Ask any shopkeeper in Thamel if they accept payments via WeChat or Alipay, and there’s a fairly good chance that they do. The answer is in the affirmative especially among Chinese-owned and operated businesses along the Amrit Marg, which has earned the moniker ‘Little China,’ owing to an influx of Chinese establishments in the area.

From a bijou noodle shop to a big hotel, the majority of businesses in the area accept payments via WeChat and Alipay, two of China’s most popular mobile payment platforms. Together, the two digital payment systems control over 90 percent of the country’s domestic market share.

“I was pleasantly surprised to learn that I could pay for a meal here using WeChat Pay,” said Tenzin, a Chengdu-based businessman who regularly travels to Kathmandu for work. “So far all the Chinese restaurants I have visited in Thamel have accepted WeChat Pay.”

Like Tenzin, who asked only to be identified by his first name, a growing number of Chinese visitors are using their digital wallets to pay for goods and services in Nepal, particularly while dealing with fellow Chinese nationals who already have access to WeChat Pay and Alipay. But while the acceptance of such payment methods has made life convenient for Chinese tourists, these transactions bypass formal banking channels, and as such are in violation of the country’s Foreign Direct Investment and Foreign Exchange laws, say experts.

Under Nepali law, any outbound transaction from the country must be first approved by Nepal Rastra Bank, the country’s central bank. When people use these platforms, the transaction is made from one Chinese account to another which means the money technically doesn’t enter Nepal.

“It’s just a matter of convenience,” said one store owner in Thamel who refused to be named fearing backlash from his customers who are primarily Chinese. “In China, people rarely use cash these days so they find it cumbersome to carry cash while travelling.”

The store owner, who deals in antiques, said he doesn’t have an account on either of the two platforms as one needs to have a Chinese bank account to avail of their services. So he relies on assistance from his Chinese friends and businessmen in the area whenever a customer wants to pay using the mobile platforms.

“The customer will transfer money to my friend’s WeChat Pay account who will then pay me in Nepali rupees here,” said the store owner. “I don’t know if it’s legal or illegal. I do it because if I don’t accept such payments, then I lose business.”

A general view of hotels at Jyatha, Thamel, in Kathmandu. Post Photo: Sanjog Manandhar

Along with the possibility of Chinese business owners using these platforms to repatriate money and evade taxes in Nepal, economists say the unregulated use of such platforms will also have a significant impact on the country’s earnings from Chinese tourists.

“A large number of Chinese tourists visit Nepal but if in-country per capita Chinese tourist spending goes down, then it will have a negative impact in terms of forex earning and balance of payment accounting,” said Chandan Sapkota, an economist currently based in Tokyo.

More than 150,000 Chinese tourists visited Nepal last year, a nearly 50 percent rise from 2017. And the number is only expected to grow as infrastructure projects linking the two countries complete.

In recent years, Chinese tourists have been known to be the biggest spenders. In 2017, Chinese visitors spent $258 billion, nearly double of what Americans spent the same year, according to the United Nations World Tourism Organization.

Experts say that for the local economy to benefit from Chinese tourists, the government has to monitor, and control, Chinese-owned businesses’ transactions via WeChat Pay and Alipay. Otherwise, the country will lose much of its revenue as the income goes directly to China.

“The tourism sector is considered to have a multiplier effect in terms of growth, income and employment,” said Sapkota. “If money is paid in China via WeChat, then we won’t realise those benefits here.”

One possible solution could be for local banks and companies to partner with WeChat Pay and Alipay, something that an increasing number of countries around the world are already doing, to accommodate Chinese buyers’ preference for mobile payment while ensuring the money passes through the country’s formal banking channels.

Last year, Nabil Bank signed an agreement with Union Pay International to facilitate QR code payment service in Nepal. As per the agreement, Chinese tourists will be able to use their Union Pay app to pay for goods and services at thousands of businesses under Nabil’s network across the country, said Anil Keshari Shah, CEO of Nabil Bank.

“We want Chinese tourists to spend money in the country,” said Shah, “and we hope that by adapting to their payment habits they will be encouraged to spend their money here.”

In a phone interview with the Post, Bhisma Dhungana, chief of forex division at Nepal Rastra Bank, said his office is aware of Chinese businesses using mobile payment platforms. But authorities still have not figured out how to bring them under the central bank’s control.

“We are working on a solution to monitor and regularise such transactions,” said Dhungana. “It’s not that easy because we are dealing with technology-based transactions.”

Dhungana said the bank is currently reviewing the application of SwiftPass, the Chinese mobile payment technology company, which supports WeChat Pay, Alipay and UnionPay. But until SwiftPass receives a licence to operate in Nepal, he said transactions via WeChat Pay and Alipay are illegal.

“Anyone caught engaging in such transactions will be held accountable,” he said.