating new forms of rail bridging—connecting separate domestic payment systems—to allow funds to move instantly across borders, but this requires significant technical and regulatory coordination between countries.

India: Indian citizens can use UPI-enabled apps for QR code payments at Nepali merchants, while Nepalis can make payments in India with daily limits of INR 15,000. The Indo-Nepal Remittance Facility allows for larger transfers up to INR 200,000, supplemented by newer digital channels for smaller, instant remittances.
Bhutan: Nepali citizens can use QR code-based systems for merchant payments in Bhutan, operating under the same transaction limits as those for India. Remittance channels for this corridor are not as developed, with the current focus being on merchant payments.
Third Countries: Foreign citizens can pay for local goods in Nepal using QR codes from their home countries, with funds settled in a convertible currency. This system is designed primarily for in-country purchases by visitors rather than for formal remittance flows.

The Lightning Network offers a powerful alternative, acting as a global settlement layer. By processing transactions off-chain, it achieves instant, low-cost payments, bypassing the delays and high fees of traditional correspondent banking and complex currency conversion paths.

How Lightspark Makes Integration Easy

Lightspark helps fintechs, digital banks, wallets, and exchanges integrate the Lightning Network without the operational overhead. We manage the complexities of liquidity, optimal transaction routing, and compliance, allowing you to focus on your core product. Our comprehensive developer tooling and APIs provide a straightforward path to offering your customers instant, global payments. With Lightspark, you can achieve sub-second settlement globally, opening new markets and use cases for your business. Ready to build on the future of money? Talk to our team.

Sources and Further Reading

https://fonepay.com/ – Fonepay's official payment network homepage.
https://fonepay.com/blogs/upi-in-nepal – Details on UPI integration Nepal.
https://kathmandupost.com/money/2024/03/18/nepal-permits-digital-payments-for-third-country-transactions – Report on third-country digital payments.
https://kathmandupost.com/money/2024/06/28/nepal-permits-qr-code-payment-in-india-and-bhutan – News on cross-border QR payments.
https://kathmandupost.com/money/2025/09/03/nepal-rastra-bank-rolls-out-framework-to-identify-systemically-important-payment-systems – Details on the Payment Act.
https://www.lightspark.com/contact – Lightspark's official contact information page.
https://www.lightspark.com/knowledge/how-the-lightning-network-is-transforming-bitcoin – Explains Lightning Network's Bitcoin impact.
https://www.lightspark.com/knowledge/is-crypto-legal-in-nepal – Discusses cryptocurrency legality in Nepal.
https://www.lightspark.com/knowledge/what-does-the-lightning-network-do – Overview of Lightning Network's function.
https://www.lightspark.com/news/insights/what-are-lightning-payments – Introduction to Lightning Network payments.
https://nchl.com.np/nepalpay-instant-interoperable-vpa-based-transaction/ – NEPALPAY Instant transaction fee details.
https://www.nrb.org.np/departments/psd/ – Central bank's cyber resilience guidelines.
https://www.transfi.com/blog/popular-local-payment-methods-and-solutions-in-nepal – Overview of Nepal's payment methods.

Instant Payments Nepal : Rails, Fees, and the Lightning Network