Buy Now, Pay Later (BNPL) fintech startup tabby has enjoyed one of the few silver linings of COVID-19 this year: a boosted e-commerce sector, thanks primarily to people stuck at home during quarantine resorting to online shopping. The regional e-commerce market value had shot up from $5 billion in 2015 to $18 billion at the end of last year, according to global management consulting firm A.T. Kearney Middle East, and 2020 has only been witness to more growth as the months passed by.
With the sector estimated to grow to $21.6 billion market value by the end of this year, from $17.7 billion last year, tabby and other companies providing services to online retail businesses have naturally flourished.
Now, the BNPL startup, which operates in the UAE and Saudi Arabia, has announced that it has raised Series A financing of $23m in debt and equity, led by Arbor Ventures and Mubadala Capital, with participation from STV, Raed Ventures, Global Founders Capital, JIMCO, Global Ventures, Venture Souq, Outliers VC, MSA Capital, HOF and Arab Bank.
The company says that this funding will fuel its next stage of growth, helping tabby materially scale its product and engineering capabilities in addition to its lending capacity, further benefiting its merchant partners and consumers. The Series A financing builds on an exceptional year for tabby which saw a rapidly growing roster of large-scale retailers and market momentum driven by evolving consumer demand.
Founded in 2019, tabby partners with retailers to offer their customers online or in-store the ability to defer paying for their purchases for up to 30 days or to pay in 4 equal monthly installments at zero cost to the consumer. Today, tabby’s customers are able to use its service across more than 500 integrated merchants, including leading global brands like IKEA, Toys R Us and Ace Hardware and regional retail giants including Al Futtaim Group, Landmark Group and Apparel Group.
Ibrahim Ajami, Head of Ventures at Mubadala said: “Buy-now-pay-later solutions are booming globally thanks to accelerated payments digitization and e-commerce penetration, and the Middle East is no exception. tabby’s solution fits squarely within our thesis that fintech solutions will drive better experiences for merchants and consumers.”
COVID-19 bolsters tabby’s growth
tabby said that it has managed to successfully capitalize on three key COVID-driven trends that have helped fuel its growth: the dwindling availability of consumer credit, the adoption of contactless payments by consumers, and the rapid retail shift online.
According to the aforementioned report by Kearney Middle East, the average share of GCC households that have bought goods online has reached over 8% in 2020. Given the range in developed markets sits at 16 to 25%, there is significant room for growth. This digital shift is also seen offline, with mobile payments for POS transactions in KSA having grown 495% for the past year until September, according to Saudi Payments. Furthermore, as banks across the region have tightened their credit policies and consumers increasingly seek ways to manage their finances, tabby has seen tremendous market adoption of its Buy Now, Pay Later offering.
The startup’s fintech service integrates directly into merchant checkouts or POS systems, instantly providing consumers a way to pay for their purchases with only 25% of the transaction value paid at the time of purchase and the remainder automatically charged over 3 monthly installments. tabby does not charge its customers any interest or fees as long as they pay on time and monetizes primarily by charging merchants a commission on sales generated via its platform.
Hosam Arab, co-Founder and CEO of tabby said: “The shift to online retail has never been more evident, and with it, consumers are becoming ever more demanding as they actively seek convenience and reliability in their shopping experience. And this includes how they pay for their purchases.”
The company says integration of its payment service can increase conversion rates by over 20% and boost transaction sizes anywhere from 30 to 85%, by providing consumers with access to zero-cost, real-time credit. Moreover, tabby says it has also helped online retailers convert a growing share of their customers from paying in cash to paying digitally due to the value proposition of interest-free installments.
tabby is now one of many other companies that are capitalizing on the BNPL financing model for e-commerce that is finding increased growth worldwide.