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Zambian Fintech Union54 Makes Strategic Shift, Embraces Super App Structure for Growth

June 30, 2023

Union54, a Zambian start-up backed by Tiger Global Management, is making a strategic shift by entering the race to develop super apps in Africa. With a growing market of tech-savvy individuals on the continent, the company sees an opportunity to tap into this potential. Union54’s founder and CEO, Perseus Mlambo, reveals their upcoming super app called ChitChat, which is expected to debut in September. This app will provide secure messaging capabilities along with dollar-based virtual cards, developed in collaboration with Mastercard, enabling users to engage in international transactions.

Union54’s founder and CEO, Perseus Mlambo

Union54 has ambitious plans for ChitChat beyond messaging. The platform aims to offer a wide range of services, including payments, gaming, dating, and food delivery. Mlambo emphasizes that users will have the convenience of sending money to each other, purchasing airtime, and buying bus tickets directly within the app. The company aims to replicate the success of super apps like Alipay and WeChat, which have thrived in regions with large unbanked populations.

The decision to develop a super app aligns with Union54’s previous focus as a fintech company. In 2021, they issued over three million virtual dollar cards, but had to suspend the service due to charge-back fraud. The company has since addressed the issue and taken steps to prevent it from recurring. Union54’s clients, who were provided with Mastercard’s virtual cards, experienced difficulties during the charge-back saga. Gabriel Swanepoel, the country manager of Mastercard South Africa, confirms that measures have been implemented to rectify the situation.

Union54 plans to finance the ChitChat project using the $12 million it raised through a Y Combinator seed funding round led by Tiger Global. They intend to retain 40% ownership of ChitChat and involve local companies in the markets they aim to operate initially, including Angola, Tanzania, Uganda, and Zambia. Collaborations have been established with companies like Nala, a money transfer service, in Tanzania and Uganda; PayPay Africa in Angola; and Zazu Africa payments app, founded by Mlambo, in Zambia.

The future looks promising for fintech companies and their offerings in Africa, including super apps. As cross-border trade within the continent continues to grow, McKinsey & Co has forecasted that African fintech revenues could increase eightfold, reaching $30 billion by 2025. Mlambo believes that the key to success lies in expanding beyond just a few markets, which many fintech companies have failed to do thus far.

In summary, Union54’s entry into the super app race demonstrates their strategic pivot towards capitalizing on Africa’s tech-savvy market. With the upcoming ChitChat app, they aim to provide a comprehensive platform that combines secure messaging, international transactions, and a range of services to cater to the needs of African users.

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Charles Rapulu Udoh

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

Again, Tiger Global Backs Zambian Card Issuing Startup Union54 In $12m Seed Extension Round

April 18, 2022

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.

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

In 2020 we hosted African Renaissance Conference with @wizaj and @mwiyas and that turned into how can we position Zambia as the city on the hill for African interests. ARC2022 is coming soon with plenty of announcements. https://t.co/8fId7hz6iH
— Perseus Mlambo (@perseusmlambo) January 13, 2022

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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

Why Tiger Global Made Its First Entry Into Zambia, Through A $3m Seed Round In Union54

October 27, 2021

Union54, the first startup in Zambia to be backed by Y Combinator, has secured investment from Tiger Global, one of the world’s leading venture capital firms. The VC behemoth led the company’s recently concluded $3 million seed round, which came only two months after it graduated from Y Combinator’s summer batch. Runa Capital, Ace & Company, Todd & Rahul Angel Fund, and Vibe VC, all based in San Francisco, also took part.

Union54 founders, Perseus Mlambo and Alessandra Martini

Among the angel investors who participated in this round are Babs Ogundeyi, the CEO of Nigerian neobank Kuda; Risana Zitha, managing director of Renaissance Capital; and Gbenga Ajayi, former head of SMB Growth at Wise.

Union54 intends to use this funding to expand its engineering, product, marketing, and sales teams. The monies will also be used to grow the Zambian company’s regional consumer base.

“The purpose of this funding is to help us find the best of African talent, people who want to work on big problems. The investment helps us to be able to go to them and say, ‘hey, we’re a well-funded company, we’ve got customers using us, we’re earning revenue and this is going to be one of the most important companies to come out of Africa.’’

Why The Investors Invested

Investment in Union54 came mostly because of the recent participation of the startup in the Y Combinator accelerator program this year. This may have partly prompted Tiger Global to invest in Zambia, outside of Nigeria and South Africa, two of Africa’s four most powerful tech ecosystems. The VC had previously made investments in Nigeria’s Jobberman, Cheki and Wakanow, as well as South Africa’s e-commerce company Takealot. As a result, Tiger Global’s seed round investment in Union54 is a huge gain for the southern African country.

But then the experience of the funding team proved a major decider for the investors. Founders Perseus Mlambo and Alessandra Martini had been tilling at Zazu, where they raised over $2 million as one of Zambia’s most funded startups. Zazu, launched six years ago, was until its pivot into Union54, a challenger bank, and was the company the founders were admitted into the YC Combinator program with.

Union54’s relative traction is also a factor in the latest investment round. Union54’s API sandbox environment now has over 50 companies. Digital banks, post-Series A fintechs, and “businesses formed on the basis of Union54’s availability” are among them. Four businesses are now in full production and are providing virtual cards to their clients. Mlambo estimates that another 30 people will join by the end of the year. According to the CEO, the average time it takes for these companies to commence production and begin issuing is three to nine days. Founder Mlambo also claims that Union54 has already transacted more than Zazu’s volume in less than a month of operation. Flutterwave, an African unicorn, as well as newer startups like Payday and Plumter (cross-border fintechs) and Bitmama, a crypto exchange platform, are also among the startup’s partners.

Andre Bliznyuk, general partner at Runa Capital, said the firm is pleased to support Union54’s efforts to “supercharge the African fintech ecosystem by enabling its customers to effortlessly launch new card-based products and give concrete value to consumers.”

A Look At What The Startup Does

Union54 is an API that allows African software firms to create and manage debit cards without the need for a bank or third-party processor. It was founded by Perseus Mlambo and Alessandra Martini in 2021 following a major pivot from Zazu, a challenger bank.

Basically, Union54 onboards a fintech firm, and the fintech company uses Union54’s API to issue a single card to an employee. When an employee uses the card to pay for something online, such as a Netflix subscription or a $30 AWS invoice, the fintech earns 1% of the transaction, or $0.30 in this case.

The Zambian startup intends to add value by assisting fintechs in generating considerable interchange money without having to undertake much of the hard work associated with card management.

“Not only are we allowing fintechs to go to market faster than any bank or card issuer could ever dream of doing, but we’re also really showing that our incentives are very much aligned,” said Mlambo. “We only make money when they do and that’s why we’re happy to give a guarantee with that interchange.”

Zambia, according to Mlambo, is a good place to do business. However, he claims that convincing people to relocate to Zambia for work has been difficult, so Union54 has had to rely on remote work (which is now the standard) for the majority of its early years. It now has a small team of ten people spread across Nigeria, Malawi, South Africa, Zambia, and Europe.

Union54 Zambia Union54 Zambia

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write