wallet funds are different from prepaid funds.
and yes, they are treated as wallet funds.
i have not seen m-pesa being accepted anywhere locally. airtel is visible at a few places.
but paytm and mobikwik are safer choices if you are looking for a digital wallet.
I would not recommend Mobikwik if you are lookning for benefits like cashback.
Airtel just had their ekyc license paused - so unless you do biometrics, they cant open an account for you.
On topic of wallets - you also have Payzapp which is decent. Phonepe as well.
Payzapp, Airtel give virtual cards which can be used to make purchases online. Now with kyc being mandatory you will need to give some proof though