A new breed of startups has introduced an innovative payment method that incentivizes consumers to save for big ticket purchases while avoiding a debt trap. This concept is called SNBL – Save Now Buy Later.
The SNBL financial strategy is a concept that works around saving money by setting aside a particular sum on a regular basis, building up savings and then using that money to make a big-ticket purchase at a later date. As new and nascent as the concept of SNBL is globally, it is garnering strong attention, especially in the fintech industry due to its model that combines saving, spending and investing simultaneously.
Globally, many startups offering the SNBL concept have generated high interest from investors. Accrue Savings, a fintech startup in New York raised USD 25 million in January 2022 in a fundraising round that was successfully led by Tiger Global Management. In December 2021, Simpl, an Egyptian startup raised USD 6 million that was led by Beco Capital, A15 and Global Ventures. India, too, has witnessed a spurt of startups in the SNBL financial space like Multipl, Omnicard, Hubble Money and Tortoise.
The Working Of SNBL
The fintech platforms that offer SNBL options for their consumers first tie up with various businesses and brands offering various products from travel packages to consumer goods or electronic goods. Individuals interested in purchasing any particular product beginning depositing a specific sum of money with the merchant every month. Once the goal is achieved the money is then returned with added incentives like cashbacks, market returns and brand-specific incentives.
These startups have adopted different working models, each effective in its own way. Hubble deposits the money in an escrow account with the partner bank and also offers a discount on purchases from the platform. Such a savings scheme allows the individual to receive discounts from merchants that crystallize on purchase. Multipl, on the other hand, is a SEBI (Securities & Exchange Board of India) registered investment advisor that allows individuals to invest money in suggested portfolios through mutual funds. This gives the freedom of choice to the individuals of purchasing from third party merchants or to withdraw the money for personal use elsewhere. The platform also offers the choice of saving directly with the merchant and also avail the discounts from them. Another platform, Tortoise, operates by holding money with a payment gateway and remit the merchant directly upon purchase.
Advantages Of SNBL
The post covid-19 era saw an increase in savings awareness across the globe and the growth of SNBL startups coincides beautifully with this growing sentiment. The idea of savings versus credit is essentially about safety versus risk. This resonates with India as the country has a strong savings culture.
Vignesh Ramanujam, Partner at Lok Capital resonates this idea and says – “It is just that earlier, the startup focus was not there to weaponize savings as an instrument to improve our financial well-being. If one is able to marry savings with a specific purpose, then one can create a huge market as there is enough demand and supply.” He also added that merchant segregation will play a key role.
The nascent market of SNBL has below set of advantages:
No Debt or Loan
It allows consumers to purchase high value or luxury goods without falling into debt through credit card purchase or a bank loan.
Assured Brand Cashbacks and Discounts
An SNPL sale honors a predetermined cashback or discount that is not dependent on any particular bank or credit card usage. This particular model is also free of any on-going sales or offers due to its confirmation of any offer or discount.
SNBL – A Savings Perspective
Working on the principle of a reverse SIP, the SNBL model estimates the amount of money required for a specific future aspirational purchase. It, then, gives the individual the amount that needs to be saved every month to finally reach the goal.
Challenges Of SNBL
SNBL is a time specific savings plan that allows the individual to gradually accrue the total money required for an aspirational purchase. Hence, it can take a few months or years, depending on the value of purchase and the monthly saving capacity to reach the final goal. This leads to delayed gratification for the consumer and not suitable for people who need products instantly.
Safety of the Invested Sum
The concept of SNBL is new and not all the fintechs within this space offer mutual funds as a savings option. Businesses where the money is in escrow, the risk of rescinded offers from either the merchant or the SNBL platform itself is high.
Rohan Agarwal, SEBI RIA and Co-Founder of Moneyjar says – “Given that not all platforms are using mutual funds to invest interim savings, the safety and reliability of the platform and associated merchants becomes a big issue with SNBL. Therefore, it is important to ensure platforms handling customer funds communicate clearly and accurately how the user funds are handled until the intended purchase is complete.”
Suitable for only Aspirational Purchases
The current features of SNBL platforms are supportive of aspirational purchases in segments like travel, electronics or gold. The benefits of SNBL in the essentials and regular use items market like groceries, education and utilities payments are not yet fully explored. However, building savings in these categories through SNBL might be more appropriate going into the future.
SNBL - Value Proposition For Brand Partners
As valuable as the concept of SNBL is for the end consumers, it presents a few key value propositions for the participating brand partners as well. Some of the important advantages for the partners are –
- Reduced cart abandonment rate
- Assured sales with higher visibility into future cashflow
- Customer acquisition cost is comparatively lower
- Cuts through the question of affordability due to the saving proposition of the platform
- Increased top-of-the-funnel conversion with integrated goal planning
- Able to offer a debt free shopping experience to the end customer
As a new category in the emerging fintech market, its path to success is still new, untraveled, and presents unique challenges. However, as a business model it presents a win-win scenario for all participants increasing its potential tremendously. Another existing advantage is that every aspect of this business is regulated by a different governing body. Hence the structure already exists. All that remains to be seen is how the market for SNBL emerges and grows in the future.
How does SNBL incentivize consumers to save?
SNBL incentivizes consumers to save by offering rewards, discounts, or other benefits for reaching savings goals toward specific items.
Can SNBL help consumers avoid falling into debt?
Yes, SNBL can help consumers avoid falling into debt by encouraging them to save money for big purchases instead of relying on credit or loans.
What types of purchases are ideal for SNBL?
SNBL is ideal for big-ticket purchases such as electronics, appliances, furniture, or any other item that requires saving.
What startups are currently offering SNBL?
Some startups offering SNBL include Hubble, Multipl, and Tortoise. However, there may be others in different regions or industries.