Chinese payments app Alipay is looking to launch in Nepal in the next few weeks, Tech Lekh reported on Monday. The development comes just 10 days after Nepal banned WeChat Pay and Alipay for operating in the country without permission.

What prompted the ban?

The ban itself came a month after the Himalayan Times reported the widespread use of such apps by Chinese tourists and businesses in Nepal. Because these companies aren’t registered in Nepal, Chinese tourists and businesses that used these apps were effectively bypassing the country’s tax system. Tech Lekh said some hotels and restaurants that focus on Chinese customers were encouraging this practice by putting QR codes on their bills. The illegal use these apps had also enabled Chinese business owners to bypass Nepal’s tax network when repatriating earnings to their home country. A street in Thamel, a tourist area in Kathmandu, has earned the name Chinatown because of the number of Chinese-run hotels and restaurants there, said a report in the South China Morning Post. A spokesperson for Nepal Rashtra Bank told the newspaper that there was no information available on the volume of transactions concerned. WeChat Pay has over 900 million active users and Alipay more than 700 million.

Alipay meets officials, ropes in Himalayan Bank

Despite the ban, the government had said it would be willing to work with Chinese payment services if they applied for permission to operate in Nepal, and earlier this week, Alipay’s representatives met officials of Nepal Rastra Bank to discuss the launch. The company also roped in Himalayan Bank to introduce its services legally, the Tech Lekh report said. Himalayan Bank has asked NRB’s Foreign Exchange Management Department for permission to settle foreign-exchange transactions from Alipay. If and when it gets permission to do so, the proceeds will be deposited in the bank in US dollars.

However, there were still fears that Chinese tourists and business could bypass Himalayan Bank by using Alipay’s peer-to-peer payments feature. Alipay tried to allay these concerns, saying it provided different sets of unique 16-digit codes for transactions in Nepal and China so that codes generated in China could not be used in Nepal, the Himalayan Times said.

Under Nepali law, anyone found guilty of embezzling foreign exchange can be sentenced to up to three years in jail, as per Reuters. The country, which is heavily dependent on tourism, welcomed 1.1 million tourists in 2018, including 153,000 from China.

Communist government ‘steering Nepal towards China’

Nepal’s ban on Alipay and WeChat Pay is the first national ban on the two companies, Nikkei Asia Review reported, citing an unnamed person in the Chinese payments sector. The report said the ban came as a surprise as Nepal’s Communist government, elected in 2017, has steered the country toward China and away from its traditional ally India, and Chinese state-owned companies including ZTE have recently won contracts to expand 4G telecommunications networks in Nepal.

WeChat Pay, Alipay and India

In March, we reported that WeChat was is in the process of obtaining a payments license in India and was planning to launch a UPI app, likely called WeChat Pay, by the end of June. WeChat’s parent company Tencent had partnered with Axis Bank, HDFC and ICICI, and wanted create its own UPI handle. In China, WeChat Pay can be used to pay for utilities and financial transactions and works like a wallet and users get a payment account by default. However, in India, WeChat itself has failed to take off (see here and here). Alipay, on the other hand, isn’t seeking to enter India directly. Last year its parent company Alibaba invested $177 million in Paytm bring its holdings up to 40%.