Buy now, pay later (BNPL) arrangements are becoming increasingly popular in Saudi Arabia, a trend that has been fueled by the e-commerce boom and embraced by the country’s youth, tech-savvy population eager to adopt what they feel is a more convenient and transparent way to finance purchases.
During the LEAP tech conference held earlier this month in Riyadh, global payment solutions provider Checkout.com shared findings from a survey of Saudi consumers it conducted in partnership with YouGov, and shared key growth metrics, outlining the rapid expansion of Saudi Arabia’s e-commerce market, and rising eagerness from the public to use BNPL products.
Checkout.com, which provides merchants with online payment options, said every sector of the Saudi economy for business-to-consumer (B2C) goods and services saw increased digital spending in 2021. Nearly half (48%) of Saudi consumers plan to spend even more on e-commerce in the next 12 months, with 40% citing the opportunity for cross-border shopping as a key reason why they now shop online.
The company observed changing payment preferences, with 55% of Saudi Arabian consumers indicating having used BNPL payment methods such as Tamara in 2021. A further 27% said they have not yet used BNPL but intend to do so in 2022.
Trends perceived by Checkout.com have also been witnessed by other payment services providers. Tamara, a Saudi BNPL platform, was launched just a little over a year ago and is already seeing massive traction.
“There is a huge gap in the market that the current legacy financial solutions are not filling,” Abdulmajeed Alsukhan, CEO of Tamara, told Arabian Business in January 2022.
“To get a sense of the size of this gap, Tamara is only 15 months old and 2021 was our first financial year, yet 2 million customers joined our platform and we have processed around SAR 1 billion (US$267 million) of GMV [gross merchandise volume] across 2,000 merchants in Saudi Arabia and the United Arab Emirates (UAE).”
Like Tamara, rival Tabby has too recorded strong growth in Saudi Arabia, a growth that’s been propelled by the COVID-19 pandemic and the boom of online commerce. The company, which has been operating for just about two years now, boasts over a million users across two markets and is today one of the top 10 shopping app in Saudi Arabia.
“With e-commerce growing 2.5 times faster than before the pandemic, the shift to e-commerce has been a key driver in the BNPL’s skyrocketing growth,” Abdelaziz Saja, general manager of Tabby’s Saudi Arabian operation, told Arab News in November 2021.
“When we launched Tabby, BNPL was only familiar to the technology community, and since then, I’d say adoption within retail and the wider community has surpassed all our expectations.”
Tabby and Tamara are the 4th and 5th most well-funded tech startups in the Middle East, showcasing investors’ bullishness on the region’s e-commerce and BNPL growth prospects. The two companies have raised US$130 million and US$116 million in total respectively from prominent investors and industry leaders such as Arbor Ventures, VentureSouq and Checkout.com.
This year, growth will likely accelerate as demand from both consumers and merchants continue rising. “I think 2022 will be the year of BNPL in the region,” said Arjun Singh, head of financial Services for the Middle East and North Africa (MENA) region at consultancy Arthur D Little.
“We’ll continue to see mass adoption by consumers… BNPL is a growth space, so more firms will enter the market.”
Checkout.com, which arrived in MENA back in 2013, started aggressively expanding its presence in the region in 2021 after closing a US$450 million Series C. The company opened an office in Riyadh in 2021, and is now planning to hire around a hundred more employees in MENA this year with nearly half of them in Saudi Arabia.
According to the company, booming BNPL adoption is part of the broader digital shift that’s been ongoing. At the LEAP conference, Checkout.com founder and CEO Guillaume Pousaz said the company has seen a 470% increase in its own transaction volumes in Saudi Arabia since 2019, “a testament to just how fast the Kingdom’s digital economy is expanding,” the company said in a statement.