Mashreq invests $10m in UAE FinTech start-up amid e-commerce boom

Mashreq has invested $10 million in UAE-based FinTech startup Cashew, becoming the latest to tap into a rapidly expanding “buy now, pay later” sector.

Founded in 2020, Cashew offers its services in the UAE and Saudi Arabia – the Arab world’s largest economies – through an app and a web-based platform.

As part of the investment, Cashew’s payment platform will be integrated as an option on the acquiring network of Neopay, the payments subsidiary of the Dubai lender controlled by the Al Ghurair family.

The bank will also support the start-up to launch in Egypt – the Arab world’s most populous economy – in the last quarter of this year.

In March, Mashreq carved out its payments arm into its new division Neopay, in an effort to help businesses handle credit and debit card payments amid an e-commerce boom fuelled by the coronavirus pandemic.

“Our partnership with Cashew will lead the way for the future of financial services in the region,” said Ahmed Abdelaal, Mashreq’s group chief executive.

“We will leverage the full network of Mashreq merchants and consumers to provide our ecosystem with the most ubiquitous and flexible BNPL options in the market,” Mr Abdelaal said.

Mashreq’s investment is part of a larger funding round that involves other investors as well, Cashew said. Since its inception, the FinTech start-up has raised nearly $10m.

BNPL platforms allow consumers to make purchases without paying the full amount upfront, avoiding the use of credit cards and hefty interest charges. Merchants are still protected through credit risk checks, late fees and blocks on customers who have defaulted.

Consumers can choose to split payments into instalments or simply delay them by weeks to months without any hidden fees, while merchants are paid in full upfront.

The BNPL concept is gaining in popularity across the world and has been disrupting the payments industry, buoyed by consumers’ fragile personal finances amid the pandemic-induced economic headwinds.

By 2025, the industry is expected to grow 10 to 15 times its current volume, topping $1 trillion in annual gross merchandise volume by some estimates, according to a report by New York data research consultancy CB Insights.

Nearly $4 billion was invested in BNPL companies last year – up from $1.7bn in 2020, according to Crunchbase.

In the Middle East, platforms such as Dubai-based BNPL start-up Tabby raised $50m last year while Saudi Arabia’s Tamara raised a record $110m in a Series A round.

In September, Abu Dhabi Islamic Bank, the emirate’s biggest Sharia-compliant lender, partnered with Dubai-based digital payments provider Spotii to launch a virtual BNPL prepaid card in the UAE.

“Mashreq is one of the most respected banking brands in the region, so they will bring our customers many benefits as we continue to grow our service offerings … this partnership will give consumers the largest merchant network to shop at, larger ticket size and the ability to pay over longer terms,” said Ammar Afif, Cashew’s co-founder and chief executive.

“We can only accomplish these goals for our customers by partnering with respected financial institutions like Mashreq that understand and want to be a part of the growing BNPL segment.”

Under the partnership, Cashew and Mashreq will offer new products to the market including longer tenure and higher ticket-size BNPL options for consumers, the companies said.

They also plan to introduce point-of-sales lending options in the region later this year. It will allow consumers to opt for BNPL but with larger tenures such as six months or a year.

The UAE’s annual BNPL volumes are expected to jump 71 per cent this year, said Fernando Morillo, Mashreq’s senior executive vice president and group head of retail banking.

“This is yet another prime example of the partnerships we can forge with innovative FinTech operators, who share our mission to deliver a safe and seamless payment experience for our customers.

“We eagerly await the roll-out of further services as we continue to empower our customers with more choice and convenience in the UAE and in the future, across Egypt.”

Mashreq, set up in 1967, is moving towards digital banking and is reducing the number of physical branches to cater to a young, tech-savvy demographic that typically opts to complete its transactions online.

We will leverage the Mashreq merchants and consumers to provide our ecosystem with the most flexible BNPL options AHMED ABDELAAL

Mashreq’s group chief executive