The Evolution of “Buy Now, Pay Later” (BNPL): A Journey Through Time and Commerce

In today’s world, “Buy Now, Pay Later” (BNPL) services have become a popular way to shop, offering consumers flexibility in spreading payments over time. While BNPL may seem like a modern innovation, the concept of buying on credit dates back thousands of years. Its journey through history intertwines with ancient trading practices, medieval innovations, and even the ethical frameworks of Islamic finance, which have significantly influenced credit systems in the Middle East and beyond.

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The Ancient Origins of Credit

The practice of BNPL began in the markets of ancient civilizations. In Mesopotamia (circa 3000 BCE), merchants allowed trusted customers to purchase goods on credit, recording transactions on clay tablets. This early form of credit was built on trust and community, laying the groundwork for structured lending.

Similar practices were observed in ancient Egypt, where farmers borrowed seeds for planting and repaid the debt with a portion of their harvest. These informal credit systems were crucial for sustaining agricultural economies.

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Islamic Contributions to Ethical Credit

As trade routes expanded across the Middle East, Islamic principles profoundly shaped credit systems. The ethical framework of Islamic finance emphasized fairness, transparency, and the avoidance of exploitation—values that aligned with the needs of thriving markets.

One prominent example is the concept of Murabaha, where the seller discloses the cost of a good and agrees on a markup with the buyer. This markup forms the total price, paid in installments without hidden fees or interest (riba), which Islam prohibits.

Murabaha reflected the trust and transparency inherent in Islamic commerce. This practice remains widely used in Islamic banking today, providing an ethical alternative to interest-based credit systems.

In the medieval cities of Cairo, Baghdad, and Damascus, markets thrived on these principles. Merchants offered credit to buyers under clear and ethical terms, ensuring fair treatment while fostering economic growth. This approach to commerce influenced European credit systems as these ideas spread through Islamic trade networks.

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Medieval Trade and the Spread of Credit Systems

As Islamic trade networks reached Europe, they introduced ideas that shaped Western financial practices. During the Renaissance, merchants in Italian cities like Venice and Florence adopted tools such as promissory notes—early forms of credit instruments that allowed buyers to defer payments. These tools mirrored the fairness and accountability intrinsic to Islamic credit systems.

Meanwhile, within the Middle East, credit arrangements remained rooted in personal relationships. A handshake or reputation for honesty often carried more weight than formal contracts, emphasizing the culture of trust in trade.

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The Industrial Revolution and Installment Payments

With the Industrial Revolution, credit systems evolved to meet the demands of a rapidly industrializing world. Mass production made goods like machinery, furniture, and household appliances more widely available but also more expensive. Companies introduced installment plans, allowing customers to pay over time.

For instance, Singer Sewing Machines and Ford Motors used installment models to make their products accessible to the growing middle class. These systems were precursors to modern BNPL, though they often involved interest or fees, unlike the transparent practices of Islamic finance.

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The BNPL Revolution in the Digital Era

The rise of the internet in the late 20th and early 21st centuries transformed commerce. E-commerce created opportunities for new payment methods, and BNPL emerged as a key innovation. Companies like Klarna, Afterpay, and Tabby in the Middle East allowed consumers to shop online and pay in interest-free installments.

BNPL platforms became particularly popular among younger generations seeking alternatives to traditional credit cards. Their simplicity and transparency resonated with consumers in the Middle East, where Islamic finance principles often shape financial behavior. For instance, Tabby operates across the GCC, offering flexible payment options aligned with Islamic finance values.

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The Impact of COVID-19 on BNPL Adoption

The COVID-19 pandemic accelerated the adoption of BNPL as consumers shifted to online shopping. In the Middle East, BNPL services expanded into industries such as fashion, electronics, and even travel. Digitally connected and predominantly young, the region’s population found BNPL a practical solution for managing finances during uncertain times.

For businesses, BNPL became a tool to boost sales and expand customer bases. Retailers benefited from higher conversion rates, while consumers appreciated the flexibility to distribute payments without incurring high fees.

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Islamic Principles in Modern BNPL

While global BNPL platforms focus on ease of use, those operating in the Middle East often integrate elements of Islamic finance to meet regional expectations. BNPL models compliant with Shariah law avoid interest and instead rely on profit-sharing or fixed fees. This ensures transparency and aligns with the ethical foundations of commerce in the region.

For instance, BNPL models inspired by Murabaha disclose profit margins upfront, eliminating the ambiguity often associated with traditional credit systems. This blend of modern convenience and ethical rigor makes BNPL an attractive choice for consumers in the Middle East.

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The Future of BNPL: Returning to Commerce and Industry

As BNPL continues to grow, its potential to reshape commerce extends beyond consumer purchases. Increasingly, businesses are adopting B2B BNPL solutions, providing suppliers and buyers with the flexibility to manage cash flow and access credit in ways that fuel trade and industry.

This shift toward B2B BNPL aligns closely with the historical roots of credit, which focused on facilitating trade rather than consumer spending. By enabling businesses to purchase raw materials, invest in growth, or manage seasonal cash flow gaps, B2B BNPL supports macroeconomic growth.

B2B BNPL often operates under clear, interest-free terms, making it more compatible with Islamic finance principles. These solutions emphasize fairness, trust, and mutual growth, echoing the practices of early Islamic merchants.

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BNPL and Saudi Vision 2030

BNPL’s potential aligns seamlessly with Saudi Vision 2030, which aims to diversify the economy and foster entrepreneurship and innovation. By facilitating trade and empowering SME growth, BNPL solutions like Tabby for businesses can help Saudi companies manage cash flow flexibly, enabling them to focus on innovation and expansion.

Ultimately, the future of BNPL in Saudi Arabia is about more than convenience—it’s about building a more dynamic and inclusive economy. By combining digital innovation with ethical values, BNPL can transform commerce and unleash the entrepreneurial spirit driving Vision 2030 forward.

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