Deferred Payments Surge in Saudi Online Shopping
Recently, there’s been a notable rise in the use of “buy now, pay later” platforms in online shopping. These platforms, known as deferred payments, have become increasingly popular, especially among individuals aged 18 to 35.
In the Kingdom, about 10 million users have made purchases worth 8.7 billion riyals using this payment method. These purchases range from food items to furniture and household appliances.
While these platforms promote their services extensively, the detailed terms are often hidden in electronic agreements. Many users don’t review these terms. If payments are delayed even by a month, accumulating interest rates can inflate the initial amount. This sometimes leads to severe financial issues, including service disruptions.
Growth in User Numbers
Recent data from the Saudi Central Bank showed a significant increase in the number of users in the past three years. In 2020, there were 76,000 subscribers. This number leaped to 3 million in 2021 and then to 10 million in 2022. Among these, 5.8 million are active users, accounting for 58% of the total.
Purchase Value
Deferred payment purchases last year totaled 8.7 billion riyals, a growth of 383%. In 2021, the value was around 1.8 billion riyals, a significant jump from 14 million in 2020 when these services first emerged.
Consumer Solutions
Saleh Ali Al-Mansour, a member of the Consumer Protection Association in Najran, believes these platforms are beneficial for low-income individuals. However, not thoroughly reading the agreements can lead to financial setbacks.
He suggests that consumers should be given 24 hours to review the agreement before signing.
Commitment to Payment
Taha Al-Sidran, a user of these services, notes that while these companies operate under legal regulations, most consumers don’t read the lengthy electronic contracts.
Trust in the integrity of state regulations might be a reason, but increased living costs also push many to opt for installment purchases.
Misusing the service, such as buying a product and reselling it at a lower price for instant cash, can lead to debts.
However, when used correctly, especially for medical services or urgent needs, and with regular payment commitment, these services can be beneficial, just like bank credit cards.
Terms of Agreement
Elham Al-Hadi sees deferred payment services as a temporary solution. She sometimes uses them but fears accumulating debt and facing financial and psychological pressure.
One reason borrowers don’t read electronic agreement terms is their haste or ignorance of its importance.
Another respondent said installment platforms are ideal if one commits to timely payments. Many consumers don’t read the terms, possibly due to eagerness to acquire goods.
Deferred payment services “Buy Now, Pay Later” in the Kingdom and customer growth rate:
2020:
Total registered customers = 76,000
Active = 37,000 = 48%
2021:
Growth rate = 3847%
Total registered customers = 3 million
Active = 1.8 million = 60%
2022:
Growth rate = 233%
Total registered customers = 10 million
Active = 5.8 million = 58%
Total value of goods sold through deferred payment service (in Riyal) and growth rate:
2020: 14 million
2021: 1.8 billion = 12757%
2022: 8.7 billion = 383%
Average deferred payment period (in days)
2020: 49 days
2021: 51 days
2022: 42 days
Pros of deferred payment service
– Big discounts on luxury purchases.
– Available in all e-stores and retail shops.
– Instant electronic approval decisions.
– Email and SMS payment reminders.
– No transaction fees.
Cons of deferred payment service
– If not careful, you’ll accrue heavy debts.
– High late payment fees if missed.
– Each purchase requires prior approval.
– Promotion of buying now and paying later at cash price.
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