The world of fintech does not lack imagination. This year saw the appearance of a new concept, born in India, taking the opposite view of “Buy now pay later” (BNPL, or split payment) which consists of buying on credit by opting for payment in several instalments. This is the “Save now buy later” (SNBL). Contrary to behaviors of immediate and impulsive purchase, even without having the available funds, the SNBL offers consumers advantages if they save over time to buy a good or a service.
Like the BNPL, more than a new payment method, the SNBL meets a marketing objective for e-commerce sites and specialized platforms: to minimize shopping cart abandonment, and to bring the consumer into a relationship with the merchant. .
A model invented in India
The pioneer of this system is called Multipl, a start-up founded in Bangalore in 2020. In India, where the average salary is less than 200 dollars, the fintech has identified a need for an alternative to credit for the high expenses of populations lacking immediate purchasing power. We don’t talk about it much, but the Indian fintech ecosystem is extremely developed, the dynamics based in particular on the needs in terms of financial inclusion. For example, the Indian start-up Moneyview just raised $75 million to make credit more accessible to the 90% of Indians not eligible for bank loans. According to the consulting firm BCG, the country has nearly 7,500 fintechs.
Multipl’s model is to form partnerships with brands, which allow consumers to obtain discounts (around 10%) while they “save” directly into an account with these brands, or through Multipl, which invests this money over time in financial instruments, using an in-house developed robo-advisor. The start-up raised $3 million in May 2022. The platform boasts around sixty partner brands, including Decathlon, for which it acts as a marketplace, exactly as Klarna does in the BNPL universe. It is remunerated on an affiliation model, the service being free for the consumer.
A trend that gained momentum in 2022
This idea has spread since the launch of Multipl. We can cite the American Accrue Savings, founded in 2021, which raised $25 million from the wealthy Tiger Global fund in January 2022; Indian Hubble Money, backed by Sequoia Capital, which raised $3.4 million in April 2022; another Indian start-up, Tortoise; or even Monkee, an Austrian application, partner in particular of Booking.com and eBay. The Austrian neobank Up has also launched an offer of this type.
“These start-ups offer these solutions to young people who can no longer or do not want to take out credit”explains Pierre Lion, chief growth officer at mangopaya French establishment specializing in payment services for marketplaces, which is responsible for confining and guaranteeing funds for Monkee. “For brands, it’s a new acquisition channel and a way to retain a consumer before they’ve bought the product. A sort of upside-down loyalty program.” “The final price of the product is guaranteed, and the money recoverable at any time”, he adds. If the purchase is not made, the brand’s contribution to the consumer’s savings account is cancelled.
Sell despite the decline in purchasing power
On average, consumers make their payments between 8 and 12 months. Purchases mainly concern relatively expensive products and services, such as an iPhone, travel, jewelry, and in countries like India, health insurance for example.
It is interesting to observe that the latest fintech innovations in personal services concern people who do not have access to credit or do not wish to take on more debt. Last September, the American start-up Kafene, for example, raised $18 million in series B, after an initial round of $30 million, for its rental solution with option to buy. It allows consumers to pay for a product over 6 to 18 months, and to return it before the term if they can no longer ensure the payments. If they make all the payments – calculated according to their credit risk and their financial capacity – they become the owners of the property.
A less favorable context for the BNPL
Along with the backdrop of rising interest rates and inflation, which are tightening consumer budgets and limiting creditworthiness, these new trends are developing as BNPL regulations are set to tighten. At least in Europe, where the adoption of the revised consumer credit directive is scheduled for early 2023. This envisages stricter rules in terms of consumer information for small loans of less than 200 euros, which relate in particular to split payment, and a new framework for assessing solvency. This is in order to limit situations of over-indebtedness.
As this is a European directive, each Member State will be free to transpose it into national law. The history of France, in this area, shows an application of stricter rules than elsewhere.
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The “Save now buy later”, a viable alternative to the BNPL?