Home » Buy now, pay later platform Tabby nabs $200M in Series D funding at a $1.5B valuation.

Buy now, pay later platform Tabby nabs $200M in Series D funding at a $1.5B valuation.

by Alex Turner
Image Credits: Tabby

Over the last six months, several firms have experienced a decrease in their valuation due to a decline in venture capital investment amid an increase in interest rates. Fintech businesses operating in the public and private marketplaces, including Affirm, Afterpay, and Klarna, have had difficulties, particularly those specializing in purchase-now, pay-later services for Western consumers. However, Tabby, a platform that provides Middle Eastern clients with BNPL services, is now doing quite well.

After moving its headquarters from Dubai to Riyadh, Tabby completed a $200 million Series D investment round, valuing the company at $1.5 billion. This highlights the app’s significant growth and market significance in how consumers purchase and pay, positioning it as the first fintech startup unicorn in the Gulf.

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Iterative approaches to corporate strategy foster collaborative thinking to further the overall value.
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This comes less than a year after Sequoia Capital India and STV, two investors in the most recent unicorn round, led Tabby’s $58 million Series C investment. Former backers, including PayPal Ventures, Arbor Ventures, and Mubadala Investment Capital, joined. The lead investor, Wellington Management, one of the best independent investment management companies in the world, and growth equity investor Bluepool Capital are among the new backers at the same time.

“Over the past year, we’ve experienced quite phenomenal growth. As a result, we witnessed a surge of interest from investors who, in my opinion, had always recognized the potential of the BNPL concept. About the company’s development and investor interest, founder and CEO Hosam Arab told TechCrunch, “Despite seeing the challenges with the model in other markets, there was that interest in understanding why this market is different and why we’ve grown profitably.”

Many investors had already seen this strategy in other markets, so we looked into having various conversations with interested parties. We felt that this was the right time to seek funds. We believe this may be the final round of funding we raise before an IPO. We also included investors with experience in the public market.

Three essential components are highlighted in Arab’s remark. First off, Tabby reached profitability, setting a challenge for its counterparts worldwide. The company has raised over $950 million in debt and stock. Although Tabby’s profitability was not made public, Arab claimed that the startup’s sales had increased threefold. He explains Tabby’s success by saying that it operates in a market whose structure makes sense economically for a BNPL model.

Over 30,000 brands—including Adidas, Amazon, H&M, and Shein—as well as ten of the biggest retail chains in the MENA area collaborate with Tabby to offer BNPL services to over 10 million customers in Saudi Arabia, the United Arab Emirates, and Kuwait at the point of sale and in-store. Even though Tabby launched a few years after services like Afterpay and Affirm, it still has a sizable client base—far lower than Klarna’s enormous 150 million customers—nearly equal to Afterpay’s 16 million and Affirm’s 14 million active users.

However, Tabby asserts that BNPL providers are lucrative in the GCC, unlike in the US and Europe, where they frequently run at a loss. There are several explanations for why this may occur. Consumers’ access to credit options is limited despite the region’s comparatively low e-commerce adoption, especially in Saudi Arabia and the UAE (8% and 15%, respectively). Consequently, BNPL functions as a vital credit source. In contrast, in developed markets with a plethora of credit alternatives, it is considered a convenience for many customers in the Middle East and, consequently, the Gulf, where it is indispensable.

Tabby appeals to two different markets. The first results from the low credit card penetration in nations like Saudi Arabia, where only 15% of people have credit cards (the GCC has about 10%, while the UAE has over 40%). Customers who find Tabby’s tokenized payment system convenient make up the second group. Tabby is frequently the initial and only source of credit for both portions. Because consumers enjoy having access to credit, the startup’s distinct market position has resulted in solid payment performance, easing worries about impulsive spending and unmanageable debt brought on by BNPL services.

“Purchasing something now and paying for it later is ineffective in marketplaces where consumers have excessive credit use. It puts more of a strain on these customers. Buy now, pay later. Suppliers still need to look into affordability, and those markets’ laws are still in the early stages of development,” Arab continued. Nonetheless, they are the two elements that are helpful in our marketplaces. First off, customers aren’t overworked or overwhelmed.

Furthermore, the restrictions were introduced quite early in the market. For instance, BNPL permits are already in place in Saudi Arabia. In addition, we check for clients’ capacity to pay, a crucial component we also handle internally, so we can’t lend to those who can’t borrow money.

Before Tabby enters a market, consideration is given to the extent of e-commerce penetration, the degree of credit card penetration (low to moderate), and the spending power of the customer. This explains why it left Egypt, a market it had entered six months earlier, in February. Egypt’s e-commerce market and penetration are smaller than those of Tabby’s more well-known markets despite the country’s low credit penetration rate of 4%. Additionally, the country’s credit system is less effective than that of Saudi Arabia and the United Arab Emirates, and its customers have lower purchasing power. Notwithstanding its withdrawal, Tabby may return to the Egyptian market, according to Arab, if the firm “begins to see promising signs of e-commerce opportunity.”

Saudi Arabia remains Tabby’s biggest market, accounting for 80% of its clientele and most of its $6 billion annual transaction volume. These statistics and the company’s IPO preparations on the Saudi stock exchange inspired the fintech’s decision to expand its presence in its largest market and relocate its headquarters from Dubai to Riyadh. The precise date of this listing on the Tadawul is still unknown, though.

Almost 4,000 businesses now accept the payment option in its second-largest region, where it introduced Tabby Cards last year to let users in the UAE make in-store purchases. This accounts for almost 20% of the platform’s overall volumes, up from 10% in January. The business also introduced Tabby Shop, which allows customers to find and follow the most incredible offers and items in one location by displaying over 500,000 products from thousands of companies.

According to Arab, the firm intends to make more significant investments in its present markets by providing clients with extra goods that improve their financial security. This involves broadening the scope of Tabby’s product offerings to cover a wider variety of financial services, such as payments and savings, and adding other credit choices that increase Tabby’s reach outside of its network.

Abdulrahman Tarabzouni, the founder and CEO of STV, who has invested in Tabby since its Series A round, stated, “Tabby created a new industry and is transforming the way people consume and pay across MENA.” “Hosam and his team created a renowned company that serves as an example of disruption and discipline—two traits that are difficult to combine. We are thrilled to witness Tabby evolve into a crucial component of Saudi Arabia’s financial scene, fostering expansion and enhancing the national economy.

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