Is 'Save Now Buy Later' more sustainable than 'Buy Now Pay Later'?

Many Buy Now Pay Later (BNPL) suppliers are having a hard time right now.

As the number of suppliers has increased, so have concerns regarding the risks associated with such payment choices, such as the potential that too many people may utilize them for "wants" (such as vacations and consumer electronics products), rather than "needs" (such as a broken wash machine). And the last months showed that this easy access to consumer credit at the end leads to unsustainable consumption and people accumulating excessive debt. And nobody is really benefiting from that, not even BNPL providers themselves, as increase in credit defaults puts their whole business model under threat.

The Buy Now Pay Later business model emerged in an environment with very low interest rates and a soaring economy. But rising interest rates and consumers cutting spending are changing circumstances which fuelled BNPLs explosive growth. The recent correction of the company valuation of Klarna are first indications of this industry getting under pressure.

This changing environment might become the trigger, where supporting consumers to better manage their finances and maintain their buying power over time gets more relevant again. And that’s exactly why a new generation of startups is turning the concept of Buy Now Pay Later on its head. Companies like Multipl, Accrue Savings or Monkee, work with a Save Now Buy Later approach and support people to save up for the things they need and want. And in exchange for buying at their retail partners, users receive benefits like discounts or financial contributions to their saving goals.

Let’s say you need to buy a new laptop next year. With companies like Monkee you can set-up a savings plan and with challenges, saving rules and nudges the app supports you in saving towards those goals. With its FutureBoost model, Monkee give Cashback a completely new twist. When you purchase your new laptop at one of the retail partners, you are getting money back into your wallet as a contribution to your other savings goals. You can even receive financial contributions while purchasing your daily necessities like groceries, pharmacy products or clothes at one of the many partners. And that’s a win-win-situation: The user receives money for doing parts of their purchases at partner organizations and at the same time the retailers connect with new customers, and create positive touch points and more loyal customers by actively contributing money to their communities’ goals.

Contrary to BNPL and other forms of consumer credit where the consumer has to pay up to 30% interest, at SNBL consumer can let their savings grow up to 20% p.a. by doing parts of their purchases at the partner organizations.

Obviously SNPL is not a replacement or competition for BNPL, but rather a new responsible and sustainable option to achieve wants and needs. SNBL implements a journey to build and maintain positive customer relationships and engagement while the consumer saves the money required to purchase the desired good or service. Companies in this area are doing this via:

·     A saving feature that allows to quickly open a no-fee digital savings account and save money towards your consumption goals.

·     An automated savings plan that is simple to use, where the user can specify the frequency, amount, and/or target date

·     Incentives and cash rewards given by merchants to consume saving goals with them

·     Value-added services, like sharing saving goals with family and friends or set-up saving rules and challenges 

Contrary to the BNPL movement, in which a first consolidation movement is occurring and incumbents start to catch up quickly, this SNBL movement is still in its infancy stage. This gives interesting opportunities to Fintechs and incumbent banks, to invest in this movement now. In a world, where costs for energy and daily necessities are increasing, SNBL can have enormous potential to help people to save-up for what's important to them and to maintain their consumption power for their “wants” and "needs".