MENA based, buy now, pay later at launch striped has raised $58 million, led by Sequoia Capital India and STV, at a valuation of $660 million. The investors jointly led the fintech’s Series B renewal round last June.
PayPal Ventures, the global corporate venture arm of PayPal, is one of the participating investors (this is the first investment in the Gulf Cooperation Council (GCC) but the second in the MENA region after the Egyptian fintech Paymob). Other investors in Tabby’s new funding round include Mubadala Investment Capital, Arbor Ventures and Endeavor Catalyst.
According to a statement shared by the Dubai-based company, the funding will be used to expand Tabby’s product line into a plethora of consumer financial services and support the company’s growing business, which now includes Egypt. The fintech has raised more than $410 million in equity and debt since its launch in 2019.
Until last September, Tabby, which allows users to shop online and in-store with flexible payments from global brands including H&M, Adidas, IKEA, noon and Bloomingdale’s, operated in Saudi Arabia, the UAE and Kuwait. Co-founder and CEO Hosam Arabin a TechCrunch interview last June, Egypt mentioned an attractive market with low bank account consumers looking for ways to spend money online beyond what is readily available to them, namely cash.
“Egyptian consumers are currently quite used to buying on credit, which usually entails additional costs in the form of interest or additional costs. So offering a completely free product to the customer has been quite a difference, and we’ve seen a lot of strong demand there,” said Arab, who gave an update on how the expansion has been going. “Having said that, the Egyptian market and the economy as a whole are currently in a rather difficult position with their currency constantly devaluing. So there are clear challenges for this market, at least in the short to medium term, beyond pure consumer demands.”
Consumer demands vary by region and the nuances behind each market are enough for a fintech to survive. In developed countries where credit has traditionally been obtained through credit cards, BNPL can be seen as a ‘nice-to-have’, mainly because of its installment aspect. For emerging markets where credit penetration is low or where a credit history is too demanding, BNPL has a more robust use case. Therefore, Arab believes his startup is somewhat isolated by the issues with Affirm, Afterpay and Klarna, global private and public BNPL players that have become worryingly loss-making and thus hit their valuation.
“I would say there has been a pullback from a demand perspective. And just as important is the looming credit crunch coming to some of these more developed markets, which brings greater credit risk, which could ultimately hurt the bottom line of these companies,” said the CEO, advocating for Tabby’s growth in a cooling BNPL room. .
“Now the structure of the economy is different for some of the markets we have [Tabby] are in today. Credit penetration in the MENA region is significantly lower than in other developed markets. From a credit risk standpoint, consumers are not overburdened because they don’t have two or three credit cards. So from a demand perspective, there’s a real gap and an opportunity that we’re filling.”
Despite the valuation crises and weak demand for growth companies worldwide, Tabby managed to double its valuation from 18 months ago, although it raised less capital in a subsequent round; as such, it is currently one of the most valued startups in the MENA region. Arab said mastering this current valuation will underpin Tabby’s product relevance and ability to build a sustainable business in a fairly challenging environment, including new entrants such as Saudi Arabia-based Tamara and Egypt’s Sympl and Khazna, radiates.
The relevance Arab speaks of can be seen in Tabby’s new numbers. Last March, for example, the “buy now, pay later” starter had just over 1 million active users who shopped at more than 3,000 brands annually. Now, Tabby says more than 3 million users shop from more than 10,000 brands, including nine of MENA’s 10 largest retail groups.
The fintech company has also issued more than 150,000 Tabby Cards just six months after launching its card program, with in-store sales now accounting for more than 10% of the company’s volumes. The company stated that its revenue has increased 5x in the past year.
GC Ravishankar, the managing director of Sequoia Capital India, spoke about the investment and said that Tabby has the opportunity to offering various innovative products to its consumers and improving access while creating more affordability.” On this, CEO Arab explained that Tabby recently launched a product for everyday purchases, such as groceries and food, and allows customers who do not have access to credit cards to make purchases and pay at the end of the month.
“There are clear gaps in the market when it comes to offering better financial services and products to consumers. One area where we see great opportunities is that our customers can use us for their day-to-day purchases,” said the CEO. “We believe this is a great opportunity to provide deeper engagement with our customers as they begin transacting with us more frequently.”