Tiger Global Management-backed African startup Union54 is joining the race to create super apps as investors seek to capitalise on the continent’s growing tech-savvy population.
Tiger Global Management-backed African startup Union54 is joining the race to create super apps as investors seek to capitalise on the continent’s growing tech-savvy population.
According to Union54 founder and CEO Perseus Mlambo, the new ChitChat app, which could launch in September, offers secure messaging along with dollar-based virtual cards that were created in collaboration with Mastercard Inc. to enable international transactions. On the platform, it also intends to offer services for payments, gaming, dating, and food delivery.
Users will have the option to send each other money in addition to messaging. They may purchase airtime. In an interview, Mlambo stated that they could purchase bus tickets.
Super apps, which offer users a one-stop shop for services and payments and have found success in regions of the world with significant unbanked populations, include the widely used Alipay in China, WeChat, and Careem in the Middle East. MTN Group Ltd. and Safaricom Plc, among other businesses, have already launched comparable products in a few markets in Africa, where cash still dominates transactions.
In 2021, African Startup Union54, a company that specialises in financial technology, was founded. Before suspending the service last year due to charge-back fraud, it had issued more than three million virtual dollar cards.
The problem, which involved errant customers who would pay for an item, receive it, and then request a refund, was addressed, according to the company. Union54 had weekly bills totaling $500,000 before it stopped the service due to fees for debit orders that failed due to insufficient funds in users’ accounts.
For the clients of Union54, to whom it had issued Mastercard’s virtual cards, the charge-back saga was a headache. In a separate interview, Gabriel Swanepoel, country manager of Mastercard South Africa, said, “We’ve gone through quite an extensive programme to ensure the issues we were seeing have been addressed.
The Ayoba app was launched four years ago by MTN Group, the largest mobile network operator in Africa, and it currently has 25 million monthly active users. Kenya’s Safaricom, which launched its M-Pesa super app in 2021, has had more than 5 million downloads from the Google Play store. VodaPay app, created in the same year by Vodacom Ltd. and Alibaba, has 3.3 million active users.
Union54 will use the $12 million it raised through a Y Combinator seed funding round headed by Tiger Global last year for the project as seed money. According to Mlambo, it intends to maintain a 40% stake in ChitChat while giving local businesses shareholdings in the markets where it intends to operate, initially in Angola, Tanzania, Uganda, and Zambia.
Union54 has a partnership with Nala, a money transfer service that also went through Y Combinator, in Tanzania and Uganda. According to him, it will function with Mlambo’s Zazu Africa payments app in Zambia and PayPay Africa in Angola.
As intra-continental trade expands, financial technology businesses and products, including super apps, are expected to prosper in Africa. In August, McKinsey & Co. predicted that by 2025, revenues from financial technology in Africa could increase by eight times to $30 billion.
Fintechs have received significant investment, but nobody has yet been successful in cashing in, according to Mlambo. “Exactly because they’ve barely covered more than two or three different markets.”