Banking News— Nepal has made significant progress in digital banking and financial technology, but the country’s traditional Know Your Customer (KYC) system remains a major obstacle to full digital transformation, according to Nabil Bank Deputy Chief Executive Officer (DCEO) Bajgain.

Speaking during the fourth session of the National Banking Discourse 2026, titled “The Future of Banking: AI, Cybersecurity and FinTech,” Bajgain said Nepal’s banking sector has rapidly embraced digital innovation, but regulatory reforms are needed to modernize customer verification and strengthen the country’s digital financial ecosystem.

He noted that Nabil Bank has been offering Phone Loan, a fully digital lending service, since 2020 through its partnership with Fonepay, making it one of Nepal’s early adopters of digital credit solutions.

The bank has since expanded its digital offerings beyond lending. Customers can now invest in Systematic Investment Plans (SIPs) of Nabil Investment Banking directly through the Nabil mobile application. Digital infrastructure has also been developed to provide access to mutual funds and other investment products offered by the bank’s subsidiaries, Nabil Stock Dealer and Nabil Investment Banking.

Bajgain said the bank is also working to enable secondary market share trading through its mobile platform while expanding the use of scorecard-based models to simplify retail lending decisions.

Recognizing that customers have varying levels of digital literacy, he said the bank has been conducting financial awareness and digital education programmes to help less tech-savvy customers use digital banking services safely and effectively.

He added that Nepal’s growing digital infrastructure has made it easier for Non-Resident Nepalis (NRNs) to access banking services from abroad. With remittance income continuing to increase, he emphasized the need to introduce digital investment products that would allow Nepalis living overseas to invest directly in Nepal’s capital market.

“If we can channel the savings of Nepalis abroad into Nepal’s capital market through digital investment platforms, it will have a positive impact on the country’s overall economy,” he said.

Despite these advances, Bajgain stressed that Digital KYC remains one of Nepal’s weakest areas.

He pointed to challenges such as the misuse of mule accounts bank accounts opened or operated in another person’s name and criticized the continued reliance on outdated customer verification procedures.

“In an era of Google Maps, facial recognition technology, and digital biometrics across government offices, banks still require customers to draw hand-written maps on paper and provide ink thumbprints when opening an account,” he said. “This system needs immediate modernization.”

According to Bajgain, the technology required to implement Digital KYC already exists. What is needed now is a regulatory framework that supports digital identity verification and reflects current technological capabilities.

He also identified cybersecurity as another major challenge facing Nepal’s digital banking ecosystem.

“Cybersecurity is not just about technology it is also about culture and public awareness,” he said, noting that organized digital fraud has become increasingly sophisticated.

Bajgain explained that online fraud should not be viewed as the responsibility of a single bank because digital banking platforms operate through interconnected systems involving payment service providers, clearing houses, and multiple financial institutions.

He therefore called for the establishment of a strong central governing authority to coordinate cybersecurity efforts and strengthen protection against online financial crimes.

While system-wide hacking incidents remain relatively rare, he said most fraud cases involve deceiving users through fake offers, lottery scams, or other forms of social engineering.

“Nearly 95 percent of digital fraud cases occur because fraudsters exploit human greed or lack of awareness,” he said, emphasizing that increasing digital literacy among customers is essential to reducing cybercrime.

Bajgain also highlighted the importance of high-quality data for the successful adoption of Artificial Intelligence in banking.He explained that AI systems require accurate, complete, and up-to-date customer information to function effectively. Although new customer records are generally reliable, older databases often contain incomplete or outdated information that can negatively affect AI-driven decision-making.

“Even if only 20 percent of historical data is inaccurate, it can significantly alter AI-generated outcomes,” he said.

He concluded that improving data quality, modernizing Digital KYC regulations, strengthening cybersecurity governance, and expanding digital awareness will be critical to the future development of Nepal’s banking sector as it continues its transition toward AI-powered financial services.