Increasing instances of cyber crime are discouraging holders of prepaid cards from using them more frequently and for high-value transactions.
The trend has become more overt in the five months to February, with the number of transactions through prepaid cards declining steadily, matching a similar trend on the value.
This was so even with the number of prepaid cards issued and active increasing to an all-time high in February at 128,872 from a mere 17,000 in mid-July 2009.
Prepaid cards are usually a convenience payment mode that holders use to transact with when shopping, travelling or paying for accommodation. They are loaded with money, at times in multi-currency, and usually powered by banks.
Central Bank data shows the number of prepaid card transactions slowed month-on-month over five months to 4,701 in February from 5,196 in October. A similar inflection is seen in the value of transactions which decreased steadily to Sh44.1 million in February from Sh57.8 million.
"What's happening is that more people have witnessed cases of hacking after using their debit cards interchangeably as prepaid cards especially when some banks ran swipe promotions," said an bank insider who declined to be named as he is unauthorised to speak on behalf of the bank.
He said most fraud cases involve hacking of debit card holder's accounts and one later realises that unsanctioned deductions have been made.
As a result, banks have prepaid cards that are not directly linked to accounts of the holders to circumvent the cyber fraud dilemma. Prepaid cards are also popular for online transactions.
I&M Bank, which offers a range of Visa prepaid cards, says they "are convenient payment cards" designed for local and international travellers and shoppers. It sells the cards in its branches and through appointed agents.
Kevin Nyateng, who works with the bank's central marketing, said the local currency card dubbed I&M M-Pesa Pre-pay cost a one-off Sh850. The card holder then pays Sh125 every time they reload up to Sh0.5 million. The card is valid for up to two years.
"Our pre-pay cards are not linked to bank accounts for security purposes," he said.
Use of prepaid cards is expected to increase countrywide as the transport sector adopts the cashless payment system from next month. Already, a number of operators have unveiled commute cards in partnership with banks.
Their success is however pegged to how flexible they will be and how fast they gain commuters' trust.