Zambian fintech company that issues credit cards In a seed extension round led by Tiger Global, Union54 has raised $12 million. Existing investors Vibe VC and new investors Earl Grey Capital and Packy Mccormick Not Boring Capital are among the other investors in this financing round.
Union54 Journey So Far
Union54, whose API allows African software businesses to create and manage debit cards without the use of a bank or third-party processor, raised $3 million in a seed round headed by Tiger Global barely six months ago.
Last year, the founders of Union54 started the company after going through the tedious process of issuing debit cards for their previous venture and challenger bank, Zazu.
Union54 has issued slightly more than half a million virtual debit cards to its consumers since its inception in October and participation in Y Combinator summer batch 2021 earlier this year. The company also claims to have processed millions of dollars in double-digit volumes.
Union54 Numbers
Union54 income in its first month (October) was a little less than $3,000, according to CEO Perseus Mlambo. The company revenue soared by 600 percent in November and has since expanded by 50 percent month over month.
“What this tells us is that there is a lot of genuine interest in the number of individuals who want debit cards, and it not going to go away very soon,” Mlambo said in an interview.
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“What’s more, our interactions with customers and potential customers have revealed that the real issue we’re dealing with is much bigger than we could have imagined.”
Union54, according to Mlambo, has consumers from a number of African countries (but didn’t specify how many). Union54 has discovered that some of the most significant difficulties they experience include longer settlement times for card transactions and the difficulty in obtaining dollars, based on multiple interactions with them.
A card-issuing platform isn’t equipped to deal with these difficulties head-on. To do so, a new payment application for Africa will have to be developed, which is a daunting effort in and of itself. Union54, on the other hand, hopes to achieve this with its card strategy.
Payment Networks
Payment networks linked to payment cards, such as debit or credit cards, are known as card schemes. Any bank or fintech that meets the criteria can join, according to Wiki. Union Pay, Visa, and Mastercard are the most widely used card methods worldwide.
Other schemes exist in the United States, such as Amex, Discover, and American Express. However, Visa and Mastercard dominate the market share in Africa; for example, Visa has 51 percent of cards in South Africa, while Mastercard has 48 percent.
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In Africa, there are only a few markets where domestic card schemes outperform the pair. Local labels such as Verve, the largest domestic card scheme launched by unicorn fintech Interswitch, control more than half of the market in Nigeria, according to Statista.
Union54 Vision
Union54 aspires to build a domestic competitor to Mastercard and Visa. Mlambo explained why the organization chose to go down this path, in addition to assisting merchants with their settlement and sourcing challenges. Recent global developments, he claims, such as Visa and Mastercard withdrawing from Russia, leaving China UnionPay to fill the hole, have demonstrated that payments are a politicized undertaking.
“The goal of establishing a new card network is to be inspired by what going on right now. First and foremost, we are vulnerable and prisoners to any political actions that may have an impact on continental commerce. And if something happened, we wake up with no access to our funds,” Mlambo, who co-founded the company with his wife and COO Alessandra Martini, explained.
“Number two, today’s card networks aren’t designed for African merchants because settlement for a local debit card can take up to three days.”