Flutterwave’s consumer app, Barter, announced to customers via email on Friday that they will not be able to have access to its virtual dollar card, starting from 17th July. What this spells is that customers would not be able to fund their existing virtual dollar cards, make online and in-store purchases with them, or create new ones.
Other African Fintechs followed suit, as companies like Klasha, GetEquity, Payday, and Eversend have sent the same kind of message to their customers, giving timelines between July 17 and 18 (yesterday and today). Their reason for this virtual dollar card service problem is that there was an update from Union54 (a card partner). No recommencement date has been announced.
What Does Union54 Do
Union54 serves as an issuing bank that provides both physical and virtual debit cards, and with this service, has contributed greatly to the growth of the African Fintech ecosystem. Its API allows companies to issue debit cards to their customers as well as their employees without the need of either a bank or a third-party processor. Sadly, in May, it started to experience some operational problems with its product, and this caused a temporary suspension of its Bank Identification Number (BIN).
In the same May, it sent a memo to its clients saying that while it had solved some of the problems, some were still unsolved. It also mentioned that the commercial inflexibility and inability of its partner to move quickly to implement technical solutions required for solving the operational issues they were having, was the main fundamental blocker to its operating a long-term, profitable card-issuing product.
According to sources, ever since Union54 launched, it had been experiencing chargeback fraud where cardholders claim to have not initiated a purchase before proceeding to dispute a transaction. They now place a complaint to the issuing bank (which happens to be Union54 in this situation) for a chargeback. After reviewing the complaint, if Union54 feels that it is a valid claim that the cardholder has made, it removes the transaction amount from the merchant’s account and returns it to the cardholder.
Further Submissions by Union54 About the Virtual Dollar Cards
Union54 further said in a memo that since it launched, there has been a consistent increase in fraud coming from its Bank Issuing Number, which Mastercard confirmed has been the highest history of card fraud in the region. Union54, upon investigating deeper, found out that cardholders were attempting to defraud merchants by requesting chargebacks even after their orders had been fulfilled. Also, some cardholders attempted to make purchases using empty cards.
These things affected merchants and they ended up requesting a reversal of the chargebacks from the issuing bank. Merchants like Facebook, AliExpress, and Google did that, and also reported Union54’s BIN to Mastercard. This resulted in the suspension of Union54’s BIN.
Ever since, Union54 has tried to salvage the situation and even decided to stop authorizing card payments by June 16 and stop operations by June 30. It wanted to use this time to allow for the “defunding of cards and refunds of remaining float deposits”. It added that it wanted its clients to access any user, card, or transaction data required for their ongoing operations. It also notified that its API would be unavailable from July 1. It eventually pushed the shutdown to July 18 as Mastercard (which requires that merchants keep a chargeback rate of below 1.5% of transactions) gave an ultimatum to improve its processes.
Still, Union54 has not been able to salvage the situation and has not satisfied Mastercard, as clients’ virtual dollar cards failed even more frequently, giving a poor user experience. However, Union54 is working hard to make sure that all these things are resolved and that its card services come back better in the next six to eight weeks.
