COVID-19 has already killed more than 260,000 people and infected over 3,700,000 people so far, according to data from Johns Hopkins University. In addition to the serious health implications, the virus is also having a several impact on businesses and startups.

In these dire times, the community has come together to show solidarity by donating resources and developing special products to help their peers.

To do our part in this global effort and support the fintech startup community, the Fintech News Network will be looking at a promising startup each week to give them the spotlight.

Today we look at Tabby, a provider of instant credit to consumer shopping at online and offline retailers from the United Arab Emirates (UAE).

Tabby: buy-now, pay-later in the UAE and Saudi Arabia

Founded just last year, Tabby is a new fintech startup based in Dubai that offers consumers across the UAE and Saudi Arabia with the flexibility to pay for their online and offline purchases either in a deferred single payment, or in multiple installments, without any interest fees.

The buy-now, pay-later startup says it has built proprietary decision engine that allows customers to check out without the need to enter their credit or debit card details when making a purchase, offering thus an alternative to cash-on-delivery (COD).

For customers, Tabby allows them to better manage their spending by making purchases at their convenience and paying for these when they have the funds available. For retailers, Tabby’s flexible consumer payments options mean access to a larger customer base, and more revenue through larger transaction sizes. According to the company’s website, retailers are paid at the time of purchase and don’t need to wait for customers to make payments.

In the region, fintech companies such as payments startup Payfort have been providing customers with the ability to make purchases and pay for these in installments. However, their model requires customers to use credit cards, and most oftentimes, cards from select-banking partners only. Tabby differentiates itself from competitors in that it does not require a card at all, the startup says.

How Tabby works

To pay with Tabby, customers simply need to apply for a Tabby payment at a partner store checkout, and confirm their purchase with a 4-digit SMS code sent to their mobile. Once the goods are received and in line with expectations, customers have up to 14 days to make the payment using a debit or credit card through their Tabby account. More payment methods will be added in the future, the company says.

Tabby charges 10 AED as a service fee. In the case of a late payment, 15 AED is charged on day 15 after the order was delivered. If customers have not repaid after another two weeks, a late fee of 30 AED is applied, and in 4 weeks after the initial due date, Tabby applies an additional 60 AED. Late fees are capped at 105 AED.

In November 2019, Tabby raised US$2 million in a seed funding round by Global Founders Capital, with backers including Arbor Ventures and Wamda Capital. The company said at the time that it would use the new funding to further develop its proprietary technology, grow its merchant network and hire talent across multiple geographies.

Booming e-commerce industry

The entrance of Tabby in the region’s startup scene comes at a time when the Middle East and North Africa (MENA) is recording strong growth in e-commerce.

In 2017, the MENA e-commerce market reached US$8.3 billion with an average annual growth rate of 25%, ahead of the global average, according to a 2019 Bain & Company report. The UAE and Saudi Arabia accounted for 60% of the region’s e-commerce market.

Though COD continues to be the preferred payment option for the majority of online shoppers in MENA, the method comes with a hefty price tag and often translates into a higher risk of packages being returned.

Additionally, with the COVID-19 pandemic and governments around the world advising to restrain contact, consumers are rapidly turning to other payment methods such as contactless and digital payments.

The market share of the buy-now, pay-later payment method increased from 3% of all e-commerce transactions in 2018 to 8% in 2019, and is forecasted to just over double that growth again by 2023, according to the Worldpay from FIS 2020 Global Payments Report.