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Buy Now and Pay Later A player tackling the credit conundrum in the Gulf of the Middle East



It was published

May 28, 2021

Financial technology startups offering online short-term credits in Saudi Arabia and the United Arab Emirates are enjoying exponential growth as the pandemic of the new coronavirus shifts online consumer spending. Stated.


Buy Now Digitally and Pay Later (BNPL) Purchases are relatively new in the region, where consumers were traditionally skeptical of paying before they got the goods.

However, Saudi Arabia-based Tamara and UAE Spotii, Tabby and Postpay all say that this use far exceeded their initial expectations. And investors are paying attention. Tamara raised $ 110 million in debt and stock last month. This is a lot of money for an early Middle Eastern startup.

This week, Australia’s second-largest BNPL player, Zip, announced that it will buy the remaining stake in Spotii, which it doesn’t yet own, for $ 16 million. Tabby has raised more than $ 30 million, including funding from Abu Dhabi’s state fund Mubadala.

“We always need to re-predict numbers just because we’re always surprised by consumer hiring,” Tabby co-founder and CEO Hosam Arab told Reuters. T.

There is no independent data available on the BNPL market in the Middle East, including Shahry in Egypt. All companies in this sector are early starters, many of which just started operations last year.

In the United States, Australia, and Europe, BNPL is sold as a credit card replacement. During the pandemic, the service became explosively popular as consumers were looking for alternative ways to save cash and borrow money.

A 2018 report by British security firm G4S shows that BNPL companies are an alternative to cash on delivery in the Gulf. This is the most common payment method for online purchases in many Middle Eastern countries.

However, Anil Malhotra, chief marketing officer of digital payments business Bango, said that the cultural challenge of BNPL in the Gulf region is to “make sure it doesn’t look or smell like credit.” Said there is.

Some consumers in the Middle East are hesitant to use credit cards because Islamic customs prohibit the imposition of interest on loans.

Saudi Arabia’s independent retailer Crate, which introduced Tamara on its website last August, decided that most customers would prefer to pay by card or cash on delivery, although users checking out at BNPL became repeaters. I noticed.

Half of all purchases are paid by card, cash on delivery accounts for 40% of all online transactions, and BNPL accounts for 10%, CEO Rayan Fadul told Reuters.

He believes that BNPL is still new to consumers in the region who are wary of using products that they do not yet fully understand.

“They want to see others talking about it first and probably explain how easy it is.”

Physical opportunity

Models vary, but BNPL companies typically allow shoppers to make installment purchases over weeks or months. Gulf providers do not charge interest and instead charge merchants a fee to make most of their revenue.

Shoppers can be charged a large fee if they fail to pay, but providers say they are less financially burdensome than credit cards. If you fail to pay, the user may be suspended.

They also say it helps sellers grow sales by allowing shoppers to spread payments over time and allow shoppers to buy the products they need.

BNPL companies usually benefit from merchant fees and late fees rather than paying interest, so they avoid the legal and credit definition of credit.

However, the sector has been scrutinized by authorities in the UK and other countries reviewing and tightening industry rules, and some regulators say that tech companies that offer BNPL are like regular creditors. Should be regulated by.

It’s not clear how Middle Eastern regulators will respond. Financial authorities in Saudi Arabia and the United Arab Emirates did not respond to Reuters’ request for comment.

“This is credit, and bad things happen if credit is mismanaged by lenders or borrowers,” Ronit Ghose, Global Head of Banking Research in Citi, told Reuters.

Saudi Arabia and Tamara in the United Arab Emirates have signed more than 1,000 merchants and said trading volumes have increased 170% month-on-month. Available in Saudi Arabia, United Arab Emirates, Bahrain and Oman, according to Zip, Spotii has 650 merchants on the platform and has seen an average monthly turnover of 90% since its launch last year.

Postpay, Spotii, Tabby and Tamara all say they plan to expand into other markets soon.
As the impact of the pandemic diminishes, investors are also seeing opportunities for BNPL companies to do more business in the Middle East.

“Physical point-of-sale will play a huge role in the future of BNPL in this part of the world,” said Eslam Darwish, a partner at Global Ventures, a Dubai-based venture capital firm that invested in Tabby. ..

Arshaya The group is a Kuwaiti retailer that grants franchise rights in the Middle East to companies such as Starbucks and Hennes & Moritz.

“We are definitely considering using BNPL in-store to benefit customers who prefer physical shopping over digital shopping,” said Paul Morris, Chief Digital Officer. I will.

© Thomson Reuters 2021 All rights reserved.

Buy Now and Pay Later A player tackling the credit conundrum in the Gulf of the Middle East

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