Tabby has become a household name in the UAE for buy now, pay later (BNPL) services, but its journey from a small fintech startup to a regional powerhouse was far from straightforward. In this founder interview, we sit down with Hosam Arab, co-founder and CEO of Tabby, to discuss the challenges of scaling in the UAE market, the regulatory landscape, and the company's vision for the future. Arab shares candid insights on fundraising, building a merchant network, and the importance of local knowledge in a highly competitive fintech ecosystem.
From Idea to Market: The Early Days of Tabby
Tabby was founded in 2019 by Hosam Arab and Daniil Barkalov, both with backgrounds in e-commerce and payments. The concept was simple: allow shoppers to split their purchases into four interest-free payments, with the first installment due at checkout. The idea resonated quickly, especially among Millennials and Gen Z consumers who were wary of credit card debt. Arab explains, "We saw a gap in the market: consumers wanted flexibility without the high interest rates of traditional credit cards. The UAE has one of the highest credit card penetration rates in the region, but many people are looking for alternatives."
The founders bootstrapped the initial product and launched with a handful of merchants, including fashion retailers. Within months, Tabby processed its first million AED in transactions. Arab attributes this early traction to a focus on user experience: "We made the checkout process seamless. No complex forms, no hidden fees. Just a simple split payment." By the end of 2019, Tabby had secured a seed round of $2 million from local investors, including CO-Ventures and Raed Ventures. For more on early-stage funding in Dubai, see our article on seed rounds in Dubai 2024.
Navigating the Regulatory Maze
One of the biggest challenges for any fintech in the UAE is regulation. Tabby operates under the purview of the Central Bank of the UAE and the Dubai Financial Services Authority (DFSA) for its international operations. Arab notes, "Regulation is a double-edged sword. It protects consumers and ensures stability, but it can also slow down innovation. We worked closely with regulators from day one to ensure compliance." The company obtained a Retail Payment Services License in 2020, allowing it to offer BNPL services across the UAE. This regulatory clarity gave merchants confidence to partner with Tabby. The fintech landscape in the UAE is evolving rapidly; for a broader view, check our regulatory guide for fintech startups.
Arab emphasizes the importance of understanding local laws: "You cannot copy-paste a business model from the US or Europe. The UAE has specific requirements around data privacy, anti-money laundering, and consumer protection. We invested heavily in legal and compliance teams." This approach paid off when Tabby became one of the first BNPL providers to be fully regulated in the region.
Building the Merchant Network
Tabby's growth is directly tied to its merchant partnerships. Today, the platform works with over 5,000 retailers across the UAE, Saudi Arabia, and Kuwait, including major names like IKEA, Adidas, H&M, and Noon.com. Arab explains the strategy: "We focused on high-volume, low-ticket items initially – fashion, beauty, electronics. Then we expanded to home goods and travel." The company charges merchants a fee per transaction, typically between 2% and 6% of the purchase amount, which is competitive with credit card processing fees.
To onboard merchants quickly, Tabby built an easy-to-integrate API and a dashboard for tracking payments and settlements. "We wanted to make it as easy as possible for merchants to offer BNPL. Our integration takes just a few hours," Arab says. The company also provides marketing support, helping merchants promote BNPL options at checkout. This symbiotic relationship has driven repeat usage: Tabby reports that merchants see an average 20% increase in conversion rates and 15% higher average order values.
Fundraising and Valuation Milestones
Tabby's fundraising journey mirrors its rapid growth. In 2020, the company raised a $7 million Series A led by Global Ventures. The Series B in 2021 brought in $25 million from Sequoia Capital India (now Peak XV Partners) and STV. By 2022, Tabby closed a $50 million Series C at a valuation of $660 million, with participation from PayPal Ventures and Mubadala Investment Company. Most recently, in 2023, Tabby raised a $150 million Series D, pushing its valuation to $1.5 billion, making it a unicorn. Arab reflects: "Each round was about proving unit economics. We showed that our model works in the UAE and can scale across the region."
For founders looking to raise capital, Arab advises: "Focus on metrics that matter: customer acquisition cost, lifetime value, default rates, and merchant retention. VCs in the UAE are sophisticated; they want to see sustainable growth." For tips on pitching, see our guide on how to pitch to UAE VCs.
Operational Challenges: Logistics and Fraud Prevention
Scaling a BNPL platform involves significant operational hurdles. Tabby handles payment processing, credit risk assessment, and collections. Arab highlights two key challenges: "First, logistics – ensuring that payments are settled to merchants on time. Second, fraud prevention – we use machine learning to detect suspicious transactions." The company employs a proprietary risk engine that analyzes hundreds of data points, including transaction history, device fingerprinting, and behavioral patterns. Default rates are kept below 2%, which Arab attributes to conservative underwriting: "We start customers with low limits and increase them over time based on repayment behavior."
Tabby also offers a Tabby Card, a physical and virtual Visa card that allows users to pay in installments at any merchant, even those not integrated with Tabby. This card, launched in 2022, has been a key driver of user engagement. "The card gives us a direct relationship with consumers, independent of merchants," Arab says.
Competition and Market Position
The BNPL space in the UAE is crowded, with competitors like Tamara (also a unicorn), Postpay, Spotti, and Cashew. Tabby differentiates itself through its focus on the GCC region and its partnerships with global brands. Arab acknowledges the competition but remains confident: "We have first-mover advantage in the UAE and a strong brand. Our merchant network is the largest, and our technology is best-in-class." Tabby also benefits from network effects: more merchants attract more users, and more users attract more merchants.
The company is expanding into new verticals, such as travel bookings and healthcare. In 2023, Tabby launched a pilot with Emirates Airlines for flight installment payments. Arab sees huge potential: "Travel is a natural fit for BNPL because it's a high-ticket expense. We are also exploring partnerships with hospitals for medical procedures." For more on fintech innovation in the UAE, see our fintech landscape UAE article.
Future Vision: Beyond BNPL
Tabby's ambition extends beyond BNPL. The company is building a full-fledged consumer finance platform, including savings and investment products. Arab explains: "We want to be the financial super app for the region. Our users trust us with their payments; we can offer them more services." The company is also exploring expansion into Egypt and Pakistan, markets with large unbanked populations. However, Arab cautions that international expansion requires careful localization: "Each market has different regulations, payment preferences, and credit behaviors. We will move methodically."
When asked about an eventual exit, Arab says, "We are focused on building a sustainable, long-term business. An IPO is a possibility, but not in the near term. We want to reach profitability first." Tabby is not yet profitable, but it expects to break even within the next 18 months. For insights on exits in the region, read our UAE startup exit analysis 2023.
Advice for Aspiring Fintech Founders
Arab offers three pieces of advice for founders looking to scale in the UAE: 1. Understand the regulations – work with legal experts and engage regulators early. 2. Build a strong local team – hire people who understand the culture and market. 3. Focus on unit economics – growth is meaningless without profitability. He also emphasizes the importance of resilience: "Startups are hard. You will face rejections from investors, technical glitches, and tough competition. But if you believe in your product, keep pushing."
Tabby's journey from a two-person team to a 500-employee unicorn is a testament to the opportunities in the UAE's fintech ecosystem. With supportive government initiatives like Hub71 and in5 innovation centres, the region is fertile ground for ambitious founders.