Inclined as we humans are towards rewards and discounts, we find it incredibly difficult to ignore a good incentive or a great deal. It doesn’t matter where one lives or which strata of society one belongs to, everyone loves a discount or cashback when making a purchase, big or small.
Dinesh Ladi, a 28-year-old data scientist in Bengaluru, is no different. Wanting to buy an iPhone 13, he was looking around for some deals when he came across a platform that offered him a 10 per cent ‘cash reward’ for the buy, with just one catch: he had to save a fixed amount of money for a few months. The added incentive was that there was no interest component or processing fee. Simply put, it was not a debt or credit scheme like Buy Now, Pay Later (BNPL). “Earlier, I used to keep money in a separate account to save for a purchase. There are fixed deposit options as well but you don’t get any incentive on the price if you go by these routes,” Ladi says, adding that he thought of trying out the novel method because the start-up offered a cash reward as well.
The savings scheme, itself, is simple, Ladi found. He had to deposit a fixed amount for a fixed number of months. Once the duration was over, the accumulated money was credited to his account and he bought his desired iPhone 13; on top of that, 10 per cent of the invoice amount was credited to his bank account. No hidden charges, interest component, or processing fees was levied.
What, then, is this scheme? Welcome to the world of Save Now, Buy Later or SNBL, where one can save for a future purchase. The added benefit is that one gets a discount of 10-12 per cent on the purchase price.
In other words, the SNBL model has brought saving and spending on the same platform, and while such schemes have been around for a while, a clutch of start-ups is now using tech and data to disrupt this segment. And they earn a commission from merchants on every transaction.
Some players like Tortoise, Hubble and Multipl—that operate in the SNBL space in India—have seen strong traction among users, although the segment is still in its infancy. That, however, has not stopped some of the marquee names of the investor community—Sequoia Capital, Blume Ventures, IIFL Finance, Kunal Shah (of Cred) and Sriharsha Majety (of Swiggy), among others—from entering the ring. Data from Tracxn shows that while Hubble is backed by Sequoia and Snapdeal Co-founder Kunal Bahl, among others, Bengaluru-based Tortoise is backed by Vertex Ventures and Better Capital along with Cred’s Shah. Meanwhile, Multipl has been funded by Blume Ventures, IIFL Finance, GrowX Venture Management, and Kotak Securities, among others.
So, what exactly are these start-ups offering that has convinced some of the most sophisticated and smart investors to pour money into them?
Your money, your goals
There are a number of reasons. To start with, simplicity, flexibility and, above all, planning with one’s own money, not borrowed funds. “India is a country where a majority of the people are savers but traditional savings instruments are not rewarding,” says Neeraj Tulsyan, Co-founder of Hubble, adding that till recently, there was no efficient system of bringing merchants and consumers on the same platform while avoiding debt.
The Gurugram-based start-up—that launched in April this year—currently has tie-ups with merchants such as Nykaa, Myntra, Croma and Bluestone, and is in the process of collaborating with 20 more brands.
Delhi-based Tortoise is another start-up gaining traction in the SNBL space. It offers a minimum 10 per cent incentive to every user who “saves to buy” on the platform. “Save to buy is a very natural thing to do and has been happening in the jewellery segment for years. We have expanded it to categories like electronics and travel,” says Vardhan Koshal, Co-founder of Tortoise.
Currently, most of the merchant tie-ups are in categories such as travel, gadgets and appliances, though the start-ups are actively working towards enhancing the bouquet of categories or goals. For instance, wedding as a goal has been gaining prominence.
Here is how it works: Following a simple registration process, users can choose a merchant (for example, from Apple, MakeMyTrip, Nykaa, etc.) through which he or she intends to make the purchase. After that, the user has to select the goal amount and the duration of the deposits; one can start with as low as Rs 500 per month. For instance, if one is targeting a purchase of Rs 50,000, one can set aside an amount of Rs 5,000 every month for 10 months, or any other variation depending on the amount of money one can save every month.
The manner of giving incentives differs from one platform to the other. For instance, Hubble gives a gift card for the cumulative amount—money deposited plus the incentive value—while Tortoise credits the money back to the user’s account and gives a 10 per cent cashback when the invoice is submitted.
Then there is Bengaluru-based Multipl, which also operates in the SNBL space, but has a slightly different business model as it allows users to invest in curated mutual fund schemes that can generate returns and lower the overall cost of the goal. “Multipl’s main premise lies in making savings a habit and it aims to offer incentives via tie-ups with brands,” says Paddy Raghavan, CEO & Co-founder of Multipl, which also offers its users the option to save for a wedding.
“In essence, Multipl is a Sebi-registered investment advisor. The market-saver model allows users to invest money in curated market instruments such as mutual funds, and tags them to the brands to avail returns from the market and exclusive discounts from the brands,” he adds, while highlighting the fact that the platform also allows users to save money directly with the merchant and avail discounts.
Interestingly, if the growth numbers are anything to go by, then the SNBL platforms are indeed creating an impact. For instance, Tortoise says it has signed up over 150,000 customers since its launch and aims to achieve a gross merchandise value (GMV) of $5 billion over the next four years across verticals such as travel, electronics and appliances, home and auto, personal care and luxury. Hubble, on the other hand, has seen more than 400,000 app downloads and says its revenue has been growing by 50 per cent every month.
Is it better than borrowing?
Comparing the SNBL and BNPL models, Multipl’s Raghavan says, “The emphasis in BNPL is on obtaining credit and receiving satisfaction right away. Credit lines are offered for instant purchases. In the absence of a savings plan, this could result in people falling into a debt trap, hurt credit scores and lower savings, which does not leave much for emergencies.”
Indeed, the BNPL model’s rigidity in terms of repayment schedule, interest cost and processing fee makes it an expensive approach at times. Sometimes, the interest cost can be as high as 15-20 per cent if the repayment schedule is disturbed. Not to forget that there are no real incentives in the form of cashbacks or savings and the model can lead one to overspend as lenders are more than happy to dole out loans for discretionary spending by consumers.
Koshal of Tortoise believes that SNBL scores over BNPL in terms of accessibility as well, since anyone and everyone can use this route—even those without a credit score or low score—and there is no prior approval process. “Additionally, SNBL or ‘save to buy’ offers a debt-free alternative to make high-value purchases. This does not require or impact the customer’s credit score and liabilities. Plus, SNBL provides rewards over and above the direct purchasing price or even zero per cent EMIs offered in the BNPL model,” he says.
But, BNPL has its share of advantages, especially for those who need to make an immediate purchase but are running low on cash. Under BNPL, the borrower gets the option of an instant, short-term loan with a deferred repayment tenure, including the option of equated monthly instalments (EMIs) after the end of an interest-free period. “SNBL can be looked upon as the Yin to the Yang of BNPL,” says Abhishek Mody, a veteran of the fintech and payments space.
Interestingly, Mody believes that SNBL platforms could also look at offering incentives for purchasing essentials apart from the current bouquet of aspirational goods and services. “Currently it is offered in aspirational segments like travel, electronics or gold. However, start-ups may think about introducing SNBL in essentials/regular use segments like kirana/grocery/education/insurance and utility payments, should the economics make sense. The average ticket size might be humble comparatively, but this could shape up as a game of scale,” says Mody.
However, not everyone believes that SNBL platforms would taste success in the essentials space as they have in the aspirational space. “SNBL is unlikely to work in small-ticket spend segments as no one is going to save to buy groceries, which has a very high recurrence rate. It is the value and utility of the use-case that will determine the utility of the savings platform or solution,” says Vignesh Ramanujam, Partner at Lok Capital and an early investor in Tortoise.
Traction now, scope later?
The growth of SNBL start-ups coincides with the post-Covid-19 era that has seen an inherent increase in awareness regarding savings. One could argue that the going has been smooth for such start-ups till now, but the future could be tumultuous if consumer behaviour changes and millennials start mimicking the western trend of over-leveraging one’s personal finances.
Mehekka Oberoi, Fund Manager at IIFL Fintech Fund and an investor in Multipl, strongly believes that the SNBL space will only grow as it caters to more consumers and many more categories and brands come on to the platforms. “This is a niche segment that has been created recently. Over the past two to three years, savings as a segment is growing as users look for avenues to save and invest,” says Oberoi. She adds that currently, this is a segment that does not have many big players. “So the ones who get into it now will definitely enjoy some early-mover advantage. The challenge that needs to be overcome is the number of merchants that are onboarded,” she says.
In a similar context, Ramanujam says that the idea of savings versus credit is essentially about safety versus risk, and India traditionally has a strong savings culture. “It is just that earlier, the start-up focus was not there to weaponise 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 says, adding that merchant aggregation will play a key role going ahead.
SNBL players are well aware of the potential and challenges of the segment and are actively working towards getting more merchants and better deals for consumers. On the other hand, consumers can make big purchases on their own terms, and are also incentivised for saving. Seems a win-win for all.
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