UAE consumers get 'pay later' financing optionson rents, remittances - even home renovations

Arun Leslie John, Gulf News, September 25, 2024

Dubai: More instalment-based payment options are becoming available for cost-conscious UAE consumers, whether it’s12 month rentals or ‘pay later’ options for remittances. Th ese are also coming to the UAE market at a time when there hasbeen some softening on consumer spending trends.
This week, the property portal announced that it is tying up with a handful of estate agents to off er tenants the choice ofpaying their annual rents across 12 months, using credit or debit card option. Th is is currently available only in Dubai, butthe company has plans to expand its scope to some of the other emirates too. (Th e landlords are paid off in full by Keyperupfront.)

“Tenants can search for pre-approved units listed by our partner agencies that are already priced for monthly rent,” saidWalid Shihabi, co-founder of Keyper. “We then support their journey end-to-end, from viewing the property all the wayuntil contract signing.”
Recently, the Astra Tech owned multi-purpose app platform added the ‘send now pay later’ feature for users whensending remittances. “Users can pay later in manageable installments, providing much-needed relief during fi nanciallydemanding periods, such as month-end,” said a statement.
In the first five months of 2023, Dh6.74 trillion was processed in remittances from the UAE, according to Astra Tech. Forthe company, it also provides another point of diff erentiation compared to the upfront fees charged by legacy currencyexchange houses or banks. “Th is service gives millions of users the fl exibility to manage their fi nancial obligations more eff ectively,” said AbdallahAbu Sheikh, founder of Astra Tech and CEO of Botim.

Subdued consumer spending?

Plus, consumers seem to be in the mood to go easy on spending where possible. Multiple retailers have confi rmed that therecent back-to-school related spending patterns had been subdued. “You had a situation where new residents in thecountry were spending on requirements for their children heading to school,” said a retailer. “But of our regular shoppers,activity had in fact come down in recent months.”
Even with interest rate cuts starting and consumers fi nally able to get relief on their credit card bills and other loanexposure payments, it will take a while for consumer spending in the UAE to pick up, said market sources.

Tech retailers, for instance, are anxious to see how far demand for the new iPhone 16 extends to those beyond those Appleshoppers who immediately pick up a new smartphone as soon as it launches. "The 'Apple iPhone' effect is usually a goodproxy to judge consumer spending," said a tech consultant. "Last year's iPhone 15 sales took a longer time to pick up, andretailers here don't want that to happen on the 16."

The BNPL phenomenon

This is where the ‘buy now pay later’ off ers had been helping. In electronics and tech sales, these zero interest rate buyingoptions currently make up anywhere between 20-30 per cent of a retailer’s consumer sales, according to some estimates.
The same trend is what’s being introduced to other possible consumer spending requirements, whether on rents orremittances. Th ere’s even a pay later option available for those wanting to do a renovation to their homes.

A new platform, Reno, has launched to off er just that, allowing users to start on their interior design or renovation needs,but opt to pay off in instalments.
This is what Reno says is the ‘renovate now pay later’ fi nancing proposition. “We’re proud to be a renovation companythat leverages smart tools and fi ntech to improve accessibility and project outcomes,” said Marc Michel. “Because for us,technology does not replace the human touch – it elevates it.”

Tighter rules too

The UAE Central Bank has in force strict rules regarding the offering of pay-later schemes in the market. Accordingly,‘these services can be offered only by agents of licensed banks or financeered only by agents of licensed banks or finance companies, as well as ‘restricted license finance companies’, said Arun Leslie John, Chief Market Analyst at Century Financial.

“The capital requirements has been well defi ned and a restricted license fi nance company or a BNPL provider must holdand maintain the higher of aggregate capital funds of Dh20 million or 5% of the outstanding lending volume.
Also, the maximum short-term credit that can be extended to a borrower by a restricted license fi nance company or agentat any given time must not be over Dh20,000 - or the total of three months' verifi ed net income of the borrower,whichever is lower.
"The repayment term of short-term credit off ered must not exceed 12 months from the date of the original agreement tolend," said Leslie. "Additionally, borrowers' assets, including movable and immovable property, must not be used byrestricted license fi nance companies or agents to secure any short-term credit extended to a borrower."

Clearly, adequate protection is already in place to ensure that pay later users/borrowers do not over extend themselves on their liabilities.
For true budget conscious consumers, the pay later schemes do come as a signifi cant relief to the other payment optionsthey can tap. Even if interest rates are cut further...

Source

Gulf News