Save Now, Pay Later (SNPL)

Save Now Pay Later (SNPL) is a new payment and savings model in which consumers sign up to save a certain amount on a large purchase later. The model has several benefits to both the consumer and the seller. 

KEY TAKEAWAYS
 

• Save Now Pay Later (SNPL) allows users to set the amount of money they wish to save and the time frame within which they want to achieve this.

• After attaining the saving goal, consumers get their money and may get bonuses and special offers from the Save Now Pay Later (SNPL) provider and retailers.

• Save Now Pay Later (SNPL) is savings-based, so there are no credit losses associated with it, as would be the case with the credit-based BNPL.

If you regularly purchase items online, you must know about the Buy Now, Pay Later (BNPL) service. BNPL is a short-term financing facility that allows you to purchase and pay for items over time without an additional cost. However, there is a more progressive, emerging alternative model to BNPL—Save Now Pay Later (SNPL).  

Companies that operate under this model provide incentives like discounts and cashback when the savers achieve their financial targets. This model is particularly helpful in setting money aside for known expenses such as vacations, birthdays, computers or electronics, weddings, or even mandatory costs such as insurance, school tuition, or property taxes.  

In addition to saving, customers get market returns, rewards, and co-investments from brands, making SNPL an exciting platform for both consumers and brands. Below, we will discuss SNPL’s main concept, benefits, and disadvantages in more detail.  

What is Save Now Pay Later Business Model?

Save Now Pay Later (SNPL) is a new payment and savings model in which consumers sign up to save a certain amount on a large purchase later. Users set the amount of money they wish to save and the time frame within which they want to achieve this. While working towards this financial goal, one can get various awards and promotions for hitting the set target.

To what extent does Save Now, Pay Later work? There are differences in the operational models between the save now pay later apps. Some platforms allow the saved funds to be held in a payment gateway, while others may have these funds with the help of banks in escrow accounts or may even allow consumers to invest the money in mutual funds.  

After attaining the saving goal, consumers get their money and may get bonuses and special offers from the SNPL provider and retailers. Brand partners create transactions, and SNPL providers earn revenues from them when they are concluded. Accrue, Multipl, and Sav are some fintech startups that provide SNPL services. 

How Does Save Now Pay Later (SNPL) Work?

The Save Now Pay Later (SNPL) is a savings program that allows customers to save for a more expensive product they would like to purchase at a future date without using credit.  

Let’s take an example to explain this. Let’s say you own a general merchandise store selling household items such as TVs, furniture, appliances, and garden essentials. Most of these items are costly, and your customer may be unable to afford or purchase them at once. Most people who are likely to be your customers are first-time homeowners who have already spent their savings on buying the house. They may also avoid using debt finance options such as the Buy Now Pay Later services to purchase furniture for their new homes.

You plan to offer a special offer dubbed Save Now, Buy Later to assist your customers. The first step is to create an app. This app enables customers to apply for an account, choose the products they wish to purchase from your store and make savings pots for these products. To this end, one has to involve a bank or a financial services company, and it is not as complicated as it may seem to be set up.

After opening an account, customers can start funding their savings pot however they choose. This ensures they do not use the money for other day-to-day expenses since it is kept in a different account than their checking account. They can also put down an amount they want to save and by when. The SNPL app also comes in handy to determine the amount they need to save every day or month to achieve their goal within the expected time.

You may provide incentives to prompt your customers to continue saving. For instance, you could offer a $5 bonus for every $100 saved or give a gift at certain savings levels. Once the customers have enough savings for the item they want, the app will notify them. Then, they can easily acquire the desired product from your online store. This process is meant to be fast and straightforward so that customers have a seamless shopping experience.

The beauty of the SNPL scheme is that it can be as basic or as complex as you wish. It could be a simple savings account connected to a customer rewards program, or it could include budgeting options, regular transfers, and many more options and deals to encourage customers to save more and spend wisely.  

The Advantages of Save Now Pay Later

Image: Savings benefits grows over time

The Save Now Pay Later (SNPL) model has several benefits to both the consumer and the seller. Below, we will list benefits for both customers and businesses.

Benefits for Customers

• Less Risk and Debt: This benefits customers since they can make timely purchases and payments without accumulating debt or facing the adverse consequences of defaulting on payments.

• No Credit Check Required: Since SNPL does not entail acquiring debt, it is necessary to check the customer's credit history. This is especially beneficial for consumers who cannot access the conventional forms of credit, thus enhancing the concept of financial inclusion.

• More Payment Flexibility: SNPL should also be included in the available payment methods merchants can provide consumers. This can also include SNPL, which can work with BNPL to offer a full range of payment choices.

• Rewards Available: Most Save Now Pay Later (SNPL) programs are very lucrative and encourage customers to save, giving them cash or investment returns that can sometimes be higher than most savings banks offer. Further, customers might get special offers from brand partners as they save towards specific saving goals.

• Help Achieve Financial Goals:  SNPL apps provide motivational incentives and simple mechanisms for goal setting and tracking, helping customers set and meet their savings targets.

Benefits for Businesses

• More Options at Checkout: By providing as many payment methods as possible, the business meets the customers’ needs and increases the chances of making a sale, thus preventing cart abandonment and increasing conversion rates.

• Stronger, Longer-lasting Customer Relationships: By promoting the culture of saving, Save Now Pay Later (SNPL) enables customers to be actively involved with the institution. Interests and returns on the savings account assist in nurturing loyalty and improving the bond.

• Bigger-ticket Sales: SNPL programs are intended for customers who would like to acquire expensive goods they cannot afford to purchase entirely. Thus, they are profitable for customers and merchants due to the increased overall revenues and better profit margins.

The Disadvantages of SNPL  

Like most emerging payment models, Save Now Pay Later (SNPL) has flaws. So far, we have only tackled the positive side of SNPL. But keep in mind that nothing is perfect, and every financial instrument has its limitations. 

The main disadvantages of the Save Now Pay Later (SNPL) service are:  

• Extended Purchase Timeframe: While BNPL or the PNBL options provide quick payment solutions, SNPL can even prolong purchasing. Finalising a purchase can range from a few weeks to a few months to a few years. Customers can redeem their savings and cancel their orders for desired products during this period. This can leave merchants empty-handed, especially when they are expecting to make sales of expensive items.

• Initial Investment in Technology: Using the SNPL model, retailers have to buy new POS systems. These systems are costly to install, so the capital to start them up may not always be readily available to the retailers.

• Cultural Shift Versus Instant Gratification: Another challenge is implementing an efficient SNPL platform and establishing cooperation with financial providers; the second is changing consumer behaviour. Due to time pressure, consumers want to have and use products quickly, and concerns about the cost are secondary; they would rather buy products and pay later than save for the product. This is because changing consumer mindset from this short-term thinking to a more long-term and sustainable approach to purchasing poses a major challenge to retailers who wish to adopt SNPL.

• Long Waiting Periods: It can take you months or even years to save a certain amount for a product that you want to buy through SNPL. Keep in mind that the price of an item keeps fluctuating in the market. Often, customers simply withdraw funds and cease saving in SNPL as they get discouraged due to such a long waiting period.  

• Need to Wait to Make a Purchase: You cannot purchase a product that you require immediately with SNPL. Suppose your smartphone gets lost, and you need to buy another immediately. You can’t wait months for it, do you?  

BNPL vs SNPL: How is SNPL Different From BNPL?  

BNPL is a radical alternative to SNPL as it asks you to save instead of looking for a loan to make an expensive purchase. Both the Save Now, Buy Later, and the Buy Now Pay Later models offer many advantages to customers and merchants, especially when it comes to big-ticket products.  

• The main difference lies in their foundational approaches: SNPL is savings-based, so there are no credit losses associated with it, as would be the case with the credit-based BNPL. Below are a few differences between the two models.  

Bottom Line

We recommend that you read and understand the terms and conditions in your agreement with any SNPL platform. You are the best judge of how much time you can wait for a product. Make a quick assessment of how long you need to save for a potential purchase. Immediate purchases cannot wait. SNPL is, therefore, perfect for aspirational purchases such as household items, electronics, motor vehicles etc.  

Although Save Now Pay Later (SNPL) is a young competition to BNPL, it has grown very popular among the users due to its attractive model. Although BNPL really doesn’t affect your credit score, it can damage it in extreme cases if you fail to pay your instalments on time. Given the circumstances, SNPL offers a cost-effective and economically sustainable way of payments, in comparison to credit or loan.  

Among the low-income yet finally literate populace, SNPL has the chance to score high as this group of customers aspires but knows how to go about financially. We are on a mission to keep our users updated about the latest in finance. Keep following BitDelta Academy to follow the latest trends in the financial markets.  

Frequently Asked Questions (FAQs)  

1.What is Save Now, Pay Later (SNPL)?  

Save Now, Pay Later (SNPL) is a new payment and savings model in which consumers sign up to save a certain amount on a large purchase later. Users set the amount of money they wish to save and the time frame within which they want to achieve this.

2. How is SNPL different from BNPL?  

SNPL presents itself as a radical alternative to BNPL. The former asks you to save a certain amount in parts over a period so that you can make a purchase. The latter, on the other hand, lets you purchase a product immediately via a loan as you repay the amount over time, though without interest.  

3. What are the pros of SNPL?  

SNPL encourages a savings mindset and saves you from falling into a potential debt     

trap. It is perfect for customers who are looking for a method other than a loan or a credit to make a purchase.  

4. What are the cons of SNPL?  

You cannot purchase a product that you require immediately with SNPL. You need to wait for months or even years for a purchase.  

5. How safe is Save Now Pay Later (SNPL)?  

The save now pay later business model is usually considered a low-risk investment. Users’ money are generally safe, while they can earn a small amount of interest on a monthly or annual basis.