With this card, you no longer need cash!

By Jackson Okoth

A quiet revolution is taking place in the local credit space. This follows the entry of prepaid cards.

Prepaid cards are plastic money usually preloaded with value in the same way that one can buy and re-load airtime. The card can be used at points of acceptance such as ATMs, point of sale terminals or online purchases.

 “They differ from a debit card in that they are not linked to the holders’ bank account and therefore limit the exposure to fraud as well as help holders to plan spending. If the card is Visa or MasterCard branded, it can be used at their points worldwide,” said Julia Matthewman, managing director, Paynet Group. In Kenya, prepaid cards are accepted in petrol stations, bank’s automated cash dispensers, supermarkets, airlines and other outlets.

Internationally, there are renown prepaid cards such as the Nectar card launched by Italy based Unicredit and the Orange Cash prepaid card (UK launched in partnership with MasterCard). It can be reloaded in about 450 orange retail outlets in the UK.

With the latter, customers are able to track their spending as well as top up their phone directly from their Orange card. While the practise is common worldwide, not many local banks practise it. Only three banks namely KCB, Investment and Mortgages Bank and Bank of Africa currently give this service. “This card is preloaded with value- which means budgeting is enhanced, as well as risk of fraud reduced. The card is fully detached from bank accounts and other credit card accounts. Prepaid cards are convenient and give the holders more control,” Matthewman tells Shilling&Sense.

She adds that anyone can buy a prepaid card, a product that does away with need to carry hard cash.

Most new generation prepaid cards are multi-functional, meaning they can be programmed for multiple purposes such as access control in companies and other facilities, loyalty card for airlines and retail merchants among other possibilities.

 Paynet Kenya has invested in pre-paid card technology and services that helps banks in their issuing of chip embedded cards-that use an operating system which enable prepaid card to replace processes. A travel health insurance could for instance, be able to pay a claim directly to its client’s prepaid card immediately after he files a claim from any part of the world.

More use

Other innovations include giving prepaid cards to shareholders of listed companies for receiving dividents. “Currently, more than a quarter of the dividend cheques sent by companies are returned and never paid either due to post office box changes or other factors. Travelers are also known to buy prepaid dollar, sterling pound and euro cards, to avoid the hassles of converting foreign currency,” said Matthewman. Prepaid cards have started making inroads locally. “As one of the ways that cashless commerce is taking shape, they are slowly claiming their place in a market where mobile money is more common,” said Matthewman.

 She adds that prepaid cards seem to serve other purposes that mobile money cannot and are therefore going to be an important component in the realisation of a cashless marketplace.

Prone to risks

While a prepaid card security is assured through the use of a personal identification number, their vulnerability to fraud and skimming differ depending on a number of factors.

“It depends on whether the card is chip based (new generation called EMV cards) which have advanced anti-fraud features or are based on the old magnetic strip standard,” said Matthewman. Prepaid cards may be in local or foreign currency depending on the financial institution issuing them.

 But be careful. The cards have charges. Some companies have hidden charges and after the card has been used at a point of sale or ATM, a charge is debited directly in the cardholders account. Users are advised to ensure they understand all the costs that are associated with the prepaid card.