Saudi BNPL Market To Hit $53bn By 2030 As Tabby Readies For IPO 

This comes against the backdrop of the growing buzz about a colossal valuation expected for the proposed initial public offering of Tabby after it secured a major funding round last week.

Alternatively, the BNPL market size is projected to reach close to $27 billion in a modest growth scenario of four per cent annually – as against the optimistic 7 per cent growth rate for reaching $53 billion, from an estimated $8 billion last year.

Tabby, the leading player in the BNPL market in Saudi Arabia, which along with Tamara controls about 95 per cent of the market, raised $160 million – a significant number considering the current tight funding scenario – at an estimated $3.3 billion valuation last week, apparently in a last funding round ahead of an IPO.

This has set off speculations about the potential valuations the fintech could be eyeing as and when it launches its IPO.

The $53 billion forecast about the surge in the Saudi BNPL market, predicted by RedSeer, a leading global consultancy specialising in digital services, is based on projections of the number of customers and merchants using the easy payment channel reaching 18 million and 80,000 by 2030.

The market size will hit $27 billion if the numbers of customers and merchants using BNPL reach 15 million and 50,000, respectively in the base case scenario, RedSeer said.

“BNPL is undeniably shaping the future of fintech in Saudi Arabia,” Akshay Jayaprakasan, Dubai-based Associate Partner at RedSeer Strategy Consultants, told Arabian Business.

“While the model has seen mixed results globally – fluctuating between hype and scepticism – the story in Saudi Arabia has been clear and compelling,” he said.

Two major players, Tabby and Tamara command 95 per cent of the market, with the remaining 5 per cent accounted for by the other 4-5 companies operating in the segment.

The absence of other major fintech players in KSA allowed Tabby and Tamara to scale rapidly, capturing significant market share by capitalising on the first-mover advantage and strong merchant relationships, with compelling offerings and continued innovation, the research said.

Boost in retail, services lead to surge in BNPL

RedSeer said the emergence of BNPL as a most preferred purchasing mode comes amidst a surge in retail and services – both online and offline – with online purchases accounting for about 60 per cent of the market.

From just digital mode, the BNPL and financing activities have grown to encompass both digital and physical shopping in e-commerce, retail and services across sectors in the last two years, enabled by some unique characteristics that make Saudi Arabia a fertile ground for BNPL to flourish, it said.

Key growth pillars of BNPL in Saudi Arabia include the country’s young population in the median age 32 driving higher adoption of tech-driven payment solutions like BNPL, lower credit card penetration – estimated at 17 per cent in 2021, and clear regulatory framework for BNPL platforms.

“The integration of SIMAH6 data, open banking, and national ID verification, along with clear KYC (know your customer) regulations helps KSA BNPL providers to offer credit responsibly, while scaling effectively,” the study said.

Unlike rising competition challenges, economic uncertainties reducing customer spending and increased defaults and tighter funding conditions hindering BNPL platforms’ growth in major markets including the US, the UK, Europe and some of the Middle East markets, the absence of other large fintechs in the face of limited issuances of licenses in Saudi Arabia help the BNPL players to thrive, it said.

“Leading players like Tabby and Tamara have thrived, driven by a well-defined regulatory framework, low credit card penetration, rising consumer spending from economic diversification, and strong KYC and credit assessment processes that keep defaults low,” Jayaprakasan said.

Tabby and Tamara each are estimated to have secured around $500 million in equity funding to date.

Future growth paths

The RedSeer study, however, cautioned that the leading players in the segment will need to step up their game to retain customers in the wake of rising consumer maturity and other payment options.

“To continue the scorching growth so far, BNPLs must retain mature consumers with access to other financial tools,” it said.

Huge expansion to cover an extensive range of merchants, efforts to evolve into comprehensive fintech platforms and moves to integrate e-commerce into their apps are some of the suggestions to players to keep up the current growth momentum.

“The market is seeing churn as the needs of customers, who are above 30, are growing.

“They also have options of credit cards, and other financial instruments, besides BNPL,” RedSeer said, suggesting that BNPL players should extend their offering to include investments, savings and mortgages.

Jayaprakasan said continuous innovation by BNPL players is needed to propel the sector forward.

“Tabby, for instance, has expanded into directly enabling e-commerce with Tabby Shop, while the Tabby Card which is launched in the UAE, has the potential to solve distribution challenges and make BNPL a truly ubiquitous payment solution,” he said.