The rise of buy-now, pay-later services has been a worldwide phenomenon over the past few years. Leading players have raised huge amounts of cash to meet the needs of a young adult population that doesn't want credit cards nor interest.Square, a fintech giant, acquired Afterpay, an Australian buy-now, pay-later company, in what appears to be a consolidation. The deal was worth $29 billion.This deal is a sign that more services will be available in established markets such as the U.S., Europe, and other promising countries. In the Middle East alone, ten startups that offer BNPL services were launched in the last three years.Tabby is one of these services and it is clearly the most well-known in the region. It announced today that it raised $50 million in Series B funding, which will bring the company's value to $300 million.Global Founders Capital, STV and Delivery Hero participated in the financing round. Raed Ventures and Mubadala Investment Capital participated as well as Raed Ventures and Global Ventures. VentureSouq, VentureSouq. VentureSouq, VentureSouq, VentureSouq, VentureSouq, VentureSouq, Outliers VC. JIMCO and HOF were also present.The company was founded by Hosam Arab in late 2019, after he had left fashion ecommerce Namshi as CEO. A Dubai-based realty firm bought it. Arab explains that tabby was launched as a buy-now, pay-later solution to address the economic needs of the MENA region and other GCC regions.Globally, BNPL Services address the obvious problems of merchants and customers by providing greater flexibility in payments. Tabby also wanted to address the Middle East's over dependence on cash as a payment option. This is so deeply rooted that Arab, who ran Namshi, noticed that 80% (or more) of transactions that were recorded by Namshi were cash-based. This presented unique challenges when scaling the ecommerce platform.Our view and hypothesis behind buy now, buy later was that in addition to the obvious benefits of buy now/pay later, we also offer consumers an option to pay online. If we were able do that, it would be a very attractive solution for retailers in this market.Tabby integrates with retailers to enable customers to shop online and in-store with interest-free installments. Tabby was launched in the early 2020. It was slow to launch because it coincided with the outbreak of the pandemic. However, it proved to be in the company's best interest as customers and merchants began to shift to online commerce. Arab believes that e-commerce penetration in the GCC region was only single digits before COVID. However, it has increased to double digits since the influx of consumers and merchants who have embraced online commerce.Tabby's 20x increase in penetration is the reason it has seen a 20x increase in transaction volumes since June 2020. The company claims that more than 400,000 shoppers are active on its platform and that there are approximately 3,000 daily installs. The platform is used by more than 2,000 small businesses and brands around the world, such as Adidas, IKEA and SHEIN.Arab says that tabby's rapid growth has allowed them to raise more capital than they originally planned. The company raised $50 million in June in one of the largest financing facilities for fintechs in the MENA region and GCC. This investment follows tabby's Series A rounds of $7million and $23million in 2020, respectively per Crunchbase. This means that tabby has received more than $130 million, despite being launched early last year.Tabby isn't the only company that has such firepower in the region. Tamara, its Saudi counterpart, recently raised $110 million in Series A debt and equity financing from Checkout. Tamara claims Checkout bought a minority stake in her company, but there are contradicting reports.If true, this buyout is part of a trend in consolidation taking place in the MENA region and the wider GCC. Zip Co, an Australian BNPL company, announced in May that it would acquire Spotti, another major player, for $26 millions. Afterpay also invested $10 million in Postpays latest investment. Tabby is now the only independent local player on the market due to this series of events. How does tabby see competition?This level of competition is common worldwide. My market is not any different. The market is large enough to support a few players, according to me. He said that the real question is how many players are there and whether this will lead to further consolidation.Squares acquisition Of Afterpay has shown that there must be more differentiation than the vanilla BNPL. If you keep playing in the very narrow space of BNPL, I believe that there will be many challenges.Perhaps this is why tabby decided to partner with Delivery Hero rather than invest in a BNPL company. It owns and operates several regional grocery and food delivery companies including InstaShop, Talabat and Hunger Station. This company has one of the largest customer bases within the MENA region. Delivery Hero's first venture in fintech in MENA.We are looking for strategic partners to expand our services. It makes sense to work with Delivery Hero, which has one of the most important consumer platforms in the area. Arab said that it was much more beneficial than working with a global BNPL company with no presence in the market.Mark Venema is senior vice president Strategy at Delivery Hero and acknowledges the strategic value of investing in tabby. The multinational believes tabby has great potential to propel the industry forward, and he is proud to support the company's growth.Ahmad Alshammari is a partner in co-lead investor STV. He stated, "The global BNPL market will grow at 30% CAGR for the next five year. We estimate that MENA's growth will be at least twice that fast. Further accelerated by a switch to contactless payment, ecommerce growth and access credit. Tabby remains the market leader in MENA, and we believe they will continue to do so by enabling both buyers and sellers.Tabby will use the funding to expand its product range and enter new markets within the GCC. Will we see more consolidation when that happens? Companies like Klarna or Affirm, who don't have a presence anywhere in MENA or the GCC, might try to buy or acquire a majority stake at tabby.Arab stated that we have a long road ahead of us, and we are not sure where we are headed or what we want to do with this business. The short answer is that we are not looking for quick exits. Otherwise, it would be possible. We have a much greater opportunity.
