Buy Now, Pay Later is becoming a common way to manage everyday spending in the Gulf, with more consumers using instalments for school fees, groceries, and medical bills. Once linked to fashion and electronics, the payment model is now being used across a wider range of sectors and is playing a bigger role in how people budget across the region.
“Essential categories now drive higher repeat usage than discretionary spend,” says Piyush Dubey, Partner at Kearney Middle East and Africa Financial Services Practice. “BNPL is transitioning from occasional indulgence to an everyday budgeting tool.”
The shift comes as BNPL volumes in the region are projected to double over the next five years. Annual transaction value is expected to rise from around $6 billion in 2025 to about $12 billion by 2030. According to Dubey, the growth is being driven by high smartphone penetration, a mobile-first population, and supportive regulatory frameworks in the UAE and Saudi Arabia.
Retailers are seeing the upside. Offering a pay-in-four option can increase conversion rates by 18% and raise average basket sizes by one third. Most BNPL providers collect their revenue directly from merchants, who pay between 4 and 8% of the transaction value to access the service.
Avoid these pitfalls
Consumers usually pay no interest unless they miss a payment. That has led to concerns around late fees and over-leveraging, especially among younger users. “Instalments are marketed as interest-free, but late fees, permitted under the UAE rules, can accumulate quickly,” says Dubey.
Global surveys show that 41% of BNPL users paid late at least once in the past year. That figure was about one-third of the year before.
To reduce these risks, Dubey says consumers need access to better budgeting tools, clear payment schedules, and reminders. He also points out that financial literacy varies across the region, which can affect repayment behaviour.
BNPL is also creating new partnerships between fintech firms and banks. Most BNPL originations still come from fintechs, but banks are starting to fund the underlying receivables. Some are using white-label technology to offer instalments through their own apps. Tabby, one of the region’s largest players, securitised up to $700 million of receivables with a global lender. “BNPL is evolving into a complement,” says Dubey. “Banks get access to new retail assets while preserving the fintech customer interface.”
Accessing risk
Lenders are using a combination of credit bureau data and alternative data sources to assess risk. This includes telco usage, device signals and user behaviour. In the UAE, providers must check a borrower’s credit file once exposure exceeds Dh5,000. “Large players run bank-grade, real-time credit factories,” says Dubey. “Machine-learning scorecards combine bureau data with hundreds of alternative variables.”
Default rates so far remain in the low single digits, roughly in line with credit cards. World Bank research suggests that these new scoring models help expand access to safe credit for borrowers with thin files.
While fashion and electronics still make up about one-third of BNPL volume, sectors such as healthcare, education, groceries, and travel are expanding quickly. Healthcare is expected to post the fastest growth through 2030, with a compound annual rate of over 20%. Market data also shows that shoppers are using BNPL more often for essential purchases than for occasional items.
Fund raising
The funding environment is beginning to concentrate around a few large platforms. Tabby reached a $3.3 billion valuation after its Series E round, while Tamara secured $340 million in Series C funding and also crossed the $1 billion mark. These two firms now account for the bulk of BNPL activity in the UAE and Saudi Arabia. “Capital is concentrating at the top,” says Dubey. He expects further consolidation and predicts that two or three firms will eventually lead the market.
Regulators in both countries have already introduced licensing requirements, disclosure rules and fee limits. Additional measures are likely to follow, including mandatory reporting to credit bureaus, standardised cost-of-credit metrics, and more structured affordability checks. “These measures will align BNPL oversight with card and personal-loan regimes,” Dubey says.
Kearney projects that regional BNPL volumes will grow about 15% a year. Over time, Dubey says, the product will shift from a niche lending tool to a core part of the retail credit system. “BNPL is poised to transition from a niche fintech offering to an integral retail credit rail for merchants and lenders alike.”
For consumers, the advice is simple. Use instalments with the same care as any other form of debt. Keep track of due dates, avoid missed payments, and stay within budget. Splitting payments may make purchases feel lighter, but the financial responsibility remains the same.
