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At a time when Indians are getting used to the credit-fuelled Buy Now Pay Later (BNPL) offerings, a motley group of start-ups has given an interesting twist by bringing Save Now, Buy Later (SNBL) programmes.
Appealing to the savings tendency established in Indians for generations, fintechs are promoting SNBL that incentivises planned saving for targeted aspirational spends while side-stepping the possibility of debt trap that impulse-driven BNPL brings to the table. Thus, SNBL providers are giving a tech-driven nudge to users to save for their purchases, instead of using credit, in the same way that women of yore used to put aside a humble amount of money each month to eventually buy gold/jewellery.
How it works
SNBL providers such as EasyPlan, Hubble, Tortoise, Multipl, etc. have put in a system that offers a handsome reward, in the form of cashback, discount etc., for the user to buy a product if they save a fixed amount of money for a few months. Plus, there is no interest component or processing fee since this is not a credit/loan offering. Think of SNBL as a new form of recurring deposit (RD) but the rewards here could be higher i.e. 10-25 per cent. Do note that the mode of incentive differs across platforms. Some give a gift card for the cumulative amount (savings plus incentive), some offer a cashback on invoice submission, some allow use of marked-linked returns from tagged MF savings plus brand discounts.
In case of SNBL, once the defined duration for savings is over, the accumulated money is credited to your account and you are free to buy the planned product effectively at a discount. BNPL facilitates instant gratification to spend by letting you pay later. But the SNBL model virtually brings saving and spending on the same platform. And what’s in it for the SNBL fintechs? They likely earn commission from merchants on every transaction. SNBL, just like BNPL, also addresses the problem of shopping cart abandonment that is prevalent in online purchases.
Advantage saving
Even though Indians have warmed up to the credit and loan culture, the truth is: nothing beats spending with one’s own money. A majority like to save but traditional savings instruments have not kept pace in terms of rewards.
Even though savings is likely to lead to spending later, hitherto there was no efficient system of joining merchants and savers on the same platform while avoiding the unsavoury part of finances: loans. SNBL providers have done that groundwork and tied up with many merchants. All a user has to do is start by saving just a few hundred a month by using UPI or netbanking facility.
Previously, savers planned purchases and started setting aside money for big spends in a systematic way. This is especially true for buying gold and jewellery, given the high cost of precious metals. SNBL has smartly expanded the same to aspirational categories such as electronics and travel, areas that are popular with millennials and Gen-Z.
To save now and buy later, you need nobody’s permission. There is no hassle of maintaining a credit score or keeping up with loan dues. KYC/PAN verification and investor profile completion is a one-time activity. Depending on the platform, there may be an upper limit on maximum deposit. For instance, Hubble allows deposits up to ₹90,000.
Goal durations allowed are usually one year. Generally, there is no lock-in period for the deposits that you make and one can withdraw deposited amount anytime without any additional charges or taxes. Your earnings, however, may not be withdrawn as they may expire/lapse upon deposit withdrawal.
Tax implications may apply for SNBL. For instance, capital gains taxation will be applicable on gains from mutual fund and digital gold investments.
As the SNBL space evolves, platforms would do well to allow app/online change of ongoing goal amount, ongoing goal duration and seamless merchant switches without closing ongoing goal. Plus, rewards expiry on not doing a purchase within a fixed number of days from the date of goal redemption should be done away with.
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