Saudi Arabia, the Arab world’s largest economy, has announced new rules to regulate the licensing of buy now, pay later sector.
The rules include provisions related to licensing requirements, regulatory measures such as internal policies and procedures, information security standards and measures to combat financial crimes, the Saudi Central Bank said on Sunday.
There are also requirements in place to protect consumers, define limits for activities and credit, as well as provisions regarding supervision and compliance, the financial regulator said.
“This decision reflects Sama’s continuous efforts to develop the financial sector as a whole and empower the FinTech sector in particular,” the regulator said.
“Additionally, the development of these rules will contribute to the growth and sustainability of the sector while safeguarding consumers’ rights.”
The BNPL business model, which allows consumers to make online purchases instantly and spread their payments out over interest-free instalments, has grown since the onset of the Covid-19 pandemic, driven by millennials and Generation Z.
The global BNPL market is projected to hit $565.8 billion in 2026, from an estimated $309.2 billion in 2023, growing at a compound annual rate of 25.5 per cent, data from GlobalData shows.
The kingdom’s BNPL market is expected to grow to $1.83 billion by 2028, from a forecast of $580 million this year, according to Mordor Intelligence.
Last month, Mubadala-backed BNPL platform Tabby achieved unicorn status after it raised $200 million in a series D funding round, taking its total valuation to $1.5 billion.
The investment is expected to help Tabby, which was founded in Dubai, expand its operations in Saudi Arabia and the UAE, as it prepares for a planned initial public offering in the kingdom.
Last year, Riyadh-based BNPL platform Tamara raised $100 million in its second funding round to fund its expansion efforts.
However, with the rise of the BNPL services market, regulators are introducing tougher guidelines to safeguard consumers from taking on debts they cannot afford.