Tamaraa buy now pay later platform for consumers in Saudi Arabia and the wider GCC region, has raised $340 million in a funding round that values the fintech at $1 billion.
Saudi asset manager and financial institution SNB Capital and Sanabil Investments, a wholly owned subsidiary of Saudi Arabia’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 like Checkout.com. The round, consisting of seed capital and the 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 grow its warehouse to $400 million. With this transaction, Tamara has raised a total of $500 million in equity financing, including secondaries, and over $400 million in debt financing since then Abdulmajeed Alsukhan, Turkey Bin Zara and Abdulmohsen Al Babtain started the company in late 2020.
Tamara claims to have over 10 million users in its core market of Saudi Arabia, UAE and Kuwait, who shop from 30,000 partner merchants including local 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 agency with operations in both markets and Kuwait, reported in October after raising $200 million in 1.5 billions of dollars.
Both startups, though competitors, highlight the growing use of BNPL, particularly in Saudi Arabia, the market that makes up more than 80% of Tamara and Tabby’s customer base. According to a fintech fair by the Central Bank of Saudi Arabia (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 increase, which now represents nearly 30% of the Saudi population, fueled by growing popularity of e-commerce and a projected 20% CAGR for digital payments by 2025, reaching 13 billion transactions with a total value of $170 billion.
Despite the global downturn in venture capital activity, numbers and forecasts such as the above are sure to attract interest from local and foreign investors. And if there’s one thing we’ve learned this year, it’s that the Bay Area has no shortage of capital to make significant investments in VCs and startups. For example, last year, venture capital companies in the south and other regions, including Africa, have sought financial support from sovereign wealth funds and large institutional investors such as PIF and Mubadala Capital. Meanwhile, Tamara is a notable example of how the region does not necessarily require foreign capital in unicorn rounds.
Notably, heavy financial backing from these funds and apparent top-down support from regulators reflect a positive shift in the region’s growing ability to create billion-dollar companies (Tamara says it’s Saudi Arabia’s first domestic unicorn , while Tabby claims to be the first unicorn fintech startup in the Gulf.)
“Saudi Arabia and the GCC deserve their place on the global stage for fintech. Just as Tamara was created by local entrepreneurs nurtured by a supportive local ecosystem and market regulator, we are here today, humbled and hungry, ready for our own leap moment. This achievement is a testament to the ecosystem, our incredible team, investors and collaborative spirit that makes this region a great place for talent to flourish,” CEO Alsukhan said in a statement.
Tamara, which was the first company to be licensed to provide BNPL solutions by SAMA and graduate from its inaugural regulatory sandbox, has over 500 employees at 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 CFO for three years. There, he identified a gap in the grocery business where small neighborhood stores had traditionally offered credit services to their customers, which he said was in response to the failure of financial institutions that provided such services and the low use of credit cards in Saudi Arabia. and other Gulf countries (15% in Saudi Arabia and 10% throughout the Gulf).
“I knew there was an opportunity to build something important and give people the service they deserve, which is a credit payment type that is customer-centric first and foremost, instead of cash loans that put you in a debt trap. something that has happened historically and probably still happens with banks globally and in this part of the world,” Alsukhan observed. “We started with one goal: to build a generational company in a huge financial industry in need of major change.”
Like most BNPL services, Tamara has implemented late payment fees to ensure customers make timely payments. Alsukhan said that while the three-year-old fintech believed fees were the right approach to take when it started, customer feedback and insights from shopping data made Tamara realize it’s not the best way to go. So from now on, the company, which wants to differentiate itself from the competition by doubling down on customer-centricity and Sharia compliance, will remove late payment fees. Instead, Tamara will focus on providing its clients with risk management tools that will enable them to pay on time and offer options that align with their financial capabilities, avoiding offering more than they can afford and then benefiting from payment delays.
“Sharia compliance is something we have taken very seriously as a company since day one. And we live by that and will continue to invest in that principle, which is a subset of being customer-centric. The basic principle of Sharia finance is not to exploit people and that is what we have been trying to do as a company. We will work tirelessly to build a business model that makes money for shareholders but doesn’t put people in debt traps to make money,” said the CEO, who added that the average outstanding amount for a Tamara customer is less than 100 dollars.
The three-year-old fintech’s primary revenue stream comes from merchant discount rates. This approach, commonly used by local and global BNPL providers, adds significant value by improving conversion rates and increasing average order value for merchants. Alsukhan stresses that Tamara is open to boosting its revenue – which has grown 300% in the past two years – in this stream, while exploring alternatives to the late fees it usually charges.
Tamara will also look to double down on other initiatives that embody its customer-centric principle, including the introduction of the Buyer Protection Program this month. In a region where PayPal is not widespread and online protection is rare, amid the prevalence of fraud and fraud, especially in cross-border transactions, Alsukhan says the program will address a critical need and instill confidence in online shoppers.
Likewise, the CEO highlights the platform’s plans to boost integration in the shopping journey through its card feature designed for offline merchants. Currently, in-store transactions account for more than 25% of Tamara’s business, which is expected to exceed 30% next year (notably, Tabby, with an annual transaction volume of more than $6 billion, shows that the card operation in the UAE contributes to over 20% of its total volumes.) Tamara is also allocating part of the investment to introducing new products and services beyond BNPL and capitalizing on opportunities in markets and financial services across Saudi Arabia and GCC.
“The leading Series C raise for Tamara through SNB Capital’s fintech closed-end fund is in line with one of our goals to invest in single target companies that achieve long-term capital appreciation,” an SNB Capital spokesperson said of the investment. Fintech is one of the key investment areas in SNB Capital’s strategic portfolio and aligns with the Kingdom’s Vision 2030 goal of supporting fintech entrepreneurs at every stage of their development. As a regional unicorn, Tamara requires significant funding options which SNB Capital is ideally placed to provide and supports the development of the fintech infrastructure that will support further growth.”
