Union54, a Zambian fintech that issues debit cards, has secured $12 million in a seed extension round led by Tiger Global. Other investors in this financing round include current investors Vibe Venture Capital and newcomers Earl Grey Capital and Packy Mccormick’s Not Boring Capital.
Union54, whose API enables African software businesses to create and maintain debit cards without the assistance of a bank or third-party processor, raised $3 million in a seed round also led by Tiger Global six months ago.
Why The Investors Invested
The startup has acquired considerable traction since it was founded in 2021. Union54 has issued somewhat more than 500,000 virtual debit cards to its consumers since its October 2021 launch and participation in Y Combinator’s summer batch 2021. The company also claims to have processed quantities in the millions of dollars that are now in the double digits.
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According to CEO Perseus Mlambo, Union54’s income in its first month (October) was slightly less than $3,000. The company’s revenue surged by 600% in November and has since soared by 50% month on month.
“What this is telling us is that there’s very much real interest in the number of people who want to have debit cards and this is not going to stop anytime soon,” Mlambo said in a statement.
“What’s more, our interactions with customers and potential customers have shown us that the real problem we are tackling isn’t the ease of issuing cards– rather, it’s much broader than we could have imagined.”
A Look At What The Startup Does
Union54 was founded last year after the founders went through laborious processes to produce debit cards for their previous venture and challenger bank, Zazu.
Mlambo claims Union54 has consumers from a variety of African countries (but he does not provide a specific figure). And, based on many contacts with them, Union54 has identified some of the most serious difficulties they encounter, such as extended settlement times for card transactions and trouble accessing money.
Union54 aspires to be a local alternative to Mastercard and Visa. In addition to assisting merchants with settlement and sourcing concerns, Mlambo provided additional insight into why the company chose to go this path. Recent global events, such as Visa and Mastercard withdrawing from Russia, leaving China’s UnionPay to fill the hole, have made it clear to him that payments are a politicized undertaking.
“The purpose of creating another card network is an inspiration of what’s happening right now. Number one, we’re vulnerable and hostage to any political decisions that might affect trade on the continent. And if anything were to happen, we would wake up and would not have access to our funds,” said Mlambo, who founded the company with his spouse and COO Alessandra Martini.
“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.”
Mlambo believes that Union54 may strike a deal with central banks and issue its own domestic and continental debit card, reducing settlement time and integrating more regional payments.
“We’ve invested a lot of time and effort to understand what needs to happen and when. So our goal is that in the next 18 months, we should be able to do a test transaction. We’ve set ourselves to target the end of this year to have at least nine member banks join to participate in this scheme.”
Union54 card Union54 card
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh