Buy Now Pay Later – A Growing Trend with Hidden Risks for UAE Expats

Buy Now Pay Later (BNPL) schemes have rapidly gained popularity across the UAE, with providers like Tabby, Postpay, and Tamara offering flexible payment options that appeal to expats and younger consumers alike. While these services may seem convenient, they often mask the long-term financial obligations they create.

Respected financial adviser and Skybound Wealth CEO, Mike Coady recently spoke with Arabian Business about the growing adoption of BNPL and the hidden risks it poses, urging expats to approach these schemes with caution and a well-thought-out financial strategy. Read the full article here.

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BNPL: A Shiny New Name for Debt?

BNPL has been marketed as a simple, flexible way to spread the cost of purchases. However, it’s crucial to understand that BNPL is simply debt by another name. While splitting payments into smaller, manageable amounts can appear harmless, these schemes often mask the long-term financial obligations they create.

BNPL can make borrowing feel more approachable and less intimidating. This often leads to overspending, with users mistakenly believing they’re spreading costs without taking on debt. But the reality is that the costs, late fees, penalties, and a lack of consumer protections, can quickly spiral out of control if repayment terms aren’t clearly understood.

Recent data highlights the risks. According to the Consumer Financial Protection Bureau, younger consumers are particularly vulnerable, with BNPL making up 28% of unsecured consumer debt among 18-24-year-olds. This aligns with trends in the UAE, where many BNPL users rely on these services for both essential and discretionary purchases.

Why BNPL Appeals to UAE Expats

1. Flexibility in a Cashless Economy

As the UAE transitions to a cashless society, BNPL has seamlessly integrated into the growth of digital wallets and e-commerce platforms. Providers like Tabby have partnered with over 10,000 stores spanning fashion, travel, and home goods, making BNPL an attractive option for expats adjusting to a new financial environment.

2. Simplicity for Younger Generations

BNPL’s appeal lies in its simplicity and immediacy, making it particularly attractive to younger, tech-savvy consumers. However, this ease of access can lead to financial overcommitment, especially for those who haven’t yet mastered long-term financial management.

How Expats Can Use BNPL Responsibly

BNPL isn’t inherently bad, it’s a tool, and like any tool, its value depends on how it’s used. Here are some practical strategies to ensure responsible use:

• Set Clear Limits: Establish a monthly spending cap for discretionary expenses and stick to it.
• Track All Payments: Keep a record of your BNPL commitments to avoid overextending.
• Plan Your Purchases: Avoid impulse buys and focus on items you truly need.
• Understand the Costs: Always review the terms, including fees and penalties, before committing.

Why Financial Advice Matters

For expats, managing BNPL alongside other financial responsibilities can be complex. This is where seeking professional advice makes a difference. A financial adviser in Dubai can help you align your short-term needs with your long-term goals, ensuring that tools like BNPL work for you, not against you.

Expats face unique financial challenges, and BNPL is just one example of how modern financial tools require careful consideration. By combining education with thoughtful planning, you can use these tools effectively while avoiding unnecessary stress.