“Buy Now Pay Later” solutions are driving growth in the untapped market of people who can’t or won’t use credit cards — and the UAE is an emerging hub.

By Xische Editorial, October 10, 2021

In 2005, a Swedish startup called Klarna started a brand new financial sector. The startup enabled shoppers at a popular supermarket to check out without having to pay. Instead of the traditional transaction, Klarna invoiced customers to settle their debts later. Buy now, pay later (BNPL) was born. BNPL is one powerful example of the dramatic changes taking place in financial technology. These forces are changing the UAE’s knowledge economy and economic outlook.

A bit more about Klarna before we go deeper into the changes in the UAE. Klara raised its first capital in 2007. Klarna has subsequently raised more than $3bn, and it is now valued at over $45bn. That high valuation is because Klara single-handedly launched the modern buy-now-pay-later industry before anyone even knew what BNPL meant. Less than 20 years later, BNPL is transforming the American credit card market. Given the expansive state of financial technology, BNPL’s growth is driving in the untapped market of people who can’t or won’t use credit cards.

The global fintech industry is booming. Financial technology companies’ funding rose to a record $98 billion in the first half of 2021. This is particularly clear in the MENA region. According to The National, fintech companies in Europe, the Middle East, and Africa received $39.1bn in investment, “including a record $15.1bn in venture capital financing. Corporate venture capital-affiliated investments for the EMEA region also rose to an all-time high of $5bn.” 

Aside from the high valuations of local fintech companies, the promising news about this moment is the growth that fintech is having across the knowledge economies of the region and specifically in the UAE. One in four technology deals in 2021 involved the fintech sector. This interest is driving the significant liquidity flows to these companies. "FinTech stood out head and shoulders above other sectors on funding volume and value," the consultancy Redseer recently reported. "Within FinTech, while payments and remittances secured the maximum number of deals, lending accounted for the largest share of the money raised."

While fintech is a truly global sector, the UAE has several specific advantages in helping local start-ups. For one, the country is at the crossroads of the emerging world. More than 85% of the world’s population lives in emerging economies. Increasingly these populations are looking to new capitals of global growth like Dubai and Abu Dhabi. This is why African, Asian, and even South American startups find themselves in a multicultural city like Dubai. Everyone is welcome and even encouraged to do business there. 

This leads us to another point; it’s effortless to do business in the UAE. The country is in the process of revamping its visa structure to ensure that digital nomads and tech entrepreneurs can come and operate with ease. When it comes to the rapid world of fintech, these shifts are vital to attracting talent. 

There is another element at work here too. And that’s the fact that the UAE has a history of operating in fintech before fintech as we know it even existed. The remittance sector is one of the largest and most established in the world. Before moving money through our smartphones, the UAE was a hive of remittance transfers to all corners of the world. Given its history in space, the UAE has a genuine trust in remittances that it is building on with fintech. 

We have long adopted a holistic approach to the building of the UAE’s knowledge economy. There are several requirements to building a thriving economy of the future. One of those pillars is increasingly fintech, and the UAE is already punching above its weight. If you want to peer into the future of the local technology sector, start with fintech.