The past year and a half have witnessed multiple startups facing valuation cuts as funding from VCs waned in an environment of rising interest rates. In this context, fintechs, especially buy now, pay later companies serving Western customers, including Affirm, Afterpay and Klarna, have encountered challenges in the public and private markets. Yet, Tabby, a platform offering BNPL services to customers in the Middle East, is currently thriving.

Tabby, previously headquartered in Dubai but now based in Riyadh, has raised $200 million in its Series D funding round, achieving a valuation of $1.5 billion. This positions the shopping and financial services app as the first fintech startup unicorn in the Gulf, underlining its substantial growth and market importance in how customers shop and pay.

This is coming less than a year after Tabby’s $58 million Series C round led by Sequoia Capital India and STV, both of whom participated in this recent unicorn round. Existing investors like Mubadala Investment Capital, PayPal Ventures and Arbor Ventures joined. At the same time, new backers include the lead investor Wellington Management, one of the world’s top independent investment management firms, and growth equity investor Bluepool Capital.

“We’ve seen pretty incredible growth over the last year. And with that, we saw a lot of inbound interest from investors that I think always saw value in the BNPL model. Despite seeing the challenges with the model in other markets, there was that interest in understanding why this market is different and why we’ve grown profitably,” said founder and CEO Hosam Arab to TechCrunch regarding the company’s growth and investor interest.

“We explored various discussions with interested parties and many of the investors that came in already have exposure to this model in other markets. For us, it made sense to raise capital at this time. We do see this as potentially the last round of capital that we would raise before an IPO. And we brought in investors that have public market expertise.”

Arab’s statement highlights three significant parts. Firstly, Tabby, which has raised over $950 million in equity and debt, achieved profitability, a challenge for its peers globally. Although specifics on Tabby’s profitability weren’t disclosed, Arab said the startup experienced a threefold growth in revenues. He attributes Tabby’s profitability to operating within a market where structure aligns with the economics of running a BNPL model.

Tabby works with more than 30,000 brands including the likes of Adidas, Amazon, H&M and SHEIN — and 10 of the largest retail groups in the MENA region to provide BNPL services at checkout and in-store to over 10 million users across Saudi Arabia, UAE and Kuwait. Despite launching several years later than platforms like Afterpay and Affirm, Tabby boasts a substantial customer base, almost on par with Afterpay’s 16 million and Affirm’s 14 million active users but still significantly smaller than Klarna’s massive 150 million customer base.

However, unlike the United States and Europe, where BNPL providers often operate at a loss, Tabby claims to be profitable in the GCC region. There are several reasons why this might be possible. While e-commerce penetration is relatively moderate in the region, particularly in Saudi Arabia and the UAE (8% and 15%, respectively), consumers have restricted access to credit alternatives. As a result, BNPL serves as a crucial source of credit; where it is seen as a convenience in developed markets with abundant credit options, it is essential for many consumers in the Middle East and, by extension, the Gulf.

Tabby appeals to two distinct customer segments. The first is driven by the low credit card penetration in markets like Saudi Arabia, where only around 15% of the population has credit cards (in the UAE, this number is about 40%, but overall GCC region, about 10%). The second comprises customers who find Tabby’s tokenized payment method convenient. In many cases, Tabby is both segments’ first and only credit source. As such, the startup’s unique market position has led to solid payment performance as consumers value maintaining access to credit, thereby addressing concerns related to impulsive spending and unsustainable debt caused by BNPL services.

“Buy now, pay later doesn’t help in markets where customers are overstretched when it comes to credits. It’s an additional burden on these consumers. The regulations of those markets aren’t there yet, and affordability needs to remain a factor that buy now pay later providers check for,” added Arab. “However, in our markets, these are the two components that help. One, consumers are not overburdened and overstretched. And two, the regulations have come fairly early on in the market. For example, in Saudi Arabia for instance, there is already a BNPL permit. To add, one key factor that we also address within is checking for customers’ ability to pay so we’re not able to lend to consumers that are not able to borrow.”

A market’s sizable e-commerce penetration, low to moderate credit card penetration and high consumer purchasing power are top of mind before Tabby enters a market. This explains its exit from Egypt this February, a market it entered six months prior. Although Tabby cited macroeconomic reasons, Egypt has a smaller e-commerce market and penetration than Tabby’s more prominent markets; in addition, customers there have a low purchasing power and the country’s credit system to check consumers’ credit score or history of debt (owing to a low credit penetration market at 4%) is not as efficient as in Saudi Arabia and the UAE. Despite its exit, Arab says Tabby may revisit the Egyptian market if the startup” starts to see promising signs with e-commerce opportunity.”

Saudi Arabia remains Tabby’s largest market, representing 80% of its customer base and contributing the lion’s share to its annualized transaction volume of over $6 billion. These numbers, along with the preparations for its IPO on the Saudi stock exchange, have influenced the fintech’s choice to enhance its presence in its largest market and shift its headquarters from Dubai to Riyadh. However, the exact timeline for this listing on the Tadawul remains uncertain.

Meanwhile, in its second-largest market, where it launched Tabby Cards last year for customers in the UAE to make in-store purchases, over 4,000 stores now adopt the payment method, contributing to over 20% of the platform’s total volumes (it was 10% in January). The company also recently launched Tabby Shop, showcasing over 500,000 products from thousands of brands to help shoppers discover and track the best products and deals in one place.

Arab says the startup plans to invest more extensively in its current markets by offering customers additional products that enhance their financial well-being. This includes introducing various credit options that extend Tabby’s reach beyond its network and expanding product offerings to encompass a broader range of financial services, such as payments and savings.

“Tabby created a new industry and is transforming the way people consume and pay across MENA,” said Abdulrahman Tarabzouni, founder and CEO of STV, an investor in Tabby since its Series A round. “Hosam and team built an iconic enterprise that is a reference model in terms of both discipline and disruption; two things that are hard to crack in tandem. We are excited to see Tabby become an integral part of Saudi’s fintech landscape, nurturing growth and empowering the broader economy.”