Many African fintech startup companies shut down their virtual dollar card services after a reported “chargeback” fraud.
On Friday, Nigerian fintech company Flutterwave sent a message to its Barter customers that the virtual dollar cards will be unavailable for any transactions and payments. The company specified that this will be effective as of Sunday, 17 July 2022.
According to TechCrunch, other fintech startups including Eversend, Klasha, Busha, GetEquity, and Payday followed suit and informed customers that virtual dollar card services would be discontinued between 17 July and 18 July.
The fintech companies reportedly pinned the disruption to a certain card partner, Union54.
Union54 is a financial technology company that offers card issuing services without needing a third-party processor. In May, Union54 started experiencing some operational issues with its product which resulted in the temporary suspension of its Bank Identification Number (BIN), TechCrunch reported.
BIN is the first 4 to 6 numbers on a payment card to identify the card issuer. Soon after, the company reportedly said that it had solved the issue.
It then became apparent that Union54 has been experiencing chargeback fraud since its launch.
This type of fraud is when consumers fraudulently attempt to secure a refund using the chargeback process. A customer might contact the card issuer to claim that they never made a certain purchase when they actually did, in order to be refunded.
Union54 found that many customers were increasingly defrauding merchants using this method. The company added that some even tried to make purchases using empty cards.
The company is still looking for a resolution to have its services up and running in the next 6 to 8 weeks.For a relatively new market innovation like ours, we are aware that we will be prone to challenges such as this periodically. We want you to know that we did everything possible up to the last minute to avoid this, but unfortunately, it was impossible to remedy on the go,” it said.
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