VISA INTERNATIONAL has played down fears that electronic card fraud is exceptionally high in Kenya compared with other regions, as it seeks to broaden the use of its payment systems to new market segments including utilities.

The brand's general manager for sub- saharan Africa, Chris Winter, told The EastAfrican that Visa would explore suggestions from its member banks in the region to see how utilities can be covered. "We are in search of means to make Visa cards more secure so that they enjoy widespread acceptance. New market segments – water, electricity and telephone bill payments – would be considered in liaison with our member banks," said Mr Winter.

Kenya is Visa's fastest growing market in Africa outside South Africa, with $452 million processed through the Visa credit and Electron debit cards last year. 

That was a 43 per cent growth over the previous year, increasing the number of Visa cards in the market to 557,000, with acceptance in over 500,000 outlets. "Based on the phenomenal growth over the past 18 months, we anticipate over two million Visa cards will be in use in Kenya within the next three years," said Mr Winter. 

Industry figures show that only 40,000 of Kenya's 30 million people have credit cards, through which about Ksh17 billion ($217.9 million) changes hands annually. With merchants paying an average 2 per cent commission to card issuers, the banking industry made $340 million from credit card usage alone. Charges on credit and debit cards are liberalised, creating competition among the 10 issuing banks.

A senior bank official told The EastAfrican that Kenya's cash culture, legislation gaps and perceived transaction insecurity demotivates financial institutions from investing in payment systems for utilities. "Kenyans are yet to embrace personal cheques, let alone credit and debit cards," the banker said, adding, "We have to come up with products that meet the customers' needs; not to create imaginary needs and seek solutions to them."

So far, only KPLC and mobile service provider Safaricom have a tariff payment arrangement with Standard Chartered Bank through which customers pay for bills using their ATM cards. A similar arrangement between KPLC and the Co-operative Bank has largely served as a decentralised payment mechanism because of the bank's limited ATM network. In all, only 11,000 out of 200,000 KPLC account holders pay their bills through the facility, with very few using the ATMs for mobile phone credit recharge far.

Key in realising growth in card usage will be the capacity to improve security against fraud as well as reaching out to a wide cross section of people outside the urban areas and traditional professions. Visa is already working on replacing the magnetic strip at the back of the card with a microchip, a technology experts say is safer and less prone to physical damage and counterfeiting. 

Although the move suggests that credit card fraud is a growing menace worldwide, Mr Winter said the company was only making Visa usage more secure in order to gain widespread acceptance. Recent media reports indicated that electronic card fraud in Kenya stood at Ksh10 million ($128,205) a month, and that it was putting off both potential users and outlet merchants. "The incidence is nowhere close to the figures floated recently; maybe less than 1 per cent," Mr Winter said, describing the incidence of card fraud in Kenya as "not exceptionally high" compared with other regions.

Although no data exists on the menace, with banks keeping cases involving their customers a guarded secret for various reasons, counterfeit cards and manipulation of lost cards remain the two most common ways in which credit and debit card fraud is perpetrated. Even on the Internet, Visa technologists say, transactions are quite secure. "Research has shown that 90 per cent of the disputed transactions via the web are genuine," said Mr Winter.

Despite the assurances, Mr Winter said member banks in Kenya have a fraud forum backed by the Central Bank's Bank Fraud Investigations Unit (BFIU) through which they share best international practice against the vice. There have been fears that an alarming increase in credit card fraud in Kenya could slow down the growth in credit card usage.

The unit said they had noted a trend of fraud involving locally issued cards unlike previous, when most cases involved international cards. In March alone, the unit said Ksh10 million ($128,205) was lost through use of fake international credit cards. "We are working with the international police network to deal with the threat because there is an international ring behind it," Supt P Letting told The EastAfrican recently. 

Cases of stolen credit cards, for which some arrests have been made, have been reported at Uchumi and Nakumatt, the country's leading supermarket chains. Visa is presently running a multi-million shilling promotion campaign in the country through the two supermarkets and other merchants through which a Visa Card holder will win the top prize of a trip for two to the Athens Olympic games. 

Through marketing support to member banks, Visa expects to reach out to potential card users in Kenya and beyond. "Through Kenya, we are expecting to substantially enhance our position in the surrounding countries of Uganda, Tanzania, and Ethiopia," Mr Winter said. 

Visa has focused on Kenya longer than on other countries due to the country's stable and developed bank infrastructure and expects reforms in the information and communications sector to unlock more opportunities.

Mobile phone networks, for instance, could help credit card usage penetrate remote areas through its communication infrastructure in line with trends in other countries. "Access to rural areas can be made possible through the GSM functionality," Mr Winter noted, as has proved successful done in some former Eastern Europe countries. 
 

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