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Save Now, Pay Later (SNPL) is a new fintech business model that provides a more sustainable alternative to Buy Now, Pay Later (BNPL) in the face of rapidly evolving consumer demands and purchasing behavior. SNPL enables customers to save the money each month in order to collect for a specific purchase. The consumer can then make the purchase without incurring fresh debt once they have saved up the required amount. When the intended outcome is achieved, the money is returned with additional benefits like cashback. If the money is invested in mutual funds, the buyer gets the market returns in addition to the specific brand incentives.

Another variant of the SNPL model exists where consumers can save money directly with the merchant through a dedicated escrow account. This unique approach allows individuals to deposit funds towards a specific goal or purchase, with the promise of receiving their saved funds and additional benefits such as brand cashback, discounts, and other incentives upon reaching their target. This alternative SNPL model combines the advantages of saving and delayed gratification, offering consumers a tangible reward for their commitment and financial discipline. By leveraging the escrow account framework, this approach encourages responsible savings while enhancing the overall shopping experience for customers.

Some of the popular SNPL companies in India that are operating as startups include Multiple, Omnicard, Hubble Money, and Tortoise.

What is Save Now, Pay Later and how it works

SNPL functions by enabling customers to open a savings account with a particular end objective in mind. For instance, a customer might want to set aside money for a new laptop. The next step would be to open an SNPL account and establish a savings target of 1 lakh INR. After that, it would be up to the customer to decide how much they want to save each month. For example, they might choose to save 20,000 INR per month.

The money that the consumer saves in their SNPL account is invested in a low-risk investment. This means that the consumer’s money is safe and will earn a small amount of interest on their savings. Once the consumer has saved enough money to reach their goal, they can withdraw the money from their SNPL account and make their purchase.

Benefits of SNPL

SNPL capitalizes on the prevalent saving culture among Indians, where individuals traditionally set aside money for their purchases rather than relying on credit. In a typical scenario, a buyer would diligently save over a few months to afford a significant purchase. Save Now, Pay Later companies leverage this behavior and incentivize users through various rewards, such as discounts, cashback, and more, when their savings goals are successfully achieved.

This approach enables users to invest or save for their anticipated expenses, including travel, jewelry purchase, weddings, vacation-trip, insurance premiums, or annual school fees. In return for their commitment, customers receive the benefits of market returns and enjoy additional rewards and brand co-investments. The SNPL introduces a novel way to accumulate funds while also benefiting from financial returns, rewards, and brand partnerships by aligning with the existing saving practices of Indians. Below is a more thorough explanation of these advantages.

Benefits for customers

  1. Making aspirational purchases without incurring debt: SNPL is appropriate for customers who want to make purchases using a method other than a loan, credit card, or BNPL scheme. While other purchasing options charge the customer processing fees in addition to interest, trapping them in debt and ultimately harming their credit scores, SNPL does not charge any interest or fees on the purchase.
  1. Brand-guaranteed incentives and benefits: When buying through traditional channels, customers may or may not receive cashback or discount advantages because various factors are taken into account when determining the same. The use of a debit or credit card for purchases, ongoing sales campaigns, or promotions on specific payment gateways are some of the most popular ways to receive discounts. However, when using SNPL, the merchant honors a predetermined cashback or discount regardless of the current specials.
  1. Encourages saving: The SNPL model works on the principle of reverse SIP (Systematic Investment Plan). This implies ascertaining how much money one needs to start saving at present to meet future financial aspirations. Through SNPL, customers get into the essential habit of saving up for short-term purchases. By putting away a desired amount into a savings scheme to pay for future purchases, customers are able to limit impulsive buying.

Benefits for branders

  1. Reduced shopping cart abandonment: Customers often engage in comparative shopping across different platforms, creating multiple shopping carts. Many times, owing to the financial pressure of the purchase, customers abandon the items before checking out. In place of browsing, SNPL enables customers to make purchases once they have saved the necessary amount.
  1. Customer retention due to affordability: Since SNPL is an affordable alternative to making aspirational purchases, brands can retain customers for a longer period of time. Being able to buy goods at an affordable price encourages consumers to remain loyal to the brand and stick around for the cashback and incentives. A debt-free and stress-free shopping experience is a major incentive for customers to remain associated with a brand.

Although SNPL is still a young business model, it has the potential to revolutionize how consumers make purchases. SNPL can assist customers in strengthening their financial situation and achieving their financial objectives by providing a more cost-effective, environmentally friendly, and practical alternative to BNPL.

Comparison between SNPL and BNPL

Parameter SNPL BNPL
Process Saving initiated after customer onboarding, and purchases take place after goal completion Credit processed at the time of purchase
Risk of purchasing beyond affordability No risk High risk
Interest accrual No penalty risks and interest Risk of late payment, possibility of bad credit score
Fulfillment Delayed as purchase happens after goal completion Instant as purchase happens after onboarding
Payment mode SIP EMI
Benefits Cashback, discounts, interest earnings Merchant discounts

Save Now, Pay Later in India and the way forward

SNPL is a new fintech business model that offers a more affordable, sustainable, and convenient alternative to BNPL. Avoiding debt by not borrowing to make urgent purchases is a great way to develop good financial habits. Saving money for future purchases prevents impulsive spending, minimizes waste, and benefits the environment.

As the BNPL market continues to grow, SNPL is well-positioned to become popular in the finance sector of India. SNPL capitalizes on the saving culture prevalent in India, and given the evolving buying patterns, it is poised to make a significant impact on the way people shop and save money.

SNPL is anticipated to grow in popularity as e-commerce trends develop and become more widely used by online buyers. Customers’ transition to SNPL is being made possible by contactless payments and the rising demand for flexible payment options. The SNPL market has a significant online presence, and SNPL businesses in India are working to create new features that will provide an even more practical and cost-effective way to shop.

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  1. How safe is Save Now, Pay Later?

When used responsibly and with knowledge of the risks involved, Save Now, Pay Later (SNPL) is generally considered to be safe. Here are some things to keep in mind:

  1. Make sure the purchase is within one’s means: Although SNPL enables customers to buy items now and pay for them later, this does not permit them to spend more than they can comfortably afford. Before using SNPL, one must make sure they have a realistic budget and can afford the monthly payments.
  1. Read the terms and conditions carefully: Each SNPL provider has its own terms and conditions, so it’s important to read them carefully before signing up. This will help understand the fees, interest rates, and other charges associated with the program.
  1. Paying off the balance in full each month: It’s best to pay off the SNPL balance in full each month. This will avoid interest charges and help build credit history.

2. What is the save now, pay later concept?

The SNPL financial strategy is a way to save money for big-ticket purchases by setting aside a fixed amount on a regular basis. This allows customers to build up their savings over time and avoid debt.

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