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Buy now, pay later growing fast in UAE and Saudi Arabia

BNPL uae saudi gulf Unsplash/Microsoft 365
Fashion and electronics are the two most popular BNPL purchase categories in both the UAE and Saudi Arabia
  • BNPL use doubled since 2022
  • Linked to strong e-commerce
  • Regulation challenges remain

A tech-savvy society, an expanding e-commerce market and the appeal of flexible financing options is fuelling the UAE and Saudi Arabia’s buy-now-pay-later (BNPL) sector, according to industry experts.

BNPL – when people can make immediate online purchases and spread payments over interest-free instalments – has grown in popularity in the Gulf since the Covid-19 pandemic.

Companies make their money by charging consumers late payment fees and taking a commission from merchants.

In Saudi Arabia, they can extend unsecured credit of only SAR5,000, while in the UAE the limit is AED20,000 or three months’ income, whichever is less. A salary certificate is also typically required.

BNPL providers in the UAE can also review a borrower’s credit report if their total credit limit exceeds AED5,000.



While BNPL penetration in the UAE and Saudi’s domestic e-commerce payments was below the global average in 2022, usage has since doubled and one in five consumers now use it for purchases, according to Redseer Strategy Consultants. 

Local players such as Tabby, Tamara and Cashew are driving this regional surge.

“The growth of BNPL services is intrinsically linked to the region’s robust online sales and the relative scarcity of traditional consumer lending options,” says Nitin Reen, a partner at Nuwa Capital, a Dubai-based venture capital company. 

The UAE’s e-commerce market, for example, is expected to reach $9.2 billion by 2026, accounting for 13 percent of total retail sales, according to Dubai Chamber of Commerce.

This surge in online shopping aligns with the region’s push towards a cashless society – a trend Luka Celic, head of payments architecture at technology company Endava, believes is driving BNPL adoption.

“The post-Covid transition towards digital services is common globally, but the UAE and Saudi Arabia, in particular, have witnessed a shift towards an ‘order everything’ culture among consumers,” Celic says.

“This culture is particularly appealing to younger, tech-savvy consumers such as millennials and generation Z seeking to make instant purchases beyond their immediate budget,” adds Celic. 

User demographics differ slightly between the two countries. 

The UAE has a user base dominated by young expatriates aged 18-35, while Saudi Arabia sees a higher prevalence of young nationals, often within larger households.

Fashion and electronics are the two most popular purchase categories across both countries but then preferences diverge. 

Celic says that beauty, travel and home furniture are popular choices in the UAE for BNPL purchases, while automotive, health and fitness and education are more in demand in Saudi Arabia.

Despite this promising growth trajectory, significant challenges remain. 

Evolving regulatory frameworks, building consumer trust and awareness, and intense competition from both local and international players are all challenges BNPL providers in the UAE and Saudi Arabia must navigate, analysts say.

Last year, the UAE and Saudi Arabia introduced new regulatory frameworks for the sector.

The Saudi Central Bank says that BNPL companies must maintain a minimum capital of around $1.3 million and ensure that at least half of the workforce are Saudi nationals. 

The UAE dictates that short-term credit can only be provided by entities acting as agents of licensed banks or finance companies, subject to approval from the central bank. 

“BNPL services can be a boon for consumers and merchants alike, but there are, of course, potential risks that need to be carefully managed,” cautions Reen. 

Industry experts such as Nameer Khan, chairman of the Mena Fintech Association, echo this concern, highlighting the challenges of regulatory scrutiny and managing credit risk, areas where some BNPL fintechs have struggled. 

Celic also emphasises the need for a scalable technological infrastructure to handle growing transaction volumes while ensuring data security and fraud prevention: “Integration into existing merchant payment systems is crucial for growth.”

Nuwa Capital’s Reen saiys the growth of BNPL is changing shoppers’ behaviours: “As merchants in the region witness an uptick in BNPL usage, they’re not only seeing an increase in average basket sizes but also a significant reduction in cash-on-delivery orders.

“This shift is accompanied by an influx of new customers. These factors are creating an ecosystem where both the customer and the merchant benefit.”

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