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Business Analysis


UAE’s ‘buy now pay later’ still has room to put in more growth – even with regulations

New rules on BNPLs will act as guard rails, not curtail growth

The BNPL consumer financing revolution came up fast and strong in the UAE. That momentum is unlikely to see a slowing down.
Image Credit: Shutterstock

If you go out shopping, chances are you have noticed a sign at the check-out counter from Tabby, Tamara or Cashew, selling you instalment payments for your purchase.

They are home-grown fintechs who claim to make your life easier by enabling you to pay for your purchases in four easy instalments. These BNPL (Buy Now Pay Later) players are part of a global post-pandemic wave of consumerism that is redefining purchase behaviour of shoppers, especially of millennials and Gen Z-ers.

Shop now, worry later

BNPL is a form of easy and small-ticket credit to consumers shopping typically for non-essential products like fashion, electronics and home furnishings. Originally launched in Europe to facilitate online shopping by young consumers with limited access to bank credit, the phenomenon has now spread worldwide to in-store purchases enabled through QR codes and BNPL ‘credit’ cards.

Shoppers pay for the purchase in typically 4 instalments, with a down payment of 25 per cent of the price as the first, and the rest spread over 3 months. Given the ease of use, this facility is now extending from consumer durables to categories like travel, entertainment and insurance.

No fee or interest is paid by the shopper. The retailer covers a fee varying between 2-9 per cent of the purchase value. The BNPL provider immediately pays the retailer the purchase price less the fee, and collects the full price from the shopper in instalments. Delays in repayments results in a fee charged to the customers. Tabby, for example, charges a fixed penalty of Dh25 on the first day the repayment is overdue, and then again in the second week of default.


BNPL providers do not conduct a full-fledged credit underwriting of the customer; they typically underwrite each purchase instantly and provide approvals. Mostly no credit bureau checks are made, and there is no reporting of limits to the regulator. However, these norms will have to change soon.

Old ways in new packaging?

If you ask bankers, they will opine that BNPL is not a new product category. Banks have provided instalment payment products on credit cards for decades, often with zero interest rates. So, what’s new?

Well, two things. One is that BNPL is available to underserved consumers who might not qualify for credit cards at banks, thereby expanding access to credit from the current low levels of around 25 per cent in the region. Two is that BNPL is a more transparent product with no hidden fees, unlike bank credit cards which whack you with fees and interest every time you miss a payment or go over limit.

Hosam Arab, the founder of the regional unicorn Tabby, tells me: “Trust has been broken by banks through fine print that is designed for customers to miss. At Tabby, we are upfront with all fees and charges.”

Of course bankers do not agree. Two retail banking heads in UAE I spoke to on the condition of anonymity said that the BNPL phenomenon is ‘just a drop in the ocean’ of the consumer credit market and ‘might die a natural death’ under the weight of inevitable bad debt.


However, we are seeing some banks covering their flanks by adopting a ‘if you can’t beat them, join them’ strategy. Mashreq has reportedly invested a tidy sum in Cashew, a regional BNPL player, and Emirates NBD has a tie-up with Tabby. And it seems credit losses for most BNPL players are still very low, in low single digits.

Big volumes bring tighter regulation

The numbers are indeed staggering. In 2024, BNPL volumes globally are estimated to be $334 billion and expected to more than double by 2028 by when there could be a billion users. Klarna in Europe, Affirm in the US and Afterpay in Australia are so successful that they are inspiring bigtechs like Apple, Google and Amazon to launch BNPL variants.

In the UAE, the market is estimated to be $3 billion, a tiny fraction of the estimated $120 billion spent annually through credit and debit cards. The opportunity for growth therefore is tremendous, especially given the young population and the high adoption of technology.

Open banking, coming soon, is also expected to accelerate adoption.

With the rapid growth of BNPL, regulators are getting worried about credit quality, compliance and consumer protection. With BNPL facilities not recorded as consumer debt, is there a chance of over-leveraging by vulnerable customers?


Is easy credit a recipe for spiralling debt disaster, especially in an economic downturn? In recent times, we have seen regulators from US, UK, Europe and Australia tightening the lending norms for BNPL providers.

Closer home, UAE, Saudi Arabia and Qatar have just announced new restrictions for such type of credit, including licencing requirements for the providers.

Regulation is good for the market, and provides guard rails to a fast-growing industry that is making both consumers and retailers happy. Though maybe not the banks so much…

Suvo Sarkar
The writer is founder and CEO of 3D Advisory. Until recently, he was the senior executive vice-president of a leading regional bank in the UAE.