Zambian card-issuing fintech Union54 has raised $12 million in a seed extension round led by Tiger Global. Other participating investors in this financing round include existing ones such as Vibe VC and new investors Earl Grey Capital and Packy Mccormick’s Not Boring Capital. It’s been only six months since Union54, whose API allows African software companies to issue and manage their debit cards without needing a bank or third-party processor, announced its seed round of $3 million, also led by Tiger Global. Union54 founders launched the company last year when they went through painstaking processes to issue debit cards for their previous startup and challenger bank, Zazu. Since its launch in October and participation in Y Combinator’s summer batch 2021 earlier, Union54 has grown to issue slightly over half a million virtual debit cards to its customers. The company also claims to have processed volumes now reaching double digits in millions of dollars.
A card-issuing platform isn’t in the best position to tackle these issues head-on. Doing so will require creating a different payment application for Africa, and that’s an audacious task of its own. Yet, that’s what Union54 intends to accomplish by creating its card scheme. Card schemes are payment networks linked to payment cards, such as debit or credit cards. According to Wiki, any bank or eligible fintech can become a member. The most popular card schemes globally are Union Pay, Visa and Mastercard. In the U.S., there are other schemes such as Amex, Discover and American Express. But in Africa, Visa and Mastercard dominate the market share; for example, in South Africa, the distribution of cardholders with Visa is 51% compared to Mastercard’s 48%. There are very few markets where domestic card schemes edge out the pair in Africa. Nigeria is one such market where, per Statista, local labels such as Verve, the largest domestic card scheme developed by unicorn fintech Interswitch, control more than half of the market. The company has learned these past few months that developing a card scheme is not a technical problem so much as it is a trust problem. Trusting that merchants will get settled on time, that merchants don’t lose money across currency conversions and that consumers trust the card itself are crucial to making this work. The company plans to get nine central banks to establish this framework by the end of the year toward a pilot by Q2 2023.