By Lubna Hamdan
The fast-growing trend of 'buy now, pay later' has taken the West by storm and is now set to make its mark in the UAE and beyond
CEO Tariq Sheikh explains how his initial plan to set up a mid-market private equity fund morphed into PostPay, a home-grown start-up preparing to launch in the UAE that provides a zero interest and zero fees ‘buy now, pay later’ product.
When did you come up with the idea?
I left my previous company and started a mid-market private equity fund. This was the jump between being in a job and taking the leap and saying, I don’t need this, I’m going to do something bolder and, worst case scenario, I would fall back on what I was previously doing.
You’re never going to have an idea that’s going to work in the direction that you want it to. I initially started the mid-market private equity fund, but by setting up to do that, I came on to PostPay.
PostPay came up in conversations with a very close mentor of mine and we started discussing this product that was emerging around the world and how we could apply it to the Middle East.
It became more and more apparent that there was a need for it and it was a product that solved many problems at the same time. This really is in a sweet spot.
"This is of no risk to the retailer, the retailer gets paid immediately. We pay the retailer 100 percent minus our fees. So we bare the risk for six weeks"
Being an ex-consultant I did an enormous amount of market research. I did as much research as possible to understand the payments world. We started looking at how to use local data and how to tailor our product for the local market and provide a product that created seamless, instant instalments for customers and at the same time provide huge value for retail merchants.
How does the product work?
The product is very simple. A customer goes online to whatever shop it may be and they want to buy, say, a blue shirt. They checkout and one of the payment options would be PostPay. They select PostPay and it will say, if the shirt is AED400, it will say pay AED100 now with PostPay. They then go onto the PostPay modal or redirect, depending on the retail merchant, and we would show them how it is split into four; the first payment would be made now, second payment in two weeks, four weeks and six weeks.
With families, it costs a lot of money to get a car seat, pushchair and socks and baby hats and towels etc so it makes a lot of sense to spread these costs out.
It’s not for someone to go and have a meal. It’s not for someone to afford something they cannot afford. It’s for people to get what they can afford, but just not right now.
How do you distinguish who can afford what?
It’s the type of product. We look at the product. A lot of the analysis that we do is on what you’re buying and who you are, but what you’re buying is quite important. We wouldn’t allow PostPay to be integrated with a food and beverage outlet, or with an electronic goods store because of fraud. There’s different categories.
We mainly focus on mothers and children, beauty and cosmetics is a major one for us, fashion and accessories and we look at lifestyle and experiences. Those are the major buckets.
"With families, it costs a lot of money to get a car seat, pushchair and socks and baby hats and towels, so it makes a lot of sense to spread these costs out"
We are trusting our customers as much as they trust us and we want to make sure that we don’t encourage them to commit fraud and we don’t allow people who are fraudulent to come on and buy say, an iPhone and sell it off in the other part of town in five minutes.
What are the revenue streams?
Inevitably, what happens is the customer has access to more on checkout, so they are likely to convert and actually buy what they want. Many times when we go online, and this is not only in this region, but all over the world, we look at something and we’re not sure if we can really afford it. But if it’s split into four it’s alright. And it’s nice because it doesn’t hurt the customer and it doesn’t hurt the retail merchant. It increases the sales, it increases the basket size – hypothetically by four but the average is a bit less. Then, on top of that, this is of no risk to the retailer, the retailer gets paid immediately. We pay the retailer 100 percent minus our fees. So we bare the risk for six weeks.
This product is clear cut. There’s no interest ever. There are fees if you don’t pay on time – never more than 50 percent of what you purchased, in the worst case scenario, but generally they’d be about AED30. We always favour our customer and before we charge them that fee we go through a process and really try to help them.
What is the funding journey for PostPay?
We have a big group of investors, about eight investors. One or two are from the region, but the rest of them are mostly from the United States. A good portion of them have been involved in some of the biggest buy now, pay later companies in the world today. So we’re backed by people who know what they’re talking about, who have done this for several years.
We’ve got a couple of funds and a couple of angel investors as well.
"We are initially launching in the UAE. We are a proudly born UAE company, but we are a global company. We are definitely going to grow in the region"
We raised just over half a million dollars and that was really just to get ourselves off the ground and to build the technology. We’re raising another round in the next couple of months and we’ll be raising a much bigger amount for our next amount.
How do you get the trust between the consumer, yourselves and the retailer?
We need to learn. It’s a relationship we’re building. For lack of a better term, we need to go and have a coffee and get to know each other. In that sense, the coffee is a lower ticket size, so we start off with that and we allow it to grow organically with our algorithms that increase the limit based on the repayments, based on the behaviours from the customer and based on the retailers that are interacting with them – we wouldn’t cap you at AED200 in a furniture store.
What are the plans for the future?
We are initially launching in the UAE. We are a proudly born UAE company, but we are a global company. We are definitely going to grow in the region. We already have ourselves in conversations in Saudi Arabia so we are looking to grow into Saudi in the early months of next year and also in other countries in the region and it’s not limited to that.
What’s it been like starting up a business?
Dubai has marketed itself as one of the easiest places to do business in and it’s true. We were able to get our license to operate within a couple of weeks. We processed visas seamlessly. These things are a dream and I guess in Dubai we take things for granted. I think the difficulties come, less with government and more with just understanding the landscape, understanding the players and getting to the right point of contact, be it payment gateways, finding the right talent. These are the things you really need in a business and I know the UAE is really working on this. I hope it becomes better.
What’s the best piece of advice you’ve been given?
I’ve been given a lot of good advice. The first and foremost, “if you’re the smartest person in the room then you’re in the wrong room”. Another very important piece of advice I was given by my godfather, he told me once at lunch: “I’m too old to spend time with people I don’t like.”