Stock - BNPL
The BNPL fund raising juggernaut rolls on, with budget-conscious shoppers looking for the easiest alternative to buy - and keep their interest rate payments minimal. Image Credit: Shutterstock

Dubai: The ‘Buy Now Pay Later’ consumer financing space gets a timely boost, with UAE’s Mashreq Bank investing $10 million in cashew, which provides shoppers options to pay off purchases in zero-interest monthly payments.

This is the second biggest funding raised by a local/regional BNPL platform recently; another player in this space, Tabby, confirmed it had raised $54 million from Saudi venture capital firm STV and Sequoia Capital India in March.

For Mashreq, this is third big exposure in the fast-emerging fintech space, and a senior official believes that cashew can be a good fit to the portfolio.

“BNPL as a mode of payment is gaining traction globally, in the wider region, and the UAE in particular, where Mashreq aims to play a key role in this space,” said Fernando Morillo, Senior Executive Vice-President and Group Head of Retail Banking Group at Mashreq Bank. “We believe this offering will allow an alternate option to pay for the consumers and would increase the size of the pie.

“We are looking at the partnership to offer more payment options to our merchant partners which would drive more business for them. We would also create longer tenure BNPL options, which would differentiate our offerings from others in the market.”

cashew will offer its services to those merchants who have signed on with Mashreq’s payments subsidiary Neopay. There will also be ‘co-created’ products exclusively for the UAE market.

The BNPL way

It was in the second-half of 2020 that the Buy Now Pay Later financing options showed up on consumer and retailer radars in the UAE and Saudi Arabia. Its acceptance has since widened as the portals offer ‘zero-interest rate’ payment support, and the payments to be paid off in months. More retailers and ecommerce portals have signed up with BNPL portals to offer these schemes to their shoppers.

Apart from the UAE and Saudi Arabia, Cashew launched in Pakistan through a sister company and will add Oman and Egypt in the second-half of the year.

“The investment deal with Cashew is a mix of equity and debt,” said Morillo. “We cannot comment on the size of Mashreq's stake. We have joint milestones that have been agreed as part of the deal, which would help us leverage each other's strengths and add value to our customers. Mashreq will work with Cashew to open up Egypt, which is a key market for BNPL in the region.”

Maintain the momentum?

After a hot streak in 2020-21, there were doubts expressed in some quarters about whether BNPL platforms can maintain that. A lot depends on the number of retailers willing to offer these services to shoppers.

According to from Ammar Afif, Co-founder and CEO of Cashew, the BNPL space needs more work to be done to fine-tune the processes. Only then will sustained growth come through.

“There are a variety of factors connected to why we have seen limited growth in BNPL in the region. There are the limited use-cases for in-store experience. Doing it via QR code or App in-store is not ideal and thus integration with POS (point-of-sale) is essential.

“Retailers have also been reluctant to share any data with BNPL providers, which would make it easier to approve loyal consumers or have data points on an applicant. As all BNPL is paid in three or four installments, having longer tenures will help consumers for larger ticket items.

“Lastly, no BNPL player has shown the ability to bring new consumers to a retailer. We have addressed these factors when developing our model - and this is why we have chosen to collaborate with Mashreq on this.”

And with $10 million added to its reserves, work on more growth in the near-term.

Mashreq’s fintech push
The Cashew investment is Mashreq Bank’s third exposure a local/regional fintech in short order.

The other investments were in NymCard (a API card issuing platform) and Touché, a niche solutions provider for hospitality and F&B merchants. These were made through a fintech investment fund set up by Mashreq.

“We do not use a separate arm for these,” said Fernando Morillo, Senior Executive Vice-President and Group Head of Retail Banking Group at Mashreq Bank. “These investments are in line with our commitment to foster the growth of local fintechs in the region. As part of the fund, we invest in fintechs who work with us, which helps us to co-create products and solutions that add value to our customers.”