Card firms eye Africa’s unbanked population

By Jackson Okoth

Global card companies are eyeing Africa’s non-bank account holders, who still have no access to formal financial services.

In Kenya, plans are underway to issue prepaid credit cards to this un-banked population, a segment so far accessible only to mobile phone companies, through their money transfer services.

" We need to capture this market and provide solutions," Victor Ndlovu, Visacard Africa, said at the recent CardExpo East Africa 2009 held in Nairobi. A prepaid credit card account is opened when a client deposits money into that account, and the card can be used anywhere, just as one would a regular credit card.

Diaspora remittances

Visa is also looking at the international money transfer business.

" There is also a card to card transfer technology, which is available for diaspora remittances," said Ndlovu.

Visa is also eyeing African Governments, whose transactions are still mostly paper-based. Using digital currency could reduce procurement costs.

" For those without bank accounts, a pre-paid card can assist in building up one’s credit history, enabling them to access credit from the bank," said Bernard Matthewman, MD, Paynet Group of companies.

While mobile phone companies dominate the pre-paid accounts, card companies are seeking to increase their penetration.

" It is critical for mobile phone companies to partner with banks. Although integrating a phone and card is still a long way from being a reality, enormous opportunities exist," said Matthewman.

Commercial banks are limited by their distribution networks in reaching out to the, mostly rural, un-banked segments. On the other hand, mobile phone companies need the cash to give to their subscribers.

" Market education is still lacking in the card space and this has affected their uptake," said Matthewman.

Visa and MasterCard credit cards are considered the most widely accepted cards in Kenya. Other credit cards much less so.

However, there are many shops, supermarkets and retail outlets without automatic dial-up systems for credit card transactions.

Credit fraud

And although no reports of massive credit card frauds have been reported, manual systems, like the swap machines in some more up-market places in Nairobi, are more susceptible to fraudulent transactions.

The tussle for the pre-paid market is happening as most commercial banks launch their mobile banking platforms.

This new technology targets millions of mobile phone users who lack access to bank accounts.

It is expected that soon, those with bank accounts will begin to use their mobile phones to pay for their cost of shopping, the same way as credit cards.