By Ezana Tedla
Since the COVID-19 pandemic, Buy Now, Pay Later (BNPL) companies have experienced rapid growth. Around the world, consumers are scaling-up their purchases by tapping this new form of credit, which is typically provided with less oversight than traditional credit cards. The customer pays installments to the BNPL provider who takes a commission before passing on the payment to the merchant.
Like in other countries, BNPL in Iran consists of interest-free loans for goods and services, both online and in person. As Iranian consumers deal with high inflation, adoption has been rapid and widespread. Consumers can use BNPL solutions to purchase a wide range of goods and services: groceries, clothing, medical treatments, electronics, and even gold. But the rapid rise of BNPL loans has created a struggle among households, merchants, and BNPL providers over who bears risk.
Unique Context
Iranian BNPL companies operate under challenging conditions. They must account for elevated inflation, loan restrictions, and war-time disruptions. Because of religious prohibitions and credit rationing, the government imposes interest rate limits on the lenders far below expected inflation. Currently, the limit is 23%, while inflation is projected exceed 50% this year.
Inflation also makes it difficult for BNPL providers to accurately price products. Providers can find themselves carrying loans with a much lower real value on their books. They also have to guard against their products being used for speculation, as zero-interest credit drives consumers to purchase products to resell.
Iranian BNPL companies have a network of affiliated online stores that consumers can buy products from. The providers tussle with merchants over who bears the inflation cost. Merchants may try to upcharge products on the platform, while the BNPL company tries to ensure no difference between online and in-store price. The suppliers are often forced between accepting losses or lower turnover. But the larger risk in the process is held by the BNPL provider because it carries the loans on its balance sheet. This risk is higher in price sensitive goods. Prices for food and other high turnover goodsmove more quickly relative to other products. And because of steep inflation, this volatility leads to significant losses in the real value of the credit, even for one-month loans.
Grappling with the quick pace of credit is another challenge for lenders. Iranian households and businesses do not want to hold the Iranian rial over extended periods of time, leading to rapid movements of money. The country’s banking system recycles through loans because longer-dated debt loses more value in real terms.
To compensate for the additional risk, Iranian BNPL companies demand higher commissions. Most international peer companies charge between 3-6% per transaction but some Iranian ones, like SnappPay, charge 15%. Additionally, while Iranian BNPL companies advertise their zero-interest products, if consumers fail to make installment payments, the penalty charges can add up to an effective interest rate of over 100%. The same companies also offer personal loans and lines of credit with better margins, using the data from BNPL transactions to gauge the creditworthiness of their customers.
BNPL providers in Iran employ two main approaches to draw in consumers: higher credit limits and ease of access. The four largest providers, Tara, DigiPay, Azkivam, and SnappPay, enjoy lines of credit from commercial banks enabling higher ceilings than their competitors. But bank-backed BNPL companies also insist on additional information requirements when on boarding customers, like proof of military service. Some banks are involved in multiple BNPL companies, with two banks, Mellat and Tejarat, each funding two separate providers. Tejarat also provides its own BNPL service. Its app faces the customer while it sources the network from Tara and other fintech companies.
Iranian BNPL companies must also balance between expanding customers, through offering zero-interest products, and collecting commissions from their affiliated merchants. SnappPay, one of the larger Iranian BNPL companies, was compelled to disclose its marketing strategies because it was sued by rival BNPL companies. It tailored its margins based on where it held more leverage over merchants. Products, like gold and food, had the lowest commission rates, while services, like education and healthcare services, generated higher commissions.
SnappPay’s leverage was also reflected in how quickly merchants were paid. Gold merchants would receive settlement within a month, while payments for education-related services were settled after four months. This difference is explained, in part, by which products are most sensitive to price movements. Gold and food quickly move in price, and the margins are lower, so SnappPay has less leverage over merchants.
Wartime Adjustments
During wartime, the Iranian government has repeatedly intervened in the short-term consumer loan market. There was a payment holiday during the 12-Day War last year and in February 2026, after the start of U.S. and Israeli airstrikes, Iran’s central bank asked, but did not direct, the country’s credit rating authority to freeze penalties for non-payment for the first three months of this conflict.
Three of the four largest BNPL companies, SnappPay, Tara, and DigiPay, suspended services and payment requirements for the first few weeks of the war. Consumer activities in these platforms then shifted towards inflation hedges and subsistence products. Sales of canned food and generators, surged by 1000% on the e-commerce platform Digikala. Searches on the platform for bullion gold spiked by 9000% year on year.
As the war drags on, the ongoing inflationary shock is making the interest-free consumer credit model less tenable, as BNPL companies struggle to pass on higher costs through various fees, like subscription tiers, and add-on payments. Providers frequently complain that there are no central black lists of non-paying customers, so they must act on their own to establish creditworthiness and mitigate non-performing loans. The intertwining of BNPL products with other services in “superapps” affords some companies alternate ways of penalizing delinquent customers. SnappPay, for example, will cut non-paying customers from its popular ride hailing service.
Iranian households are relying on BNPL credit at a time when household incomes and expenditures are under significant strain. But these strains are increasingly systemic. The recycling pool of consumer debt is mismatched and the related risks will not remain limited to BNPL companies because the loans are backed by credit lines from the country’s key banks, with little oversight from the government.
Additionally, the expansion of BNPL credit may be contributing to the inflation crisis by fueling consumer purchases, artificially supporting purchasing power. Iranian households are taking advantage of zero-interest credit to expedite expenditures. This hedging against the expectation of future inflation is being reluctantly subsidized by merchants desperate to move inventory in expectation of weakening demand.
Ezana Tedla is an analyst for the Bourse & Bazaar Foundation. He focuses on macroeconomics and trade in emerging markets, with field experience in the Middle East and Horn of Africa.
Section: (vision-iran-initiative) Photo: Canva