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“A lot of the market value of BNPL companies is based on the belief that they can predict consumer patterns more accurately than banks,” says the fintech pioneer
Consumers in the US and Europe have long been familiar with the “buy now, pay later” philosophy, but it has now spread to the Middle East. Cashew Payments, a United Arab Emirates-based Buy Now Pay Later (BNPL) provider, has announced an agreement with Dubai-based Mashreq Bank that will allow it to expand its operations not only in the UAE but also in other countries the area.
“Our partnership with Cashew will lead the future of financial services in the region. We will leverage Mashreq’s complete network of merchants and consumers to provide our ecosystem with the most ubiquitous and flexible BNPL option on the market,” said Mashreq Banking Group Chief Executive Ahmed Abdelaal said.
Mashreq Bank, the UAE’s oldest private bank, has committed up to $10 million to fintech leader Cashew, which currently offers BNPL services to consumers in the UAE and Saudi Arabia. As part of the strategic investment, Mashreq is integrating Cashew Payment as an option for the bank’s payments technology subsidiary NEOPAY and supporting the launch of Cashew in Egypt.
Many of these people are not used to working and spending on credit. We try to address this in a number of ways, such as educating about responsible consumption. Our systems can also identify when a customer exceeds their usage and struggles to pay full price.
“BNPL is gaining traction globally as a payment method, with UAE BNPL transaction volumes expected to grow by 71% in 2022 compared to last year,” said Fernando Morillo, senior executive vice president of Mashreq Bank, head of retail banking group Morillo) said.
“Through our partnership with Cashew, customers can enjoy greater flexibility when making payments. We are eagerly looking forward to the launch of further services as we continue to provide our customers with more choice and convenience in the UAE and in the future across Egypt, ‘ Morillo added.
Buy now, pay later is an e-commerce service that allows consumers to split payment for a product or service over a period of time, usually structured like an installment plan. The e-commerce company guarantees the retailer payment based on the risk profile of the customer. Major companies offering services in the West include Affirm, Klarna and Afterpay.
In the US and Europe, the service is often associated with retail shopping and luxury spending. Cashew co-founder Ammar Afif told the media hotline: “That’s what drove it in the first place.”
“In the UAE, however, we see people using it for a wider variety of things like travel, furniture and insurance. It’s a big difference because in GCC [Gulf Cooperation Council] You have to pay your premiums up front, including health insurance, and BNPL allows people to better insure themselves,” he explained.
While BNPL is generally associated with commodity consumption, Cashew co-founders Afif and Ibtissam Ouassif have different goals for it.
“Our vision is to provide financing to consumers at all levels, including things of higher value. What about education? If we extend the duration of the amortization payment, students can use the service to finance their time in college. Empower consumers and help them grow their services,” Afif said.
But extending large amounts of credit to inexperienced consumers can also be detrimental. Cashews are also available to expats in GCC countries, including poor migrant workers.
“Many of these people are not used to working and spending on credit. We try to address this in a number of ways, such as educating about responsible consumption. Our system can also identify when customers are exceeding their usage and struggling to pay full price ,” Afif said.
Nadav Lidor, managing director of Brex Israel, said: “When BNPL first started, it looked like a magic payment solution. People didn’t realize at first that it was similar to a loan or credit. Today, people are more aware of it , so there are more regulations.”
Lidor was previously the co-founder and CEO of Weav, a fintech infrastructure startup acquired by US fintech giant Brex.
“With inflation rising, it’s more expensive to borrow money, which means if you’re not a bank, you’re going to need outside capital. Six months ago, these companies had better room to maneuver, but today it’s harder,” Lidor told the media hotline.
“A lot of the market value of these companies is based on the belief that they can predict consumer patterns more accurately than banks. They have a lot of data and if they succeed in building an accurate [customer] A profile that helps assess how much credit they can give consumers, which is very lucrative. However, it is quite difficult to be groundbreaking in this sense,” he explained.
“The entire industry has gone through a massive drop in the stock market. It doesn’t mean it’s over, it’s just that some companies have to recalculate the way they work. If Cashew learns from Western companies and takes this lesson, they might do Something really interesting, especially since the concept is relatively new in the MENA region,” Lidor said.
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