The buy now pay later (BNPL) market in the UAE is valued at approximately USD 4.25 billion, having experienced a period of rapid growth marked by a CAGR of 24.5% from 2021 to 2024. This reflects the strong demand for instalment-based transactions as a flexible and accessible alternative to traditional credit products.
Dubai is the primary hub of BNPL activity, accounting for nearly 60% of transaction volume in the UAE. This is underpinned by the emirate’s position as a global retail destination with 17.15 million visitors in 2024 driving high-value spending across luxury and lifestyle segments – where BNPL is increasingly integrated at the point of sale. Beyond retail, BNPL usage is also expanding into higher value sectors such as automotive, healthcare, and private education.
Leading providers, such as Tabby, Tamara, Postpay, and Cashew Payments, have established partnerships across retail and higher value sectors, embedding BNPL into the UAE’s digital payments ecosystem. In the 12 months to March 2025, BNPL was the preferred online payment method, with an adoption rate reaching 39%.
Expatriates represent approximately 88% of the UAE’s population, with a large proportion of this population in lower paid construction or cleaning roles, and excluded from traditional credit. For many, the interest-free, Sharia-compliant nature of BNPL has driven uptake for payments which had previously been cash only – such as groceries and utility payments.
Since December 2023, the Central Bank of the UAE (CBUAE) has regulated BNPL providers via the Finance Companies Regulation, to enhance consumer protection, but also allow for continued growth and innovation in the sector.
BNPL providers are required to either be a Restricted License Finance Company status, or partner with a licenced bank or finance company. Regulatory requirements include the following:
BNPL providers are also subject to minimum capital and liquidity requirements.
A BNPL entity must maintain a minimum capital base continuously to ensure financial stability and to absorb potential losses which will be the higher of:
BNPL platforms must maintain sufficient liquid assets to meet short-term obligations and withstand liquidity stress. The CBUAE requires finance companies to hold an amount equivalent to 10% of their aggregate liabilities in liquid assets.
The regulatory environment is more advanced than currently seen in the UK or US, although regulation in the UK is due to be introduced in July 2026, and legislation has been introduced in New York that will bring lenders under stricter oversight.
As the market continues to evolve, BNPL providers need to ensure they are as resilient as possible to face possible headwinds in the market, which include the following:
In the UAE, fintechs held a 67.7% share of BNPL transaction volume in 2024 – benefiting from purpose-built platforms and rapid onboarding processes.
However, banks are increasingly integrating BNPL modules into their mobile apps, utilising existing credit infrastructures and removing the need for consumers to use a separate fintech platform. As such, banks are expected to grow their share of BNPL transactions in the UAE, with a forecast CAGR of 20.9% from 2025 to 2030. In addition, card issuers are introducing split-pay on existing credit limits to try to defend their market share.
BNPL providers are forming strategic partnerships to expand their reach. Recent examples include Tabby partnering with Checkout.com in March 2025, and Tamara teaming up with Mastercard to launch a virtual card in February 2025 that enables Tamara’s customers to split their purchases in up to four equal payments or pay in full through mobile wallets for online and in-store purchases. In 2025, Tamara also secured USD 2.4 billion in sharia compliant investment to expand its fintech business. In a highly competitive market, the sharia compliance of both Tamara’s financing and products is hoped to act as a differentiator to customers who prioritise ethical financial models.
This increased competition may put a downward pressure on margins for smaller, standalone players in the market.
Smaller fintechs face higher compliance costs compared to larger banks, who can have more of a capital buffer to meet the regulatory requirements introduced in December 2023. This may mean there is less capital available for product innovation, which is essential in a competitive marketplace.
In the UAE, BNPL merchant fees (merchant discount rates) range from 3% to 7%. Retailers, who can operate a low margin business model, are increasingly passing on BNPL surcharges to consumers or restricting availability to premium product lines. In market segments where price sensitivity overrides the convenience premium, this could impact BNPL take-up.
BNPL providers must carefully model the impact of introducing tiered fee models on revenue and profitability. Firms face a delicate balance in setting a merchant fee where increases may negatively impact retailers versus setting consumer fees and charges that comply with regulations.
BNPL firms must ensure they carefully monitor levels of stress in their portfolio and are resilient enough to accommodate any rise in default rates, given the high volume, low margin nature of the sector. BNPL providers must navigate originating enough loans to support sales and meet the expectations of retail partners, while ensuring that credit losses are limited.
In such a fast-growing market, lenders must ensure they are operationally and financially resilient, especially given the sector’s reliance on external capital and increased competition in the sector. Some smaller players may seek to be acquired. Other players may choose to exit the market altogether, while others could consider portfolio sales.
Whatever the future holds in the ever-evolving consumer finance sector, all firms need to ensure they have a sustainable business model with robust internal controls to ensure resilience and regulatory compliance.
For more information and guidance, contact Chris Laverty.
