Tabby offers buy now, pay later services to customers of retail groups like Ikea, Toys R Us and Landmark Group. Courtesy of Tabby
Tabby offers buy now, pay later services to customers of retail groups like Ikea, Toys R Us and Landmark Group. Courtesy of Tabby
Tabby offers buy now, pay later services to customers of retail groups like Ikea, Toys R Us and Landmark Group. Courtesy of Tabby
Tabby offers buy now, pay later services to customers of retail groups like Ikea, Toys R Us and Landmark Group. Courtesy of Tabby

Technology

UAE's Tabby secures $23m in funding round led by Arbor Ventures and Mubadala Capital

The buy now, pay later service will use the money to finance its next stage of growth

Michael Fahy
Michael Fahy

December 08, 2020

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  • Arabic

Tabby, the Dubai-based company that allows people to make online purchases instantly and pay for them later, raised $23 million in initial venture capital funding led by Arbor Ventures and Mubadala Capital.

The money will be used to fund the company's next stage of growth and help it "materially scale its product and engineering capabilities", it said in a statement on Tuesday.

“The shift to online retail has never been more evident," Hosam Arab, the company's co-founder and chief executive, said. "Consumers are becoming ever more demanding as they actively seek convenience and reliability in their shopping experience. And this includes how they pay for their purchases."

Founded last year, Tabby has agreements in place with a number of big retail groups including Ikea, Toys R Us, Ace Hardware and other brands operated by Al Futtaim Group and Landmark Group. It allows shoppers to defer payment on purchases made either online or in-store for 30 days or to pay in four monthly instalments at no extra cost.

The company says integration of its service can help increase sales conversion rates for retailers by over 20 per cent and boost transaction sizes by 30 to 85 per cent. Tabby has already agreed a partnership with Visa and joined a regulatory sandbox run by Saudi Arabia's central bank.

The initial Series A funding round also secured backing from STV, Raed Ventures, Global Founders Capital, Jimco, Global Ventures, Venture Souq, Outliers VC, MSA Capital, HOF and Jordan's Arab Bank.

Tabby is "the leader in buy now, pay later" in the Middle East and North Africa region, said Melissa Guzy, managing partner at Arbor Ventures. The region itself is "at a tipping point" in terms of the growth of digital payments, she added.

"Buy now, pay later solutions are booming globally thanks to accelerated payments digitisation and e-commerce penetration, and the Middle East is no exception. Tabby’s solution fits squarely within our thesis that FinTech solutions will drive better experiences for merchants and consumers," said Ibrahim Ajami, head of ventures at Mubadala.

Investor interest in buy now, pay later firms is also booming. Europe's biggest player, Sweden's Klarna, raised $650m in a funding round led by US venture capitalist Silver Lake and Singaporean sovereign wealth fund GIC in September. In the same month, US-based operator Affirm founded by Max Levchin raised $500m in a late stage funding round backed by Durable Capital Partners.

Mr Levchin had sold a previous company to PayPal, which has itself launched a 'Pay in 4' service allowing customers to spread payments over a four-month period.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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