Shop now, pay later schemes are financial services that allow consumers to purchase goods or services immediately and pay for them in installments over time, often interest-free. After gaining immense popularity in the West, these schemes are now making waves globally.
According to a report by Global Data, the global shop now, pay later schemes market will have reached $309.2 bn in value by the end of this year.Â
The Middle East Market
The Middle East retail market is renowned for its resilience and growth, benefiting from a blend of local and expatriate consumers. According to Alpen Capital’s GCC Retail Industry Report, the UAE’s retail sector alone is projected to grow at a CAGR of 5.1 percent between 2022 and 2026.
Moreover, studying consumers’ spending habits in the Middle East reveals their openness to novel shopping experiences. The Mastercard New Payments Index 2022 report states that 73 percent of consumers in the region know about open banking and use it to shop now and pay later.
Meanwhile, the report also indicates that 67 percent of the shoppers are likely to shop now and pay later for services in the future. Such a propensity towards evolving payment options provides a perfect backdrop for the surge of shop now, pay later schemes in the Middle East.
Timeline of the shop now, pay later schemes
The emergence of shop now, pay later schemes in the Middle East started around 2019 with firms like Spotii and Tabby. Despite initial skepticism, consumer acceptance grew as these platforms invested in education.
As 2021 swung around, the adoption of these schemes rocketed, culminating in a thriving scene by 2022. The entrance of established players like Klarna into the regional market further solidified the foothold of shop now, pay later services.
A report by Checkout.com revealed that 55 percent of consumers in Saudi Arabia used the shop now, pay later option in 2021. Additionally, another 27 percent expressed plans to use such services in 2022, pointing to a persistent upward trend.
Fast-forward to 2023, and the region’s eCommerce market is projected to soar and reach a remarkable $10.21 bn in revenue. This growth is a testament to the region’s transition towards digital and contactless payment methods. Among the leading trends, shop now, pay later services stand out as significant catalysts.
Despite their relatively recent introduction, the upward trajectory of shop now, pay later schemes in the Middle East is unmistakable. A Research and Markets report anticipates the Saudi Arabia market to reach $5.53 bn by 2028.
Read: BNPL changing payment habits in UAE, Saudi, globally
Shop now, pay later providers in the Middle East
Spotii, a trailblazer founded in 2019, was among the first providers to offer shop now, pay later schemes in the region. Since then, the company has enjoyed rapid growth and popularity due to its user-friendly interface and transparent terms.
Meanwhile, Tabby, another regional startup also established in 2019, has been making significant strides in expanding its market coverage. With a presence in the UAE, Saudi Arabia, and soon in other Gulf Cooperation Council countries, Tabby continues to expand its network.
Furthermore, Klarna, a global giant in the shop now, pay later services industry, made its foray into the market in 2022. With a vast merchant network and smooth payment process, Klarna’s entry highlights the region’s increasing appeal for global players.
Partnerships and collaborations
Partnerships between businesses and shop now, pay later providers have become highly prevalent in the region. This trend stems from rising consumer acceptance, evident sales growth, and low associated risks of these schemes.
In 2022, Tabby announced its partnership with Apparel Group in the UAE to provide shop now, pay later options for customers. On the other hand, Klarna has been securing major partnerships regionally.
One such collaboration is with Namshi, a prominent online fashion retailer in the Middle East. This partnership ensures that Klarna’s services reach a wide consumer base, contributing to its growth strategy for 2023 and beyond.
Reasons to integrate shop now, pay later in your business
- Increased conversion rates. The integration of shop now, pay later services can boost conversion rates by offering customers greater payment flexibility.
- Customer acquisition. Such schemes are particularly effective in attracting younger customers. A significant number of customers using these services are millennials, or Generation-Z.
- Boosts average order values. More manageable payment options can encourage higher spending per purchase.
- Enhances customer retention. Implementing user-friendly and flexible payment methods can improve the overall customer experience, leading to higher retention rates.
- Diversification amid digital transformation. The rapid shift to e-commerce necessitates that businesses diversify their payment strategies. The shop now, pay later service is part of this digital adaptation.
The future is now
The growth and resilience of the Middle East’s retail sector align well with the increasing consumer preference for flexible payment options like shop now, pay later. As the e-commerce market continues to thrive, businesses should actively incorporate these services into their digital transformation strategy. Doing so will enable them to seize opportunities in a growing market, stay competitive, and provide an enriched customer experience.
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