Zambian card issuing startup, Union54 secures $12M in Tiger Global-led seed extension round

Union54 a Zambian card issuing fintech startup has secured $12 million in a Tiger Global-led seed extension round, with participation from existing investors like Vibe VC, new investors,  Earl Grey Capital, and Packy Mccormick’s Not Boring Capital.

Union54’s API allows African software companies to issue and manage their debit cards without a bank or third-party processor. It secured $3 million from another Tiger Global-led seed round six months ago.

Co-founders and couple, Perseus Mlambo and Alessandra Martini started Union54 in 2021 after launching, Zazu, a challenger bank, six years ago and since its launch and participation in Y Combinator’s summer batch 2021 earlier, the startup has grown to issue slightly over half a million virtual debit cards to its customers. It claimed to have processed a double-digit volume of transactions in millions of dollars.

Union54 reported a little less than $3,000 in income in its first month of operation (October). The startup’s sales soared by 600 percent in November and have 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’s not going to go away very soon,” Mlambo said.

“What’s more, our encounters with consumers and potential customers have revealed that the true issue we’re dealing with is far bigger than we could have imagined.”

Union54, according to the CEO, has gained clients from a variety of African countries. Union54 has discovered that some of the most significant difficulties they experience include lengthier settlement times for card transactions and the difficulty in obtaining dollars, based on multiple contacts with them.

A card-issuing platform isn’t equipped to address these concerns 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.

Any bank or qualifying fintech can join card schemes, which are payment networks linked to payment cards such as debit or credit cards. Visa and MasterCard are two examples of such cards, and they are the most widely used.

Union54 aspires to build a domestic competitor to MasterCard and Visa. Mlambo explained why the company chose this strategy in addition to assisting merchants with their settlement and sourcing challenges. Recent global developments, he claims, such as Visa and MasterCard withdrawing from Russia, allowing China’s UnionPay to fill the hole, have demonstrated that payments are a political undertaking.

“The goal of establishing a new card network is to be inspired by what’s 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’d wake up with no access to our cash,” Mlambo explained.

“Number two, when you think about the card networks today, they’re not fit for African merchants because settlement is often taking three days for a local debit card, maybe it’s taking over seven days for an international debit card. There’s a significant opportunity as the world realigns itself; we need to get to a point where we’ve got a payments route that needs to be developed locally for local use.”

Union54 has gotten in touch with three central banks interested in exploring how settlement agreements might operate with a new card scheme thanks to Mlambo’s and a few colleagues’ work through the African Renaissance Conference.

Meanwhile, the business has discovered over the last six months that building a card system is more of a trust issue than a technological one. To make this work, you must believe that merchants will be paid on time, that businesses will not lose money due to currency changes, and that customers will trust the card itself. By the end of the year, the business hopes to have nine central banks sign on to the framework, with a trial planned for Q2 2023.

“Ultimately, the card is a physical manifestation of that trust. By going through Central Banks, we want to understand and agree on a common framework for the paperwork that documents that cements that trust,” the CEO said.

“We’ve put in a lot of time and effort to figure out what needs to happen and when it needs to happen.” So our objective is to be able to conduct a test transaction within the next 18 months. We’ve established a goal of having at least nine member banks engage in this plan by the end of the year.”

For the time being, the implications of a new card system can only be speculated about. Mlambo, on the other hand, believes that if Union54 can strike a deal with member central banks and issue its own domestic and continental debit card, it will be able to reduce settlement times and integrate more regional payments.

Flutterwave, Payday, and Plumter (cross-border fintechs) are among the companies represented at Union54, as is Bitmama, a crypto trading platform.