From Dubai to Riyadh, Buy now, pay later players tackle credit conundrum

From Dubai to Riyadh, Buy now, pay later players tackle credit conundrum
The Buy Now, Pay Later (BNPL) model is transforming the global retail landscape. (AP)
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Updated 26 May 2021

From Dubai to Riyadh, Buy now, pay later players tackle credit conundrum

From Dubai to Riyadh, Buy now, pay later players tackle credit conundrum
  • Digital buy now, pay later (BNPL) purchasing is relatively new to the region where consumers have traditionally been skeptical of paying for goods before getting them

DUBAI: Financial technology startups in Saudi Arabia and the UAEoffering online short-term credit say they are enjoying exponential growth as the coronavirus pandemic drives a shift in consumer spending online.
Digital buy now, pay later (BNPL) purchasing is relatively new to the region where consumers have traditionally been skeptical of paying for goods before getting them.
But Saudi Arabian-based Tamara and UAE’s Spotii, Tabby and Postpay all say the take-up has far exceeded initial expectations. And investors are paying attention. Tamara last month raised $110 million in debt and equity, a large amount for an early stage Middle East startup.
This week, Australia’s second biggest BNPL player Zip said it was buying the rest of the shares in Spotii it did not already own for $16 million. Tabby has raised over $30 million including funding from Abu Dhabi state fund Mubadala.
“We’re constantly having to re-forecast our numbers just because we constantly get surprised by the consumer adoption,” Tabby Co-Founder and Chief Executive Hosam Arab told Reuters.
There is no independent data available on the Middle East BNPL market which also includes Shahry in Egypt; all of the companies in the sector are early stage start-ups and many only began operating last year.
In the US, Australia and Europe, BNPL is marketed as an alternative to credit cards. During the pandemic, with consumers conserving cash and seeking alternative methods of borrowing money, the service exploded in popularity.
In the Gulf, BNPL companies present themselves as an alternative to cash on delivery, the most common payment method for online purchases in many Middle East countries, according to a 2018 report by British security firm G4S.
But Anil Malhotra, chief marketing officer of digital payments business Bango, said a cultural challenge for BNPL in the Gulf was to make sure it “doesn’t look or smell like credit.”
Islamic customs prohibit charging interests on loans, which has deterred some Middle East consumers from using credit cards.
Saudi Arabian independent retailer Crate, which introduced Tamara on its website last August, has found that while those checking out with BNPL had become repeat users, most customers preferred to pay by card or cash on delivery.
Half of all purchases are paid with card, while cash on delivery accounts for 40 percent of all online transactions with BNPL making up 10 percent, Chief Executive Rayan Fadul told Reuters.
BNPL is still new to the region’s consumers who are wary of using a product they don’t yet fully understand, he believes.
“They would like to see other people talk about it first and maybe explain to them how easy it is.”
The model varies but BNPL companies typically allow shoppers to pay for purchases in instalments over several weeks or months. Gulf providers do not charge interest and instead earn most revenue by charging merchants fees.
While shoppers can be charged hefty fees if they miss a payment, providers say they cause less financial burden than credit cards. Users can be suspended if they miss a payment.
They also say they help merchants increase sales as shoppers are able to spread out payments over an extended period and allow shoppers to buy products they need.
As BNPL firms generally make money off merchant commissions and late fees, not interest payments, they sidestep the legal definition of credit — and credit laws.
But the sector has come under scrutiny with authorities in Britain and elsewhere reviewing or tightening rules around the industry, with some regulators saying that technology companies offering BNPL should be regulated like ordinary lenders.
It’s not clear how Middle East regulators plan to react. The financial authorities in Saudi Arabia and the UAE did not respond to Reuters requests for comment.
“This is credit and if credit is mismanaged, either by the lender or borrower, bad things happen,” Citi Global Head of Banking Research Ronit Ghose told Reuters.
Tamara, which is in Saudi and the UAE, says it has signed up over 1,000 merchants and that transaction volume has been increasing 170 percent month-on-month. Spotii, available in Saudi, UAE, Bahrain and Oman, has 650 merchants on its platform and has seen transaction volume rise at an average of 90 percent month-on-month since it launched last year, according to Zip.
Postpay, Spotii, Tabby and Tamara all say they plan to expand to other markets soon.
As the impact of the pandemic diminishes, investors also see an opportunity for BNPL firms to take more business at the shop till in the Middle East.
“We think physical point of sale will play a very big role in the future of BNPL in this part of the world,” said Eslam Darwish, partner at Dubai-based venture capital firm Global Ventures which has invested in Tabby.
Alshaya Group, a Kuwaiti retailer with Middle East franchising rights for companies including Starbucks and Hennes & Mauritz, is planning to roll out Postpay in different online stores after trailing it this year in the UAE at Footlocker.
“We are certainly looking at in-store availability of BNPL to benefit customers who, sometimes or always, prefer physical to digital shopping,” Chief Digital Officer Paul Morris said.


HP, Procter & Gamble join companies pledge to cut emissions

HP, Procter & Gamble join companies pledge to cut emissions
Image: Shutterstock
Updated 11 sec ago

HP, Procter & Gamble join companies pledge to cut emissions

HP, Procter & Gamble join companies pledge to cut emissions
  • The companies aim to cut almost 2 billion metric tons of carbon dioxide by 2040
  • Scientists say the world needs to achieve ‘net zero’ emissions by 2050 if it wants to meet the Paris climate accord's goal of keeping temperatures from rising more than 1.5 degrees Celsius by the end of the century

Computer-maker HP, consumer goods business Procter & Gamble and coffee capsule company Nespresso have joined a corporate pledge to sharply cut their greenhouse gas emissions over nearly two decades.


The Climate Pledge, a grouping of companies and organizations spearheaded by Amazon, said on Monday it has signed up 86 new members for its voluntary measures. The group has 201 members with global annual revenues of more than $1.8 trillion, it said.


Other new members include telecoms company BT, truck-maker Scania and the Selfridges department store chain.


Together, the companies aim to cut almost 2 billion metric tons of carbon dioxide by 2040 — more than 5 percent of the current global total.


While the group's members are encouraged to eliminate as many emissions as possible, those that can't be avoided need to be completely offset in the next two decades. That means paying for measures to ensure as many emissions are absorbed by then as the companies continue to emit.


Scientists say the world needs to achieve ‘net zero’ emissions by 2050 if it wants to meet the Paris climate accord's goal of keeping temperatures from rising more than 1.5 degrees Celsius (2.7 Fahrenheit) by the end of the century compared to pre-industrial times.


Saudi Arabia leads regional adoption of online shopping post-pandemic

Saudi Arabia leads regional adoption of online shopping post-pandemic
Updated 28 min 8 sec ago

Saudi Arabia leads regional adoption of online shopping post-pandemic

Saudi Arabia leads regional adoption of online shopping post-pandemic
  • 83 percent of 13,000 surveyed consumers said they will “maintain or even increase their current level of e-commerce spending into the next year”
  • The unprecedented growth in both e-commerce and digital payments are also reflective of a developing regulatory regime

DUBAI: When countries implemented lockdowns to control the COVID-19 pandemic, consumers all over the world took to the internet to satisfy their shopping needs – accelerating the growth of e-commerce.

The region was no exception, and the trend is likely to continue post-pandemic.

Based on a new report by global payments company Checkout.com, 83 percent of 13,000 surveyed consumers said they will “maintain or even increase their current level of e-commerce spending into the next year.”

The shift in consumer behavior was remarkable in Saudi Arabia, the report noted, with 53 percent of Saudi respondents saying they shop online at least once a month – above the regional average of 45 percent.

It’s even highlighted during peak shopping seasons, such as in Ramadan, where 76 percent of consumers in Saudi Arabia and the UAE say they were likely to buy products and services online more frequently during the holy month.

The report estimated that 209 million more customers in the Middle East and North Africa, as well as Pakistan, — a region known as MENAP — have begun shopping online since the pandemic broke out in March 2020.

The growth in e-commerce owes to a “greater sophistication” in the region’s digital payments ecosystem.

“A flourishing digital payments and e-commerce ecosystem is leading consumers to feel more empowered, with star-ups thriving in the fintech arena, and commercial markets opening up,” said Mo Ali Yusuf, regional manager for MENAP at Checkout.com.

The report said 60 percent of consumers in the region now prefer to use a digital payment method when purchasing online – up by 20 percent since the company’s 2020 report.

Not only is cash being used less, but consumers are also using newer ways of paying, including digital wallets and “buy now, pay later” apps.

Outperforming Europe

Yusuf said MENAP has begun “to outperform European markets in the adoption of emerging payment methods.”

Around 24 percent of surveyed consumers have used a “buy now, pay later” option this year – higher than the 23 percent across the UK and Europe.

“This presents a phenomenal opportunity for global and domestic merchants to expand their businesses across MENA,” he added.

An official at the World Bank earlier highlighted the role of digital payments in economic growth, entrepreneurship, job creation, public service delivery and financial inclusion in the region.

The use of financial technology (fintech) applications in the region has been promising – with 76 percent reporting to use some form of it in the past year, only 4 percent short of the consumers in the Asia Pacific region.

This presents an opportunity to address financial inclusion in the region, the Checkout.com regional manager said, particularly empowering the unbanked and underbanked population.

Government backing and a modernized regulatory regime

The unprecedented growth in both e-commerce and digital payments are also reflective of a developing regulatory regime, with many countries including Saudi Arabia showing keenness in adapting to trends in banking and finance.

Core policies in several Gulf countries are built around promoting a “digital economy,” even accelerated by the impact of COVID-19.

“As countries recover from this crisis, robust inclusive digital financial systems will be vital to creating a foundation for critical gains for sectors,” a statement from the Arab Monetary Fund said.


Banque Misr to get largest syndicated loan in its history at $1bn, reports CNBC

Banque Misr to get largest syndicated loan in its history at $1bn, reports CNBC
Updated 20 September 2021

Banque Misr to get largest syndicated loan in its history at $1bn, reports CNBC

Banque Misr to get largest syndicated loan in its history at $1bn, reports CNBC

RIYADH: Egypt's Banque Misr is in the process of obtaining the largest syndicated loan in its history — about $1 billion — to pay off financing obtained in 2018, banking sources told CNBC Arabia.

The second-largest governmental bank in the country in terms of assets is getting a record turnout by banks to provide financing, and will use the loan to pay off a $550 million financing obtained in December 2018, the sources said.

The bank's initial plan was to obtain the same amount of financing that it would have to pay back, but later raised the size of the loan amid a rush from banks to provide the joint sum.

Al Ahli Bank of Kuwait, Emirates NBD, First Abu Dhabi Bank and Standard Chartered are among the banks working as arrangers, private sources said.

Banque Misr deputy, Akef El Maghraby, has previously said the bank will launch a number of funds by the end of this year in the real estate, health and FinTech sectors.

Going digital

Meanwhile, Banque Misr plans to launch Egypt’s first digital bank by the first quarter of 2022, El Maghraby told Masrawy on Sunday.

The Central Bank of Egypt is still working on a regulatory framework governing digital banks, he said.

Misr Digital Innovation, a subsidiary of Banque Misr set up last year to launch the bank, has signed a seven-year partnership agreement with Visa that will see it issue the iconic branded cards, use its APIs, and work with it on marketing and design, the company said in a separate statement.


Indonesia wrestles with lure of lucrative coal industry and greener vision

Indonesia wrestles with lure of lucrative coal industry and greener vision
Coal barges at Mahakam river, Samarinda, Indonesia. Image: Shutterstock
Updated 20 September 2021

Indonesia wrestles with lure of lucrative coal industry and greener vision

Indonesia wrestles with lure of lucrative coal industry and greener vision
  • Indonesia, the eighth-biggest carbon emitter, recently brought forward its goal for net zero emissions from 2070 to 2060 or sooner
  • With nearly 39 billion tonnes of reserves, coal remains the economic backbone of parts of Indonesia and miners are among the biggest taxpayers

As Indonesia wins cautious praise from some green groups for ambitious plans to cut carbon emissions, the world's biggest exporter of thermal coal is grappling with its commitment to a greener future.


Indonesia, the eighth-biggest carbon emitter, recently brought forward its goal for net zero emissions from 2070 to 2060 or sooner, ahead of the United Nations Climate Change Conference in Glasgow in November, and joined a U.S.-led Global Methane Pledge.

Indonesia is wrestling with how to balance its environmental targets with the cost of pulling the plug on an industry that contributed $38 billion in export earnings in the first seven months of 2021.


It also plans to stop commissioning new coal-fired power plants and phase out coal for electricity by 2056 under a new, greener, long-term economic vision.


"We are phasing out coal power plants. But if you ask whether we're closing down mines, we have the coal and there are other utilisation options," Dadan Kusdiana, the energy ministry's head of renewable energy, told Reuters.

Indonesia is exploring ways to keep consuming and extracting value from coal by using carbon capture and storage (CCS) technology, although environmentalists say CCS is unproven and expensive.

COAL GASIFICATION


With nearly 39 billion tonnes of reserves, coal remains the economic backbone of parts of Indonesia and miners are among the biggest taxpayers.


The government has been encouraging miners to invest in production of dimethyl ether (DME) from coal. Under new laws passed in 2020, it no longer requires them to pay royalties to the government on such processes, and their mine permits can be extended.


It has touted DME as a replacement for imported liquefied petroleum gas and a feed stock for chemicals and fertilizer.


Making DME requires burning coal, so it needs to be paired with CCS to be environmentally friendly, Dadan said.


However, if Indonesia can adopt CCS more widely and cheaply, the technology could also be applied to coal power plants, extending their usage, he said.


He said that although using CCS technology is feasible, there is risk of leakage in trying to capture emissions from burning and mining coal.

RECORD PRICE 


Coal power generation is Indonesia's second-biggest emissions source after deforestation, contributing 35 percent of its 1,262 gigatonnes of CO2 equivalent a year, government data showed.


Indonesia consumes about 130 million tonnes of coal annually to fuel 60% of its 73 gigawatt (GW) electricity capacity, and exports about three times that amount.


Renewable sources like solar, hydro and geothermal make up just 11 percent of its energy mix, even though experts say Indonesia has 400 GW of renewable potential.


The government has pledged to increase the renewable share to 23 percent by 2025. 


Coal power remains the cheapest option.  Coal prices hit all-time highs this year, helping Indonesia book record exports and a trade surplus in August. The government raised its 2021 coal output target by 14 percent to 625 million tonnes to cash in.


Cerah and other green groups have campaigned to retire coal plants early, but officials have said this could trigger fines for breaching contracts with independent power producers.

On the flip side, parliament is reviewing a government-proposed carbon tax, and Indonesia has ambitious plans to use its nickel reserves to become a production hub for batteries and electric vehicles.

 


Saudi Arabia's blockchain market to grow 41 percent by 2025

Saudi Arabia's blockchain market to grow 41 percent by 2025
Updated 20 September 2021

Saudi Arabia's blockchain market to grow 41 percent by 2025

Saudi Arabia's blockchain market to grow 41 percent by 2025

Saudi Arabia's blockchain market is expected to grow by 41 percent between 2021 and 2025, according to estimates of the Kingdom's communications sector regulator.

The blockchain market surge is part of wider expected growth in the IT and emerging technology sector that will hit SR100 billion by 2025, with an annual compound growth rate of 10 percent, Saudi Press Agency reported, citing Raed Alfayez, vice-governor of emerging technologies at the Commission of Information Technology and Communication.

The market today has a size of SR65 billion, he added.