Dubai: More instalment-based payment options are becoming available for cost-conscious UAE consumers, whether it’s 12 month rentals or ‘pay later’ options for remittances. These are also coming to the UAE market at a time when there has been some softening on consumer spending trends.
This week, the property portal announced that it is tying up with a handful of estate agents to offer tenants the choice of paying their annual rents across 12 months, using credit or debit card option. This is currently available only in Dubai, but the company has plans to expand its scope to some of the other emirates too. (The landlords are paid off in full by Keyper upfront.)
“Tenants can search for pre-approved units listed by our partner agencies that are already priced for monthly rent,” said Walid Shihabi, co-founder of Keyper. “We then support their journey end-to-end, from viewing the property all the way until contract signing.”
Recently, the Astra Tech owned multi-purpose app platform added the ‘send now pay later’ feature for users when sending remittances. “Users can pay later in manageable installments, providing much-needed relief during financially demanding periods, such as month-end,” said a statement.
In the first five months of 2023, Dh6.74 trillion was processed in remittances from the UAE, according to Astra Tech. For the company, it also provides another point of differentiation compared to the upfront fees charged by legacy currency exchange houses or banks.
“This service gives millions of users the flexibility to manage their financial obligations more effectively,” said Abdallah Abu Sheikh, founder of Astra Tech and CEO of Botim.
Subdued consumer spending?
Plus, consumers seem to be in the mood to go easy on spending where possible. Multiple retailers have confirmed that the recent back-to-school related spending patterns had been subdued. “You had a situation where new residents in the country were spending on requirements for their children heading to school,” said a retailer. “But of our regular shoppers, activity had in fact come down in recent months.”
Even with interest rate cuts starting and consumers finally able to get relief on their credit card bills and other loan exposure payments, it will take a while for consumer spending in the UAE to pick up, said market sources.
Tech retailers, for instance, are anxious to see how far demand for the new iPhone 16 extends to those beyond those Apple shoppers who immediately pick up a new smartphone as soon as it launches. "The 'Apple iPhone' effect is usually a good proxy to judge consumer spending," said a tech consultant. "Last year's iPhone 15 sales took a longer time to pick up, and retailers here don't want that to happen on the 16."
The BNPL phenomenon
This is where the ‘buy now pay later’ offers had been helping. In electronics and tech sales, these zero interest rate buying options currently make up anywhere between 20-30 per cent of a retailer’s consumer sales, according to some estimates.
The same trend is what’s being introduced to other possible consumer spending requirements, whether on rents or remittances. There’s even a pay later option available for those wanting to do a renovation to their homes.
A new platform, Reno, has launched to offer just that, allowing users to start on their interior design or renovation needs, but opt to pay off in instalments.
This is what Reno says is the ‘renovate now pay later’ financing proposition. “We’re proud to be a renovation company that leverages smart tools and fintech to improve accessibility and project outcomes,” said Marc Michel. “Because for us, technology does not replace the human touch – it elevates it.”
Tighter rules too
The UAE Central Bank has in force strict rules regarding the offering of pay later schemes in the market. Accordingly, ‘these services can be offered only by agents of licensed banks or finance companies, as well as ‘restricted license finance companies’, said Arun Leslie, Chief Market Analyst at Century Financial.
“The capital requirements has been well defined and a restricted license finance company or a BNPL provider must hold and maintain the higher of aggregate capital funds of Dh20 million or 5% of the outstanding lending volume.
Also, the maximum short-term credit that can be extended to a borrower by a restricted license finance company or agent at any given time must not be over Dh20,000 - or the total of three months' verified net income of the borrower, whichever is lower.
"The repayment term of short-term credit offered must not exceed 12 months from the date of the original agreement to lend," said Leslie. "Additionally, borrowers' assets, including movable and immovable property, must not be used by restricted license finance companies or agents to secure any short-term credit extended to a borrower."
Clearly, adequate protection is already in place to ensure that pay later users/borrowers do not over extend themselves on their liabilities.
For true budget conscious consumers, the pay later schemes do come as a significant relief to the other payment options they can tap. Even if interest rates are cut further...
