Buy now, pay later is a global phenomenon. The payment method allows consumers to purchase a product and spread payments over several installments (usually four), often interest free, while the merchant gets all of its money up front, usually in exchange for a fee. The BNPL platforms (of which there are many worldwide) then collect the full payment from the consumer, thus assuming essentially all of the risk.
In the Middle East, a host of companies including Tamara, Tabby, Spotii, and Postpay, are working furiously to achieve scale to avoid becoming also rans in a highly competitive market where consumers are eager for easier ways to buy luxury goods.
BNPL is also gaining competitive steam on the continent. Which is why last week’s $12 million debt and equity raise by Nairobi-based Lipa Later is so interesting.
“We are excited to be working with our investors as we look to grow and expand to more markets in Africa. In the next 12 months, we are looking to grow and double our presence in the existing markets, even as we open in three to five new markets in Africa,” Lipa Later Founder and Group CEO Eric Mulli said in a statement.
Lipa Later currently operates in Kenya, Uganda, Rwanda. And it has plans to launch in Nigeria, Ghana, and Tanzania.
With BNPL growing so rapidly globally, it seens like 2022 will be an important year for platforms on the African continent.
One of its investors is certainly betting on Lipa Later taking on a leadership role in Africa’s still-nascent BNPL industry.
“Over the last few years, we have watched Eric Muli, CEO of Lipa Later and his team put together the building blocks for Pan-African expansion and this round of funding takes Lipa Later one step closer to being the dominant Buy-Now-Pay-Later player on the Continent,” said Samakab Hashi, Partner at Lateral Frontier VC, one of Lipa Later’s original investors.
If Lipa Later is able to execute on its 2022 plans, we could easily see an international BNPL move in and make an acquisition. The most likely international player in our view is Block, formerly Square. Why? The U.S.-based fintech is run by Jack Dorsey, who famously has designs on Africa. And the company has already acquired the global BNPL player Afterpay, for a cool $29 billion. The only question is which African BNPL gets big enough and covers enough ground to make itself a viable acquisition target.
Lipa Later’s raise comes after a pretty busy 2021 in the funding of BNPLs in the Middle East. In August, Tabby announced a US$50 million Series B round with a new valuation of US$300 million.
Tabby’s raise brought its cumulative funding to more than $130 million. That includes a US$50 million debt financing round Tabby raised in June of last year. Tabby was founded in 2019 and claims 40,000 active shoppers and 3,000 daily downloads.
Tabby’s B round answered recent moves by some of its MENA rivals. For example:
If 2021 was the year of MENA BNPL, then perhaps 2022 will be the year for Sub-Saharan Africa? Some other contenders besides Lipa Later include South Africa’s Mobicred, Payflex, and PayJustNow, as well as Nigerian neobank Carbon, which entered the BNPL space via its Carbon Zero product.