BNPL firms are raising funding round to accelerate their growth amid growing consumer demand

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The buy now pay later (BNPL) industry has experienced a severe downturn in 2022, after enjoying a high-growth period over the last few years. Amid the tussle with regulators globally and declining valuations due to the current macroeconomic environment, BNPL firms have found it difficult to reach profitability. However, amid the mounting losses for these firms, the bigger trend for the sector remains positive due to the surging demand for payment options among consumers globally. Notably, the rising cost of living and inflation rates have again created the perfect environment for BNPL consumer adoption and spending.

With the demand rising among consumers, BNPL players have further started to expand their presence through strategic partnerships. Firms, such as Klarna are forging an alliance with food delivery platforms like Deliveroo, as consumers find it difficult to even fund their food purchases. Furthermore, amid these testing times for consumers, the demand for BNPL has also increased in the healthcare and education sector, where the ticket sizes are usually higher compared to other sectors. Overall, the consumer demand for BNPL is high and firms are responding to this demand by raising capital. For instance,

• In August 2022, Tabby, one of the leading BNPL players in the Middle East region, announced that the firm had raised US$150 million. While the firm acknowledged that rising inflation and looming recession fears have impacted BNPL players in developed markets, the demand for BNPL in the Gulf region is expected to further grow among consumers.
• The demand for BNPL is also high in the region because access to credit is scarce. According to Tabby, 20% of the population in Saudi Arabia has access to credit compared to 70% in the United States. This has supported the growth of Tabby and in H1 2022, wherein the firm recorded a growth of eight times in its active customer base, when compared to H1 2021.
• The demand for Tabby is expected to further increase in the region and consequently, the firm had raised US$150 million to support the rising demand. Notably, the firm is planning to keep its focus on the core markets, including the United Arab Emirates, Saudi Arabia, and Kuwait. However, it also has plans to expand operations in Egypt. Unlike players in the developed market, the firm is also nearing profitability and therefore, has been able to raise huge capital under the current market conditions.

Notably, Tabby is not the only player in the region that has attracted investment from global players. Many other firms have raised funding rounds to further scale their operations and support the growing demand among consumers. For instance,

• In August 2022, Tamara, the Saudi Arabia-based BNPL firm, announced that the firm had secured US$100 million in a Series B funding round. The firm is planning to use the capital to further drive its growth and expansion of product offerings across shopping and payments. As of August 2022, the firm had onboarded over three million users and has partnered with 4,000 merchants across the region.

The trend of raising capital is also evident in other markets, including Southeast Asia as well as Europe, where the B2B BNPL business model has grown into significant prominence in 2022. For instance,

• In September 2022, BillEase, one of the leading BNPL players in the Philippines, announced that the firm had raised approximately US$20 million in a debt facility. This funding round will allow the firm to further grow and expand its loan portfolio, amid the rising demand for BNPL among consumers. In H1 2022, the firm has recorded a growth of 5 times in volumes compared to H1 2021.
• In June 2022, Zilch, the United Kingdom-based BNPL firm, also announced a capital round of US$50 million, bringing its Series C investment to US$160 million. The firm is planning to use the capital to further accelerate its growth, especially in the United States. Notably, in the United States, the firm is experiencing high traction among consumers, with over 150,000 pre-registered customers.

From the short to medium-term perspective, PayNXT360 expects more global BNPL firms to raise capital to further support the growing demand among consumers. While the sector is projected to remain under pressure due to the macroeconomic condition, consumer demand is expected to keep driving the transaction value and volume for these BNPL players over the next few quarters. Furthermore, the upcoming holiday season should also assist the consumer BNPL spending.

To know more and gain a deeper understanding of the global buy now pay later market, click here.