Revolutionising payments
Due to its unparalleled shopping experience, merchants and brands are offering ‘buy now, pay later’ at their checkouts, and the technology has proven beneficial to all
Q:
DIVSHA
The buy now, pay later business model has gained much traction during the pandemic. So, how does this model work, and how is it different from the existing payments methods?
WALID
I am very happy that we started our buy now, pay later platform - valU at the end of 2017. So, it was not even relevant to what happened in the pandemic. We started in December 2017 in Egypt. So, everyone in Egypt was sceptical about this model, [asking] ‘what are you trying to do, are you replacing the bank card? Are you providing unbanked finance’ and things like that. But luckily enough, with the pandemic, everyone started shopping online. Buy now, pay later is online; it’s also physical, but it’s more popular for online transactions. So [after] we started this in 2017, we got some traction in 2018 – it was not very promising, to be fair. In 2019, we began to see an increase; we grew three times. In 2020 with the pandemic, actually, we [witnessed up to] five times growth. This year also, we are growing. With all the players that emerged in Saudi Arabia, in the UAE, in the Middle East, it has become the most important topic everywhere.
DIVSHA
So, do you think this platform can help retailers drive consumer demand?
WALID
Yes, it helps retailers, right, so let’s look at what buy now, pay later can actually do. What is the product? The product is easy, providing minimal extended payments anywhere between 30 days and 60 months. Not all companies have the same model. So, the retailers are pleased with that. The only issue they have is how much they need to pay to get the security. And there are also different models. Again, some models are zero fees and
zero interest. This is all covered by the merchant or retailer, so they’re not very happy with it, but it drives demand. The valU model is actually a mix between interest and zero interest, and we have customised a dashboard for each and every merchant. We try to be very flexible with the merchant, especially with the dimensions in the Middle East; the margins are very slim.
DIVSHA
Going back to what you said, 2018 and 2019 were not great years and the pandemic in 2020 changed the equation. But do you think consumer behaviour is going to change again post-pandemic?
WALID
No. 2018 was not great because we were the only buy now, pay later [platform] in the Middle East. Even when we picked a name, we chose [something] that’s not relevant to EFG. We did not use the EFG name to support the company because of two things – frankly, if it fails, [we] didn’t want it to be [an] EFG fail. And if it’s going to work, then it should be on a standalone basis.
So, 2018 was very difficult; we were trying to pave the way for all other players and the merchants to understand that we can do this. In 2019, before the pandemic, we grew three times. And this is the reason I think other buy now, pay later players emerged in Saudi and in the UAE.
Actually, the first company to launch after valU was in 2019, in March, and in June 2019, the second company launched. I’m talking about the companies that have raised massive funds. Currently, our figures are going up; we are growing month-over-month by at least 10 per cent and securing more than 40,000 transactions per month.
DIVSHA
What are the EFG NBFI’s future plans for the region?
WALID
We have a complete package of financing solutions and payment solutions in Egypt. We think it’s about time for some of those products to get into bigger markets. So I believe valU will enter a second market for sure in the next six to nine months. We are in between two markets right now; I am in Dubai because of discussions with potential partners. And I think we will make up our mind before the end of the year and we will start [in another location]. We are also starting our SME financing company in Egypt. We already tried and had the pilot on that, and it’s working very well. So, these are the two things that we will be bringing to the region [between now and next year].
DIVSHA
So, how does valU stand apart from the rest?
WALID
valU has already established high-entry barriers in the market. [As EFG], having been in the market for 40 years, we are like the generic brand of monopolies. The best thing for us was to place ourselves as the first mover, make sure our brand is recognised. We also have access to financing, which is not the same case for the other players in the region. We got financing from banks, we got our first securitisation, which was extremely important because we were able to securitise our portfolio. We have partnerships with Apple, Ikea and Samsung. And I believe we also have a very good team. Our average age on the team is 26. And accordingly, I think those people are growing the business faster than anyone else because most of our users are in this age bracket. When we decide to go outside Egypt, we [will] make sure that we have the same offering.
THIS YEAR ACTUALLY, WE ARE GROWING. WITH ALL THE PLAYERS THAT EMERGED IN SAUDI, IN THE UAE, IN THE MIDDLE EAST, IT HAS BECOME THE MOST IMPORTANT TOPIC EVERYWHERE