Tamara, a purchase-now, pay-later platform for customers in Saudi Arabia and the broader Gulf Cooperation Council area, has secured $340 million in a fundraising round valued at $1 billion.
The Series C round was headed by Saudi asset management and financial institution SNB Capital and Sanabil Investments, a wholly-owned subsidiary of Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF). Shorooq Partners, Pinnacle Capital, Impulse, and others have joined previous investors such as Checkout.com. The deal, which includes both primary capital and a secondary share sale, is one of the region’s biggest investments in fintech.
The announcement comes ten months after Goldman Sachs and Shorooq Partners provided loan funding to the platform, which enables users to buy, pay in installments, and bank, to expand its storage capacity to $400 million. Tamara has secured a total of $500 million in equity finance, including secondaries, and over $400 million in debt financing since its founding in late 2020 by Abdulmajeed Alsukhan, Turki Bin Zarah, and Abdulmohsen Al Babtain.
Tamara claims to have over 10 million users in its core markets of Saudi Arabia, the United Arab Emirates, and Kuwait, who shop from 30,000 partner merchants, including regional and worldwide brands such as Shein, IKEA, Jarir, Noon, eXtra, and Farfetch. Those figures are very comparable to those provided by Tabby, a UAE-born but Riyadh-based BNPL service that operates in both markets and Kuwait after financing $200 million in October.
Both firms, however rivals, emphasize the explosive rise of BNPL use, notably in Saudi Arabia, which accounts for more than 80% of Tamara and Tabby’s client base. According to a fintech study by the Saudi Central Bank (SAMA) this year, the number of registered clients using BNPL services increased from 76,000 in 2020 to 3 million in 2021 and 10 million in 2022. The rapid popularity of e-commerce and a predicted 20% CAGR for digital payments until 2025, with 13 billion transactions worth $170 billion, are driving the growth, which already makes up over 30% of Saudi Arabia’s population.
Despite the worldwide slowdown in venture capital activity, figures and estimates like those above are certain to pique the curiosity of both domestic and international investors. And if there’s one thing we’ve learned this year, it’s that the Gulf area has plenty of money to invest in VCs and startups. For example, venture businesses in the West and other areas, including Africa, have been clamoring for financial support from sovereign wealth funds and other institutional investors such as PIF and Mubadala Capital in the last year. Meanwhile, Tamara exemplifies how the area does not always need international money in unicorn rounds.
Notably, the substantial financial backing from these funds, as well as the clear top-down support from regulators, reflect a positive shift in the region’s growing ability to build billion-dollar companies (Tamara claims to be Saudi Arabia’s first homegrown unicorn, while Tabby claims to be the Gulf’s first fintech startup unicorn).
We stand here, humbled and eager, prepared for our own leapfrog moment, just as local entrepreneurs who benefited from a supportive local ecosystem and market regulator developed Tamara. Saudi Arabia and the Gulf Cooperation Council deserve a place on the global stage for financial technology. This accomplishment is a credit to the ecosystem, our outstanding staff, investors, and the collaborative attitude that makes this area a terrific environment for talent to thrive,” CEO Alsukhan said in a statement.
Tamara, the first firm to be awarded permission to supply BNPL solutions by SAMA and to graduate from its maiden regulatory sandbox, employs over 500 people in Riyadh and other places such as Dubai, Berlin, and Ho Chi Minh City. In an interview with Eltrys, Alsukhan said.
Alsukhan co-founded Nana, a digital grocery shopping platform, where he was the chief financial officer for three years before founding Tamara. There, he identified a gap in the grocery industry where small neighborhood shops had traditionally offered credit services to their customers, which he attributed to a failure in financial institutions to provide 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,” Alsukhan said. “We launched with one goal: to build a generational company in a huge financial industry that needs a major change.”
Tamara, like other BNPL services, instituted late payment fines to ensure clients paid on time. Alsukhan said that although the three-year-old fintech thought the fees were the best way to get started, consumer feedback and insights from shopping data have led Tamara to recognize that it isn’t the best route ahead. As a result, the firm, which seeks to separate itself from the competition by emphasizing client-centricity and Sharia compliance, will no longer charge late payment costs. Tamara will instead concentrate on giving its clients risk management tools that will allow them to pay on time and provide solutions that are in line with their financial capacities, rather than offering more than they can afford and benefiting from late payments.
“From the beginning, we have taken Sharia compliance very seriously.” And we live by it and will continue to invest in it as a subset of being customer-centric. The key concept of Sharia finance is not to exploit people, which is exactly what we were attempting to do as a firm. “We will work tirelessly to build a business model that profits shareholders while not putting people in debt traps to profit,” stated the CEO, who noted that the average overdue amount for a Tamara user is less than $100.
The principal source of income for the three-year-old fintech is merchant discount rates. This method, which is widely used by local and worldwide BNPL suppliers, adds considerable value to merchants by boosting conversion rates and raising the average order value. Alsukhan notes that Tamara is open to increasing its income—which has increased 300% in the previous two years—via this channel while also investigating alternatives in lieu of the late fees it now charges.
Tamara will also strive to expand on other projects that represent its customer-centric approach, such as launching its Buyer Protection Program this month. Alsukhan claims that the initiative would meet a key need and inspire trust in online buyers in an area where PayPal is not widely used and online safety is limited due to the frequency of scams and fraud, particularly in cross-border transactions.
Similarly, the CEO emphasizes the platform’s goals to improve integration into the purchasing trip via its card function for offline shops. In-store transactions already account for more than 25% of Tamara’s business, with that number expected to rise to 30% in the future year (note that Tabby, with an annual transaction volume surpassing $6 billion, reports that its card function in the UAE accounts for more than 20% of total volumes). Tamara is also investing a portion of the investment to develop new goods and services outside of BNPL, as well as capitalize on possibilities in retail and financial services across Saudi Arabia and the GCC.
“Leading 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,” stated an SNB Capital spokeswoman on the investment. “Fintech is one of the core investment sectors in SNB Capital’s strategic portfolio, and it is aligned with the Kingdom’s Vision 2030 goal of assisting fintech entrepreneurs at all stages of development.” Tamara, as a regional ‘unicorn,’ needs considerable financial alternatives, which SNB Capital is uniquely positioned to provide, as well as help for the creation of the fintech infrastructure that will enable future expansion.”
