When Citizens Bank International launched its Citizens Fonepay Credit Card during its anniversary celebrations in April last year, few could have predicted the disruption it would trigger. Just a year later, nearly 5,000 customers are using this digital line of credit—accessible entirely through their smartphones, eliminating the need for a physical card.

While credit cards are not new in Nepal, the complete shift away from plastic cards, swipe machines and paperwork marks a significant innovation in digital borrowing. “The virtual credit card arrives on your mobile phone within a minute and can be used anywhere Fonepay QR is accepted—from a five-star hotel in Kathmandu to a grocery shop in Jumla,” says Paras Kunwar, Chief Operating Officer at Fonepay. “With this, we solved two major barriers: acceptance and accessibility.”

From Plastic to Pixels

Credit cards were introduced in Nepal in the early 1990s—even before debit cards—but they never quite went mainstream. Today, just over 300,000 physical credit cards are in circulation, largely due to restrictive application processes and limited utility. Credit cards have traditionally targeted high-income urban customers and required a cumbersome application process involving extensive documentation such as income proof, permanent address verification and in-person bank visits.

Virtual credit cards, however, are different. While new users must still complete a one-time, in-person KYC (Know Your Customer) process to open a bank account, the credit card itself is issued entirely online. Once mobile banking is activated, customers can apply directly from their phones. If approved, the card is instantly delivered within the app and ready for use via Fonepay QR.

A virtual credit card is a digital version of a traditional credit card that uses a disposable number different from the one on the physical card. This added layer of security helps protect users from data breaches during online or card-not-present transactions. The temporary card numbers often expire after a single use, making them ideal for secure e-commerce. Since virtual cards are never physically swiped, they also eliminate the risk of skimming entirely.

QR Acceptance Unlocks Nationwide Reach

Fonepay’s QR network, reportedly accepted at over five million merchant locations across the country, is extending the reach of formal credit to areas lacking traditional POS infrastructure.

“You can now pay rent, school fees or even EMIs via QR, all using a virtual credit card,” Kunwar says.

(Paras Kunwar, Chief Operating Officer at Fonepay)

Credit limits are determined by the issuing bank. At Citizens, for example, limits range from Rs 20,000 to Rs 250,000, typically based on 1.5 times a user’s monthly income. While Nepal Rastra Bank (NRB) allows digital credit lines up to Rs 500,000, most banks are cautious in this early stage of adoption.

The card offers a 45-day interest-free period. If dues are cleared within this timeframe, no interest is charged. Otherwise, a flat 2% interest applies to the outstanding amount. There is a Rs 500 joining and annual fee with a four-year validity and no cancellation penalties.

A Tool for Inclusion and Discipline

For Ganesh Raj Pokharel, CEO, Citizens Bank International, the virtual credit card is more than just a product—it is a bridge to financial inclusion. “Even if customers do not use the card regularly, just having it offers peace of mind,” Pokharel explains. “It has helped people in places like Jumla and Baitadi engage with formal banking and learn how to manage credit.”

He also highlights the behavioral shift brought by digital usage. Unlike traditional cards that issue end-of-month paper statements, virtual cards offer real-time updates, spending trackers and customizable alerts.

(Ganesh Raj Pokharel, CEO, Citizens Bank International)

“Users can monitor their expenses, set reminders and cut back on unnecessary spending's. It encourages financial discipline,” he adds.

Rethinking Creditworthiness

Fonepay is encouraging banks to rethink how they access credit eligibility and who qualifies.

“A freelancer or a student with part-time income may be more reliable than a salaried worker,” says Kunwar. “We are urging banks to consider digital footprints, such as QR usage, transaction frequency and mobile banking engagement, as new indicators of creditworthiness.”

That shift is already underway. Everest Bank has launched its own virtual credit card, and Kumari Bank is currently piloting one. Kunwar believes that increased competition will drive innovation, introduce more customer-friendly features and speed up approval processes.

[Read:  Mahalaxmi Bikas Bank Introduces Virtual Credit Card in Partnership with Fonepay ]

Challenges and Opportunities Ahead

While virtual credit cards have seen early success, challenges remain. Customers are still required to visit a branch for the initial KYC process, and skepticism toward credit products, especially in rural or financially conservative households, persists. Banks also continue to rely heavily on conventional credit evaluation metrics that often exclude informal income earners.

However, both Fonepay and Citizens Bank see these hurdles as surmountable—and believe the virtual model could unlock broader use cases.

“Imagine public subsidies, student stipends or agricultural loans disbursed via virtual credit cards,” says Kunwar. “That level of flexibility just is not possible with traditional plastic cards.”

Nepal’s economy has historically been savings-oriented, unlike developed markets where credit use is routine. But digital tools are gradually changing that mindset. Thousands of Nepalis have already embraced this new, contactless form of credit—trading physical cards and paper trails for a secure, mobile-first solution.

“If we stay stuck in legacy systems like Visa or Mastercard, we will not reach the last mile,” Kunwar says. “We need to localize, digitize and think bigger. It is just the beginning—but it is a step in the right direction.”

Correction: Ganesh Raj Pokharel is the CEO of Citizens Bank International. The print version of the article mistakenly identified him as holding a different position.

(This article was originally published in  July 2025 issue  of New Business Age Magazine.)