It’s been a little over a year since buy now, pay later (BNPL) firm Tamara launched in Saudi Arabia, and looking back at the last 12 months, Abdulmajeed Alsukhan, the firm’s co-founder and CEO, says one thing has been clear — the BNPL service serves a huge need in Middle East and North Africa (MENA) region.
In an interview with PYMNTS, Alsukhan said people were not well served by financial services providers and credit card penetration was at an all-time low although people are well banked, both of which contributed to the rapid adoption of BNPL when it launched in the region.
There was also an inflection point in eCommerce adoption that happened in the last 12 months in the region, where eCommerce penetration was previously lower than other parts of the world but is now slated to become one of the most penetrated regions globally.
Another key insight Alsukhan said he’s learned while operating in the BNPL space since Tamara’s launch in September 2020 is the shift in the mindset of global investors towards the region. He said they are more and more open to investing in the region today than they’ve ever been, which has led to a spike in global investor interest, from venture capital (VC) to private equity (PE) firms to investment banks.
And recent consolidation moves attest to Alsukhan claims. In the BNPL segment alone, which is dominated by four main firms — tabby, Spotii, Postpay and Tamara — all but tabby have partnered or secured investments from major global players so far this year, including from Australian BNPL giants Zip and Afterpay.
In April of this year, the Saudi Fintech startup also raised $110 million from U.K.-based FinTech unicorn Checkout.com, in what was considered the largest Series A round in the MENA region. This came only four months after it closed a $6 million seed round investment led by U.S.-based VC firm Impact46.
The firm is currently Saudi Arabia’s fastest-growing BNPL provider, recording a 180% month-on-month (MoM) increase in its user base in the six-month period from November 2020 and April 2021. The firm offers two main products: ‘Pay in 30 days’ and ‘Pay in 3’, available both online and in-store through Tamara’s mobile app.
The firm earmarked the Checkout.com investment to boost its expansion across the wider Gulf Cooperation Council (GCC) region and is already operating in the United Arab Emirates (UAE) and Kuwait, with plans to launch in Oman, Bahrain and Qatar before the end of this year.
Today, Alsukhan said the young company is more global than ever, spread across four cities worldwide — Riyadh, Dubai, Berlin and Ho Chi Minh City in Vietnam. It also boasts a global workforce representing more than 22 nationalities: “When we speak, we speak the same language, which is technology,” he said.
MENA banks play catch-up
According to Alsukhan, most people in the MENA region have had very limited exposure to credit cards because banks have been consistently reluctant to offer credit cards to the masses, choosing instead to lend to corporates and high net worth individuals as an easy way to minimize their risk exposure “and make money without really serving customers,” he said.
The issue dates back several decades, he further explained, when central banks in the region were highly conservative and banks had monopoly power over the financial system. In a way they didn’t see the need to innovate or take on additional risks by producing products that benefitted the masses.
And due to religious reasons prohibiting earning money on interest, savings accounts were not popular in the predominantly Muslim region, which further limited the number of product offerings available to consumers.
As a result, banks had “cheap money” on their balance sheet, creating a culture where everyone paid using their debit cards.
But the tides are changing now, he said, and today central banks are playing catch-up to FinTech firms like Tamara that are coming onto the scene and plugging the credit card hole in the market, as people increasingly embrace BNPL as a better alternative to credit cards.
In a sign that the central bank is starting to open to FinTechs, the new “Buy Now, Pay Later” service was approved in the central bank’s (SAMA) Regulatory Sandbox in October 2020, as part of the bank’s efforts to support eCommerce and help the diversity of services offered within the financial sector.
With that approval, the Saudi firm was authorized to operate in the sandbox environment through which Tamara obtained a permit — “a lighter version of a license” — allowing the company to continue working and scaling under SAMA’s supervision until it acquires a full license.
And while waiting for that to happen, Alsukhan said they’ll be focused not only on their goal to reach every country in the GCC, but their wider ambition to reach every customer and merchant in the region.
“We need to build a brand that people want to be associated with, providing a service they love and that they trust,” he said.