The State of Buy Now Pay Later eCommerce Model in the Middle East 2021

Buy Now Pay Later!

What could be more incentivized to complete your online purchase than that?

Consumers are happy; they get to pay for whatever they buy later.

Merchants are happier: they get to receive their payment once the order is shipped.

Well, what is it with this BNPL solution?

How does BNPL work and how is it changing the face of e-commerce in the Middle East and the whole world?

What Is Buy Now Pay Later (BNPL) Model?

As the name suggests, ‘Buy Now Pay Later is a solution for e-commerce businesses and online stores to ease the purchase decision for the customers.

Retailers and online store owners offer their visitors a ‘pay later’ option to enable them to pay in installments instead of having to pay the entire cost up-front.

BNPL solutions allow shoppers to purchase the product they love and need and pay in a number of installments, determined on checkout.

The best part is that customers get to buy now and pay later at no interest or extra fees!

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Stores built on ExpandCart are integrated with 65+ payment gateways and shipping providers. Plus, you have the ability to integrate it with many BNPL platforms.

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BNPL Value for Customers

Remember that PS5 you’d kill for? How much was it? $1150?

Well, what if I told you that you can buy it today, get it delivered to your doorstep, and pay for it over 3, 6, or 12 months at no interest, how would you like that?

A lot, no?

Instead of immediately paying the whole amount or paying it a month later in their credit card bill, customers would definitely love to have other flexible payment options, through a seamless checkout experience (fast and straightforward sign-up process, with one-click checkout for returning customers).

BNPL-Value for customers

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BNPL Value for Merchants

Merchants also benefit greatly from this ‘pay later’ solution, as they

  1. witness an improvement in conversion rates,
  2. see an increase in basket sizes (AOVs), and
  3. enhance repeat purchase rates.

📈 BNPL became the fastest growing e-commerce payment method globally, with a projection for this category to account for 9% of e-commerce payments by 2023 in EMEA (Worldpay’s 2020 Global Payments report).

BNPL vs. Credit Cards

We all have credit cards, which are, in essence, ‘Buy Now Pay Later’ tools, because they allow us to make delayed payments.

The catch here is that these delayed payments accumulate interest rates on the outstanding balance month by month. Although some banks have been offering interest-free installments for their customers for some years now.

Yet, no one can deny the fact that credit card providers are being disrupted by BNPL players; some even argue that BNPL companies will overtake MasterCard and Visa one day.

This claim is made based on many factors and observations:

  1. the recent surge in adoption by a huge segment of consumers,
  2. the growth of e-commerce business model and the Millenial/younger consumers who have different expectations,
  3. and the growing disinclination towards credit cards (due to the excessive demands for upfront personal information before credit approval, short interest-free periods, and extremely high rates).

Why Should Online Stores Adopt BNPL Options?

Now, I believe you have a clear idea about ‘Buy Now Pay Later’ solution and a good vision of how important it is to consider it as one of your payment options on your store.

But, let’s dig deeper into the merits of this new and trendy payment option and how “better” it will make your store.

1. Better User Experience

First things first.

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This way, it’s guaranteed that customers will enjoy a superb user experience on your e-commerce site and will come again.

2. Better Conversion Rate

The reason why BNPL has a positive impact on conversion rates is that it eases the process of making big payments on the human mind.

Customers will only think of taking the product they love home right now, instead of worrying about such a big chunk of money leaving their bank account, or the prospect of high interest rates on their credit cards.

📉 The second most commonly cited reason for abandoned carts was the price (The Baymard Institute)

That’s why offering installment options encourages shoppers to complete their purchase and checkout process successfully.

📈 Recent research has found that BNPL option increases average basket sizes by 20–30%.

3. Better Customer Loyalty

Finding what they need easily, getting their products quickly, and paying over interest-free installments, customers will definitely love your website and come back over and over again!

Better yet, display on the homepage that your store offers free returns within 14 days of purchase, or the option that a customer can order multiple pieces or sizes to choose from and send the ones they liked the least back. This trick is proven to skyrocket sales and strengthens customer loyalty to the max.

Businesses that see BNPL as an opportunity to build better relationships with their customers and, ultimately, sell more products, are better placed to succeed than their competitors who don’t.

4. Better Customer Lifetime Value

On one hand, BNPL gives customers more flexibility of what and more control of how they buy online.

On the other hand, merchants attract new customers, get more repeat visits, and convert higher average basket sizes.

It’s a win-win situation.

✏️  Customer Lifetime Value (LTV) represents the value of a given customer to a given company over a period of time.

Expected Consequences of ‘Buy Now Pay Later’

Analysts and researchers have been studying the market and consumer behavior for some time now, and they have come out with some expectations about how the market would change or be affected by this new payment model.

1. Survival Is for the Strongest

Not all BNPL companies will survive; the process is not easy and companies have to raise enough money to cover losses in the early years of growth.

Most likely, smaller players won’t achieve the required scale or raise enough money. The result is that these small players will exit the market or be acquired by some other company.

Eventually, a few independent players would survive and grow, each picking a certain category of retailers or geographic locations to focus on.

2. More Scrutiny

Because consumer lending is an extremely regulated sector in the MENA region, as BNPL providers are expected to attract a higher level of scrutiny as they grow in the market.

Let’s think about it for a moment.

Why do consumers opt for the BNPL service?

Because they can’t afford to pay for their purchase fully.

Then, these consumers will be at a higher risk of falling back on paying their loans and getting burdened by debt.

That’s why regulators will look for ways to protect these citizens and won’t look lightly at BNPL providers using tactics that incentivize impulse purchases.

3. Traditional Players Joining the Party

What would hold big e-commerce companies like Amazon and noon and retail stores like Carrefour and Al-Futtaim back from offering their own BNPL upon checkout?

Nothing, analysts presume.

Moreover, some claim that these big whales will potentially buy the smaller players in the space sooner or later.

Banks as well will start providing a credit card suite with a similar structure: the option to pay for purchases over multiple months at 0% interest and a small monthly fee.

In fact, a lot of banks in the Middle East are doing so now.

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Reviews from ExpandCart Stores Integrating BNPL Payment Options

We surveyed store owners on ExpandCart who have integrated ‘Buy Now Pay Later’ payment option on their e-commerce websites to get feedback about the advantages and disadvantages of the solution.

1. Big-Ticket Equipment

“We are seeing new success with customers purchasing our brand’s big ticket items,” said an enthusiastic store owner.

Customers are encouraged to pay for more expensive items when they know that they’re allowed to pay in no-interest installments over 6+ months.

Stores have reported that orders made with BNPL have a 100% higher AOV.

✏️  Average Order Value (AOV) is one of the most important metrics for online stores that measures the average total of every order placed with a merchant over a defined period of time.

2. Furniture and Home Décor

ExpandCart stores selling furnishings items and home décor products have also seen a difference in AOV on announcing that they offer BNPL options.

They reported that the easy use of this system for both of the merchant and the buyer is such a benefit, as compared to other credit processes that are lengthy for the customer and complicated for the store owner to initiate.

3. Outdoor Activities

One of the most expensive products are outdoor and sports ones, which customers feel that they are luxury or unnecessary items they don’t have to put a lot of money in.

But our stores have told us that by helping consumers divide the cost of these purchases over the year, they help make it easier for people to buy and invest much money in.

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BNPL Providers in the MENA Region

Let’s take a look at some of the big BNPL players in the Middle East.

1. Tamara, Saudi’s Famous ‘Pay Later’ Provider

Buy Now Pay Later BNPL Tamara

ExpandCart has integrated with the most famous BNPL provider in the Middle East, Tamara.

Tamara is a Saudi platform that offers a ‘Pay Later’ option for shoppers and merchants. The platform charges shoppers after 30 days of the shipping date and accepts Mastercard, Mada, and Visa.

Tamara does not charge any fees on purchases from the customers, providing that they pay on time. They promise that late fees are donated to government-approved charities.

How Do Customers Pay Through Tamara?

The process is easy and fast.

The customer browses your website, adds products to the cart, and goes to the checkout page.

On checking out, they choose to pay through Tamara.

On signing up, Tamara asks for a phone number and verification,

BNPL tamara sign up
an ID number, and a date of birth.
BNPL tamara id
The customer then picks the number of installments they would be able to commit to and add their payment info,
BNPL tamara installments
and that’s it — the process is successfully completed.
BNPL tamara completed

How Do Merchants Receive Payments through Tamara?

Tamara offers online store owners to “Spoil their customers with different payment solutions!”

While customers get to pay over months, merchants get paid once the product is shipped.

In case you’re still wondering, here’s what your store will see on integration with Tamara:

  • Increase in sales and average order value, as the platform connects your store to a wider range of recurring consumers and enables them to purchase spontaneously.
  • Reduction in fraud and non-payment risks, as Tamara assumes customer fraud and non-payment risks while you focus on your core business.
  • Relief from cash on delivery fees and long cash cycle, as the platforms promise that you get paid as you ship.

💡 Read Also: What Is Cash on Delivery? All You Need to Know

2. Tabby, UAE’s Titan Fintech

BNPL Tabby

Tabby is a ‘Pay Later’ provider in the UAE, which promises customers to

  • shop at their favorite stores and pay later,
  • pay for their orders with installments at no extra cost, and
  • try before they buy without the hassle of paying in cash.

Tabby is also integrated with ExpandCart stores, where store owners can choose this payment method to display for the website visitors.

The platform allows customers to shop from hundreds of places in the UAE and Saudi Arabia — how convenient is that!

💡 Read Also: Virtual Shopping: What Is It? And How to Use VR Shopping in Retail Stores?

3. FawryPay, Egypt’s Trusted BNPL Provider

Fawry is the number one and most trusted payment gateway in Egypt. It also offers BNPL solutions in integration with POS at stores and e-commerce websites.

BNPL fawrypay

Fawry allows credit cardholders to benefit from every purchase by splitting the transaction into fixed and equal installments based on the default ranges of 3, 6, 9, and 12 months installment plans.

Fawry is integrated with almost every e-commerce website in Egypt and Fawry payments are accepted in a network of more than 165,000 points of sale across the country.

BNPL fawry and Jumia

To Sum Up,,,

The e-commerce world is always shifting, and providers are always innovating new solutions to incentivize customers to purchase online through a seamless, fast shopping experience.

One of the biggest and most trendy inventions is BNPL solution, which allows shoppers to buy their favorite products now and pay later on installments at no interest.

Regardless of how things play out, the future looks bright for fintech players in the region and specifically BNPL providers.

Online stores around the world are adopting this payment solution for the convenience of their shoppers and are seeing very good results out of it: shoppers are happy, merchants are happy, everyone seems to love it.

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