A prepaid card company is trying to drive down fraud with an application that replaces plastic cards with virtual accounts that users access with mobile phones.

The company, Net1 UEPS Technologies Inc. of South Africa, is teaming up with a wireless carrier that is offering its virtual, prepaid card app to customers. The VCpay app accesses funds stored in prepaid accounts and generates one-time-use account numbers that let people make secure purchases online or by phone. Observers said that the app could encourage users to reload their accounts, a key goal for most prepaid companies.

Though the app is initially targeting the underbanked — the traditional market for prepaid products — Net1 said that the security features could appeal to a wider, banked audience, and that it is mulling versions of the technology that would work with standard credit and debit cards.

"This technology is created essentially to eliminate fraud in card-not-present transactions," said Dhruv Chopra, Net1's vice president of investor relations.

Net1, of Johannesburg, did not name its carrier partner, but a person involved in the effort said it is MetroPCS Communications Inc., a Richardson, Texas, provider of prepaid phone plans that counted more than 6.6 million subscribers at the end of last year, according to public filings. MetroPCS did not return calls Friday.

Chopra said Net1's partner is offering VCpay as a preinstalled application on new phones purchased by customers, and people can download it now on some existing devices.

Net1's primary business is issuing closed-loop prepaid cards to unbanked and underbanked consumers in developing countries. It also offers some cobranded MasterCard Inc. cards that are issued by bank partners, Chopra said.

Tom McCrohan, an analyst who follows Net1 for Janney Capital Markets, said the VCpay app will access MasterCard prepaid accounts, and initially is being offered on a version of the BlackBerry smartphone, though Chopra would not confirm either point.

Users set up a prepaid account that functions like a traditional general purpose reloadable card, minus the plastic.

They can load cash into their accounts at any of MoneyGram International Inc.'s 35,000 U.S. agent locations.

The app is offered through Net1's Plano, Texas, subsidiary, Net1 Virtual Credit Card Inc., and the virtual cards are issued by Bancorp Bank, a subsidiary of Bancorp Inc. of Wilmington, Del. FSV Payment Systems Inc., a Houston prepaid card processor, handles the transactions.

To make a purchase, a user enters a PIN and dollar amount into the app, which then generates a one-time-use card number for that specific amount. The user enters the code when paying online or over the phone.

"We think it's valuable because of the security and the unique nature of how the card and the identity are protected in the application," said Matt Frye, FSV's chief commercial services executive.

Net1 has been testing the technology with different partners in several countries but this rollout is the first commercial release of the program, Chopra said.

In addition to wireless carriers, Net1 is also looking at traditional card issuers and "large online retailers" as possible partners, Chopra added.

McCrohan said offering the application through a prepaid wireless carrier makes sense.

"The subscriber base for MetroPCS are people who prefer to have a prepaid mobile phone," he said. "There's a logical overlap between those people who are familiar with … the concept of prepaid."

Net1 sees opportunity beyond prepaid cards. For example, it could provide the technology to an issuer, which could include it in a mobile app and provide additional security for credit or debit cardholders.

But there are no current plans to do so. "I think the general view is we want to see the first commercial deployment and … how it rolls out and how it scales and how customers react to it," Chopra said. Net1 plans to offer versions of the app for other phones throughout the year.

Virtual cards, which mask a customer's true account number, are an old payments concept but are new in the context of prepaid cards.

McCrohan and Brian Riley, the research director for the bank cards service at TowerGroup, said a challenge for Net1 is making the user experience smooth.

People could grow frustrated with the process of generating a new, one-time-use card numbers with the app each time they want to use it to make a purchase, Riley said.