Banks are starting to roll out
prepaid products in Kenya, adding competition to an industry
already featuring M-Pesa, the powerful m-payments player. As
financial institutions begin to enter the prepaid arena, Kenya
looks set to become one of the world’s most fascinating and dynamic
prepaid markets.


The Kenyan prepaid market remains
in its early stages – fragmented and uneven, but growing quickly
despite heavy competition from m-payments specialist M-Pesa.

Prepaid cards in issue in July 2010
stood at 19.7m, up 17.6% in the seven months since year-end 2009,
and the market looks set to grow even further.

Box showing the participants at the Kenya prepaid cards round tableVisa estimates the
prepaid segment in Kenya is worth about $6bn in gross dollar volume
and expects this to grow to $9bn by 2015. The figures reflect a
prepaid cardable opportunity of $4bn at end-2009 and $5.8bn by

Jonathan Reynolds, Visa’s regional
director for central Europe, the Middle East and Africa (CEMEA),
presented the research at VRL’s prepaid round table in Nairobi,
Kenya. Bankers from some of Kenya’s leading banks, including Kenya
Commercial Bank, the country’s largest bank by assets, Citi, Equity
Bank, and Diamond Trust Bank, attended the session to discuss their
experience of the market so far and how best to build prepaid in
the country.

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What became clear during the course
of the debate was that card issuers have had many different
experiences with prepaid and the market is dynamic and still at an
early stage of development.

Among the varied issues brought up
by the banks were communication with and education of consumers, a
lack of point of sale and ATM infrastructure, and the sensitivity
of Kenyan consumers to fees.

In addition, one banker on the
panel said that some customers did not like having anonymous
prepaid cards that do not feature the consumer’s name printed on

“These anonymous cards are an
important issue,” they said. “People are not used to having cards
which do not have their names on them. It is almost like paying
with a note. This could prove problematic for merchants and
acquirers – they may not be comfortable accepting such cards.”

Reynolds said that many of the
problems affecting Kenyan issuers have been witnessed in other
prepaid markets across the world and can often be overcome.

Bar chart showing the cardable opportunity from 2009 to 2015“In my limited
experience in Kenya, but wider experience elsewhere, the general
topics brought up here are fairly similar to a lot of the other
markets we have worked in,” said Reynolds. “The first thing I would
say is Kenyan issuers are not alone in these barriers and hurdles.
I think we can look across other markets and see ways and means to

“Clarity of the product and how it
works and why it is of benefit to consumers will be important.
Education will also be important, not just to the consumer but the
variety of the stakeholders involved in prepaid. That could be
retailers, regulators and mobile phone companies.”

M-Pesa, which is covered in detail
later in a later supplement, is one of the main competitors to
banks in the prepaid space. It has convinced Kenyans to make
person-to-person payments via mobile phone – an impressive
achievement given the populations’ caution of new payment
technologies. One of the panellists said this gave some hope for
banks looking to familiarise their customers with prepaid

There is evidence prepaid cards are
beginning to gain traction with banks and consumers alike. Kenya
Commercial Bank has two prepaid cards currently in issue and has
discontinued two others.

A number of the other banks on the panel had plans to launch
prepaid in the coming months. Chase Bank, no relation to the larger
US outfit JPMorgan Chase, is the next bank to launch. It has plans
to issue a debit card in November, a prepaid card in December and a
credit product in February next year. Its initial product will be a
gift card and it also has plans to launch student and travel cards
later in the year. Equity Bank is also in the process of launching
a prepaid product.