Retail

Sama issues regulations for growing BNPL sector

December 18, 2023, 1:39 PM

An online shopping shipping fulfilment centre in Riyadh. The buy-now, pay-later (BNPL) retail sector is booming

Buy now, pay later to double
Half workforce must be Saudi
Kingdom is centre of region

The Saudi Central Bank (Sama) has issued new rules covering the rapidly expanding buy-now, pay-later (BNPL) retail sector, which analysts predict will double in size to $2.7 billion in annual transactions by 2028.

Sama said it was issuing the regulations to ensure sustainable growth, transparency and consumer rights in the BNPL market, as part of a drive to become a regional leader in financial technology.

“This decision reflects Sama’s continuous efforts to develop the financial sector as a whole and empower the fintech sector in particular,” it said.

Sama defines BNPL activity in basic terms as “a type of financing that allows a consumer to purchase goods or services without a term cost payable by the consumer”, meaning retail without interest or fees.

The new rules mean BNPL companies must maintain a minimum capital of around $1.3 million and ensure that at least half of the workforce are Saudi nationals. There are currently seven licensed enterprises in the BNPL market, among 58 registered fintech companies.

Demand for BNPL, which allows consumers to order and take a product without immediately paying for it, has risen sharply in recent years, driven by an increase in online shopping.

The consumer analysis firm Research and Markets found that BNPL payments in Saudi Arabia were expected to grow by around 13 percent annually, from $1.4 billion in 2023 to $2.7 billion in 2028.

Saudi Arabia, with the largest Gulf population at more than 32 million according to its 2022 census, has rapidly become the centre of regional BNPL business.

Tabby, a BNPL service provider that operates in Saudi Arabia, the UAE, Kuwait, Bahrain and Qatar, moved its headquarters from Dubai to Riyadh this year and raised $200 million in a Series D funding round in October, achieving a valuation of $1.5 billion.

The company, which is backed mainly by Abu Dhabi’s Mubadala, exited Egypt in February, blaming low e-commerce penetration and an inefficient credit system.

This week another BNPL company, Tamara, which is also based in the kingdom, said it had raised $340 million in a financing round that values the Saudi platform at $1 billion. Tamara claims 10 million active users in Saudi Arabia, the UAE and Kuwait, while Tabby says it has more than 4 million active users.

In the UAE, the Dubai-based payments platform NymCard acquired the BNPL provider Spotii earlier this year. Other regional platforms include Cashew and Postpay.

In August, Saudi Arabia set up a $200 million fund to invest in local and global high-tech companies, part of its strategy to transform its economy under Vision 2030. The government is trying to make Saudi Arabia a centre for venture capital in the region.