We’ve been writing about the evolution of buy now pay later for some time now. And we’ve observed a few things along the way.
First, BNPL is not going away. This is despite persistent negative attention from regulators, consumer advocates, and the press. And we’ve covered this extensively.
The fact that BNPL appears to be feeding destructive consumer behavior (rather than the financial responsibility it originally sold itself as promoting) doesn’t appear to be slowing BNPL down. Not even a little.
According to Research and Markets, Buy Now Pay Later (BNPL) is expected to grow by 51.6% in payments in the United States to reach US$2,133.0 million in 2023.
BNPL Hot Zones
Another item we have observed is that BNPL seems to have regional appeal. Or at least there are parts of the world where BNPL has taken a firmer hold than in others. One of these regions is Australia, where some of the industry’s top founders, like Nick Molnar (Afterpay) and Larry Diamond (ZipCo), hail from.
Another of these BNPL hot zones is the Gulf States region (Saudi Arabia, UAE), which is also home to a concentration of BNPL startups. And where the payment model remains highly popular with consumers.
And finally, a third observation is that BNPL consumes a massive amount of capital. BNPL platforms essentially issue loans to consumers so they can take immediate possession of goods. It’s a good deal for merchants, who get paid upfront. This, plus growing pressure to innovate (see below), requires a lot of cash.
$340M Series C
We were not particularly surprised to read about a Series C that touches on most of these observations. Today Tamara, a BNPL platform based in Saudi Arabia, has raised a $340 million Series C round, bringing its valuation up to over $1 billion. Yes, that makes the company a unicorn. And it’s the first Saudi fintech unicorn, as Tamara proudly claims.
Tamara, which is headquartered in Saudi Arabia, also operates in the UAE and Kuwait. Right in the heart of the Gulf region BNPL hot zone.
The company, founded in 2020 (when many BNPLs popped up in the Gulf), claims more than 30,000 merchant partners and more than 10 million users.
Tamara, which has previous backing from big-name players like Goldman Sachs, saw this latest round led by SNB Capital and Sanabil Investments.
Since its founding, Tamara has raised more than $500 million in equity and $400 million in debt. We told you BNPL sucks up a lot of capital.
BNPL in Name Only
Tamara Co-founder and CEO Abdulmajeed Alsukhan said something in the funding announcement that echoes what we have been hearing across the BNPL landscape. And that is a desire to pivot away from being narrowly defined as a BNPL platform, and into something broader and perhaps more interesting over the long run.
“ As we set our sights on becoming the next big giant in shopping, payments, and banking,” Alsukhan said. “We remain ever grateful for the significant opportunity in this underpenetrated and underserved banking and financial services landscape.”
More and more buy now, pay later platforms are talking about themselves as banks, alternative payment platforms, and AI-powered shopping engines. Anything but a BNPL.
For example, Sweden’s Klarna, one of the biggest players in BNPL, no longer calls itself a BNPL platform. It talks about BNPL as one of its services, not as a business.
We think there are a couple of key reasons for this shift.
The strongest reason in our view is pure differentiation. There are a lot of BNPL platforms out there. To the point that the basic BNPL service is increasingly being described as a commodity. The playbook for operating a BNPL is essentially in the public domain now.
And once the “C” word enters the dialogue you had better be able to define how you are different. And if you wait until after the commodity tag sinks in to change the language you use to describe yourself, it’s probably too late.
The other reason is the bad PR that buy now, pay later has received. Again from a combination of regulators and even thought leaders like Scott Galloway who criticize BNPL for being everything from a bad business to bad for consumers.
