UAE consumers could soon be paying off school or medical bills on 'Buy Now Pay Later' - and on 0%

Dubai: Not just for shopping, UAE consumers could soon pay off their medical or education bills in monthly instalments… at zero interest. If they do, it could mean savings in the thousands of dirhams each year – and these days, each saved dirham counts.

Yes, the ‘Buy Now Pay Later’ could soon show up quite forcefully in helping clear off those bills too. It was last year that the payment option emerged as a viable option for UAE consumers to pick up goods on credit… and not have to worry about the credit card charges.

A handful of BNPL platforms/apps rushed to fill the market need and at a time when shoppers were being extremely careful with their spend patterns following the COVID-19 outbreak and the resultant hit on the economy and jobs.

“We believe the world has gone through a fundamental change and consumers are looking at their spending differently,” said Ammar Afif, founder of cashew, one of the popular BNPY fintech platforms in play. “Healthcare and education are two categories that should garner more interest for BNPL.”

Ammar Afif, founder of the fintech cashew. His company has just tied up with Mashreq Bank to offer Buy Now Pay Later payment schemes at the bank's merchant partners. Image Credit: Gulf News

Right fit for the times

Industry sources say that school bills are usually paid through credit cards, and more so these days, given the safety guidelines in place for COVID-19 and the preference to use digital means rather than cash to complete a transaction.

Mashreq Bank has just introduced a BNPL scheme in partnership with cashew with an aim to accelerate digital payment adoption in the UAE. This will allow Mashreq’s merchant partners to offer buy now pay later schemes at their outlets/online platforms.

The bank is a Top 3 merchant acquirer in the country, with volumes having surged by more than 35 per cent in the first three months of this year. (It also saw e-commerce volumes grow by more than 250 per cent in 2020.)

“This BNPL product is growing exponentially in popularity across the world,” said Kartik Taneja, Executive Vice-President and Head of Payments, Mashreq Bank. “By partnering with cashew, we have the potential to serve millions of clients across the UAE - rather than just our own bank clients,”

While talking about the BNPL’s impact on bank’s credit card business, Taneja said: “Yes, there may be an impact for the cards – it remains to be seen. The idea is that if our clients demand this product, and if we don’t supply it, they will just go to someone else.

“We would rather be customer-centric and disrupt ourselves than let someone do it to us.”

There are penalties...
In a Buy Now Pay Later scheme, the customer is not charged any processing fee or interest on their purchases. In the unlikely event of a customer not making a payment in time, cashew applies a late fee of up to Dh35 or 2 per cent of the total outstanding amount, whichever is higher. It is capped after 2 missed payments. cashew’s initial credit limit for the first transaction is Dh4,500, then the limit will increase based on the customer’s risk profile. The limit can go up to Dh10,000.

What’s in it for the shopper?

It’s just like a credit card deal, but without the interest charges. The customer needs to have a credit or debit card on file and the purchase price of the goods or services can be split over a certain period, depending on the choice of scheme. And at 0 per cent additional cost.

Currently, the BNPL fintech platforms typically offer three products catering to a customer’s lifestyle:

• Delay, which allows you to buy now and pay the entire amount up to 14 days later.

• Divide, which allows you to buy now and pay over monthly instalments.

• Defer, designed to enable a consumer to make larger purchases while paying over a longer period of time.

Traditionally, BNPL options have attracted fashion retail and beauty brands and retailers, in a bid to ease the customer’s spending pathway. But BNPL is not limited to just those categories.

“We’re approaching our categories from a customer-centric point of view and learning deeply on other aspects of their lifestyle that can benefit through digital financing,” said Afif. “These include education, travel, entertainment, home improvement, and healthcare.”

So, for your next school bill or medical expenses, you could be thinking BNPL…

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