With Travel Now, Pay Later (TNPL) trend steadily gaining momentum across the globe, it has emerged as a viable financing option to travelers, enabling them to plan for their future trips now and pay later. TNPL is the travel version of Buy Now, Pay Later. BNPL has existed for almost a decade now and offers small-sized credit for the purchase of merchandise with payments made in instalments without any interest rate provided the repayment is made within the stipulated timeframe, usually with varying short-term time periods. TNPL has ignited the habit of borrowing money for the purpose of travel and is developing as an alternative funding source as opposed to the use of credit cards with monthly interest rates ranging between 1-2.5% and maximum tenure of 1.5 years.[Economic Times] The emergence of TNPL has sufficiently increased the revenue of vendors through increased customer base. Companies offering TNPL earn a higher portion of their revenue from the interest rates charged and additional fees levied, if the principal is not repaid on time.
Travel Now, Pay Later - in Middle East context
Though Buy Now, Pay Later has gained traction in the Middle East over the past few years with Saudi Arabia having the highest penetration of 39%[Checkout] , the evolution of Travel Now, Pay Later is taking place at a slow yet steady pace. The airlines and online travel aggregators collaborate with banks and fintech firms to offer TNPL services.
Companies offering TNPL in the Middle East
For instance, Alternative Airlines, a leading flight search and booking site based in U.K. helps residents of the Middle East to book tickets on Emirates through tie up with TNPL companies in the region including Spotti, Tabby and Postpay. On the other hand, AkbarTravels, one of the largest travel companies in India has paved way for hassle free travel by providing UAE-based travelers an option to make interest free monthly payments by collaborating with the leading banks in the country.
Some UAE banks offer Travel Now, Pay later in partnership with Akbartravels for payment value of AED 1,000 or more made with their credit card. Saudi Arabian banks have started offering TNPL schemes as well. Almosafer, a travel service provider in Saudi Arabia has collaborated with leading banks in the country that offer TNPL services. The following table summarizes TNPL schemes that can be availed on tickets booked through Akbartravels and Almosafer app.
Though United Arab Emirates and Saudi Arabian banks have taken the forefront in providing TNPL services, banks in rest of the GCC region are yet to jump on the trend.
GCC countries especially, Dubai and Saudi Arabia are world’s largest tourist destination, enticing people with their sightseeing locations and religious heritage. Moreover, Qatar is considering a range of new infrastructure products for strengthening its tourism sector and preparing itself to host some mega sporting events such as the Asian Games 2030 and FIFA World Cup 2022. The country’s spending on infrastructure ahead of the events is in line with Qatar’s vision to develop as a popular tourist spot alike Dubai. The emergence and growth of TNPL is expected to positively influence the tourism sector of the GCC region, as many people are likely to choose this alternative to access short-term travel credit and repay them at no-cost EMI due to its relative benefits such as ease of accessibility, transparency and no hidden fees as compared to credit cards.
From a GCC perspective, the growth of TNPL is additionally expected to aid the expat population of the region and ease their travel to home countries because of convenient accessibility to TNPL as opposed to credit cards. While majority of expats are construction workers with limited access to traditional banking facilities like credit cards due to stringent requirements as per the banking regulations, TNPL does not require a minimum credit score or joining fee to access the short-term funds. As the youth population in the GCC region is on a rise with high digital penetration, the demand for TNPL is anticipated to increase and may emerge as a competing alternative to credit cards in the future.
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