What to know about SAMA’s recent BNPL regulations

NOHA.GAD
Dec 21, 2023

Riyadh - Sharikat Mubasher: The buy now, pay later (BNPL) payment sector in Saudi Arabia saw remarkable growth in recent years triggered by the Kingdom’s aspirations to position itself as a leading fintech hub by setting up a robust and reliable ecosystem.

The Kingdom witnessed a surge in the adoption of digital payments and e-commerce, establishing an encouraging environment for BNPL providers to thrive.

BNPL allows customers to buy goods and services and pay for them in installments over a specific period, typically interest-free.

Thanks to the growing demand for BNPL services, several local and global fintech companies entered the Saudi market, harnessing cutting-edge technology and user-friendly interfaces to provide seamless online and offline purchasing experiences.

The Saudi Central Bank (SAMA) plays a crucial role in fostering the fintech sector and supporting BNPL companies’ business; it has been working on a regulatory framework to ensure responsible lending practices and consumer protection.

Obtaining SAMA’s permit is a prerequisite condition to engage in BNPL activity in the Kingdom; so far, there are seven authorized BNPL companies in Saudi Arabia including Tabby, Tamara, Spotii, Madfu, and the recently licensed Jeel Pay.

Recently, SAMA issued rules regulating the BNPL companies in the Kingdom, in line with its commitment to regulate the licensing of the BNPL companies and set minimum standards and procedures required to offer BNPL services.

Under SAMA’s rules, the BNPL activity is defined as “a type of financing that allows a consumer to purchase goods or services without a term cost payable by the consumer."

The rules include various provisions related to licensing requirements, internal regulatory measures such as internal policies and procedures, information security standards, and measures to combat financial crimes.

License Requests: Companies seeking SAMA’s permission to provide BNPL services must submit requests that meet the following:

  • A completed license application in the form provided by SAMA.
  • A copy of the commercial register, memorandum of association, and articles of incorporation.
  • A list of the founding members or shareholders of the company, including the number and percentage of shares of each.
  • The Fit and Proper Form for founding members or shareholders, signed by each.
  • Information about the company’s owners and organizational structure.
  • The feasibility study and business plan.
  • An irrevocable bank guarantee for an amount equivalent to the minimum capital, issued in favor of SAMA by a bank licensed to operate in the Kingdom.

Minimum Capital: the minimum capital of the BNPL company must be SAR 5 million.

Management Requirements: all candidates for supervisory and executive positions in a BNPL company must meet the professional eligibility requirements set by the central bank, be permanent residents of Saudi Arabia, and have sufficient experience in the field.

The applicant company must provide the required documents within 30 working days from the request date.

License Fees: SAMA determined the license issuance fees at SAR 5,000.

SAMA’s regulations further included rules related to the company’s internal policies, obligations, activity limits, consumer due diligence (CDD), credit limits, and more.

One of the most important rules stipulated by SAMA is that at least 50% of human resources employees must be Saudi nationals when the BNPL company starts operations.

SAMA’s issuance of these regulations mirrors its continuous endeavors to foster the financial sector in general and empower the fintech sector in particular.

According to Mohammed Alzubi, Founder and Managing Partner of Nama Ventures, the fintech sector in Saudi Arabia is expected to witness a surge in BNPL companies within the upcoming period, following the announcement of SAMA’s regulations.

On the other side, recent reports forecasted BNPL payments in the Kingdom to rise by 21.7% on an annual basis to hit $1.4 billion in 2023.

Moreover, the adoption of BNPL payment solutions is expected to record a compound annual growth rate (CAGR) of 13.1% during 2023-2028. 


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