In the past decade, buy-now, pay-later services have been growing in popularity. These companies are raising huge amounts of cash to cater for a young population that doesn’t want credit cards nor paying interest.
In what seems to be a consolidation of some sorts, fintech juggernaut Square acquired Australian buy now, pay later giant Afterpay in a mouthwatering $29 billion deal this week.
This deal signals the future for markets such as Europe and America, and is also a signal of what’s to come in promising markets that are witnessing an increase in these services. In the Middle East alone, ten companies offering BNPL services were launched in just three years.
Tabby, one of these services is well-known in the area.
Global Founders Capital, STV and Delivery Hero participated in the financing round. Raed Ventures and Mubadala Investment Capital participated as well as Raed Ventures and Global Ventures. VentureSouq, VentureSouq. VentureSouq, VentureSouq. VentureSouq, VentureSouq. Outliers VC, JIMCO and HOF were also present.
The company was founded by Hosam Arabic in late 2019, after he quit fashion ecommerce Namshi. He had been the CEO of Namshi until it was acquired by a Dubai-based estate company.
Globally, BNPL Services address the obvious problems of merchants and customers by providing better rates for conversion. This is so deeply rooted, that Arab, while managing Namshi, noticed that cash was a major component of 80% of transactions. It presented unique challenges when scaling up the ecommerce platform.
We believe that buy now and pay later provides consumers with an option to make payments online. If we can do this, it becomes an interesting solution for retailers in the market .”
Tabby integrates with retail to enable customers to shop online or in-store with interest-free installments. Tabby was launched in 2020.
Tabby’s 20x increase in penetration has been one of the reasons tabby saw a 20% rise in transactions volume between June 2020 and now. The company claims that more than 400 000 active shoppers are using its platform and there are approximately 3,000 daily installs.
Arab says that tabby’s rapid growth allowed them to raise more capital than they originally intended. The company has raised $50 Million in debt financing, making it one of the most significant in the MENA/GCC region. This investment comes after tabby’s Series A and seed rounds of $7million and $23million in 2020, according to Crunchbase. Tabby received $130M in total, despite being launched early last year.
Tabby isn’t the only one with this kind of firepower. Tamara asserts that Checkout has acquired a minor stake. However, contradictory reports show otherwise.
If true, then the buyout is part of a series of consolidations taking place in the MENA region and the wider GCC. Afterpay also took a significant stake in Postpay’s recent $10 million investment. Tabby is now the only independent player on the local market due to this series of events. How does tabby see the competition?
We are seeing such high levels of competition worldwide.
I think that what Square acquired of Afterpay has shown us is the need for a greater differentiation than just vanilla BNPL.
Perhaps this is the reason tabby decided to partner with Delivery Hero rather than invest in a BNPL company. It owns several local food delivery and grocery companies in the MENA area, such as InstaShop, Talabat and Hunger Station. Delivery Hero is the first to invest in fintech in MENA.
“As our service offerings expand, we are looking for strategic partners to offer the same services going forward. It makes more sense to work with someone, say, a global BNPL company with no presence in the market.” Arab said.
Mark Venema is the Senior Vice President, Strategy at Delivery Hero and acknowledges that tabby investments are strategic. According to Venema, the multinational believes tabby has great potential to propel the industry forward. He also said that he was proud to support the company’s growth .”
Ahmad Alshammari is a partner in co-lead investor STV. He stated that the global BNPL industry will continue to grow at 30% CAGR for the next five year. “We estimate that MENA’s growth will be at least twice the rate of the rest, further accelerated through a switch to contactless payment, ecommerce growth and credit access. Tabby remains the market leader for MENA, and we believe they will keep driving BNPL’s success across the region.
Tabby will use the funding to expand its product range and reach new markets within the GCC. Will we then see further consolidation?
Arab stated that there is still a long road ahead and where they believe they are headed. He also spoke about the plans to create a business around it. The short answer to that question is “No, we are not seeking a quick exit. Otherwise, it would be possible for us to have done so by now.” We have a much bigger opportunity.
Publiated at Wednesday, 4 Aug 2021 11:01:42 +0000