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Tamara, a buy now pay later platform for consumers in Saudi Arabia and the wider GCC region, has raised $340 million in a financing round that values the fintech at $1 billion.
Saudi asset manager and financial institution SNB Capital and Sanabil Investments, a wholly-owned company by Saudi’s sovereign wealth fund Public Investment Fund (PIF), led the Series C round. Other backers include Shorooq Partners, Pinnacle Capital, Impulse and others, joining existing investors such as Checkout.com. The round, composed of primary capital and a transaction of some secondary shares, is among the largest investments in a fintech in the region.
The news comes ten months after the platform, which allows consumers to shop, pay in installments and bank, received debt financing from Goldman Sachs and Shorooq Partners to upsize its warehouse facility to $400 million. With this transaction, Tamara has raised a total of $500 million in equity funding, including secondaries, and over $400 million in debt financing since Abdulmajeed Alsukhan, Turki Bin Zarah and Abdulmohsen Al Babtain started the company in late 2020.
Tamara claims to have over 10 million users across its primary market, Saudi Arabia, the UAE, and Kuwait, that shop from 30,000 partner merchants such as regional and global brands SHEIN, IKEA, Jarir, Noon, eXtra, and Farfetch. Those numbers are strikingly similar to what Tabby, a UAE-born but Riyadh-based BNPL service that operates in both markets and Kuwait, reported this October after raising $200 million at $1.5 billion.
Both startups, albeit competitors, highlight the surging growth in BNPL usage, particularly in Saudi Arabia, the market that makes up more than 80% of Tamara and Tabby’s customer base. According to a fintech report by the Saudi Central Bank (SAMA) last year, registered customers with BNPL services increased from 76,000 in 2020 to 3 million in 2021 and 10 million in 2022. The surge, now accounting for nearly 30% of Saudi Arabia’s population, is fueled by the booming popularity of e-commerce and a projected 20% CAGR for digital payments until 2025, reaching 13 billion transactions with a total value of $170 billion.
Despite the global slump in venture capital activity, numbers and projections like those above are bound to attract interest from local and foreign investors. And if there’s one thing we’ve learned this year, the Gulf region isn’t short of funds to make marked investments in VCs and startups. For example, this past year, venture firms in the West and other regions, including Africa, have clamored to receive financial backing from sovereign wealth funds and large institutional investors such as PIF and Mubadala Capital. Meanwhile, Tamara is a notable example of how the region doesn’t necessarily require foreign capital in unicorn rounds.
Notably, the weighty financial backing from these funds and evident top-down support from regulators reflect a positive shift in the growing capability of the region to build billion-dollar companies (Tamara says it is Saudi’s first homegrown unicorn, while Tabby claims to be the first fintech startup unicorn in the Gulf.)
“Saudi Arabia and the GCC deserves its place on the world stage for financial technology. Just as Tamara was created by local entrepreneurs nurtured by a supportive local ecosystem and market regulator, we stand here today, humbled and hungry, ready for our own leapfrog moment. This achievement is a testament to the ecosystem, to our incredible team, investors, and the collaborative spirit that makes this region a great place for talent to flourish,” said CEO Alsukhan in a statement.
Tamara, which was the first company to be granted a permit to provide BNPL solutions from SAMA and to graduate from its inaugural regulatory sandbox, has over 500 employees across its headquarters in Riyadh and other cities, including Dubai, Berlin, and Ho Chi Minh City, Alsukhan told TechCrunch in an interview.
Before launching Tamara, Alsukhan co-founded Nana, a digital grocery shopping platform where he was the chief financial officer for three years. There, he identified a gap in the grocery business where small neighborhood shops traditionally offered credit services to their customers, which, according to him, was in response to a failure in financial institutions providing such services and low credit card usage in Saudi Arabia and other Gulf countries (15% in Saudi Arabia and 10% across the Gulf).
“I knew that there was a chance to build something significant and give people the service they deserve, that is, a credit type of payment that is customer-centric, first and foremost, rather than cash loans that put you in a debt trap, which is the case historically and probably still is with the banks globally and in this part of the world,” remarked Alsukhan. “We launched with one goal: to build a generational company in a huge financial industry that needs a major change.”
Like most BNPL services, Tamara implemented late payment fees to ensure customers make timely payments. Alsukhan said that while the three-year-old fintech believed the fees were the right approach to take as it got off the ground, customer feedback and insights from shopping data have made Tamara realize that it isn’t the most optimal way forward. So, from now on, the company, which wants to differentiate itself from the competition by doubling down on customer centricity and being Sharia-compliant, will remove late payment fees. Instead, Tamara will focus on providing its customers with risk management tools to enable them to pay on time and offer options that align with their financial capabilities, avoiding offering more than they can afford and subsequently profiting from late payments.
“Sharia compliance is something we take very seriously as a company from day one. And we live by it and will continue to invest in that principle, which is a subset of being customer-centric. The core principle of Sharia financing is not to take advantage of people and that’s what we were trying to do as a company. We will work tirelessly to build a business model that makes money to shareholders but doesn’t put people into debt traps to make money,” said the CEO, who added that the average outstanding amount for a Tamara customer is less than $100.
The three-year-old fintech’s primary revenue stream is derived from merchant discount rates. This approach, commonly employed by local and global BNPL providers, contributes significant value by improving conversion rates and increasing the average order value for merchants. Alsukhan emphasizes that Tamara is open to boosting its revenue — which has grown 300% in the last two years — in this stream while exploring others in place of the late fees it typically charges.
Tamara will also look to double down on other initiatives embodying its customer-centric principle, including introducing its Buyer Protection Program this month. In a region where PayPal isn’t prevalent and online protection is scarce amidst a prevalence of scams and fraud, especially in cross-border transactions, Alsukhan says the program will address a critical need and instill confidence in online shoppers.
Similarly, the chief executive highlights the platform’s plans to enhance integration into the shopping journey via its card feature designed for offline merchants. Presently, in-store transactions account for more than 25% of Tamara’s business, a figure projected to exceed 30% in the coming year (notably, Tabby, boasting an annual transaction volume exceeding $6 billion, indicates that its card feature in the UAE contributes to over 20% of its total volumes.) Tamara is also allocating part of the investment to introduce new products and services beyond BNPL and capitalizing on opportunities in shopping and financial services across Saudi Arabia and the GCC.
“Leading on the series C raise for Tamara through SNB Capital’s close-ended fintech fund aligns with one of our objectives to invest in single target companies achieving long-term capital appreciation,” said a spokesperson from SNB Capital about the investment.” Fintech is one of the core investment sectors in SNB Capital’s strategic portfolio and is aligned with the Kingdom’s Vision 2030 objective of supporting fintech entrepreneurs at every stage of their development. As a regional ‘unicorn,’ Tamara requires significant funding options which SNB Capital is ideally positioned to deliver, and backing the development of the fintech infrastructure which will support further growth.”
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