Savings. When we think of finance, we immediately think of financial products such as fixed deposits, bank accounts, SIPs and mutual funds.
The relationship with money is often purely transactional, with a fixed amount set aside for a larger nameless "good" that is then returned in due course with a small interest component. .
As consumers, our end goal is usually unclear and we always try to save for a future that hasn't happened yet.
Moreover, this is the age of BNPL(Buy Now Pay Later), where credit lines are given for instant purchases. All one needs to buy on credit is a couple of clicks on the phone. In India, RBI is taking steps to add a regulatory framework to BNPL, which could potentially complicate things.
In all this mess, it seems that the time is ripe for new alternatives such as Save Now Buy Later.
So, how does SNBL work?
Let’s say you want to buy an iPhone. The phone costs ₹1 lakh and you can keep aside ₹10,000 per month over 10 months for it. There are multiple ways in which you can buy the iphone.
First, you can buy it now using a credit card or buy BNPL loan and pay back the lender in 10 instalments (EMIs) which is booming these days.
Second, you can put the money in a bank FD or debt mutual fund and buy it when your savings reach ₹1 lakh (helped along by interest).
However, there is a third option. In this option, your instalments go to the merchant as advances or they sit in an escrow account with a third party designated for a specific product from a specific merchant (for example, an iPhone). In return the merchant gives you a discount. If you factor in the merchant discount, your ‘return’ on savings is a lot higher than just keeping aside money in the bank. Sounds interesting right?
The startups have embraced differing models.
According to Hubble’s website, your money is deposited in an escrow account with its partner bank and you get a 10% discount on your purchases through the platform. Hubble is able to offer this flat percentage off through a mixture of using merchant offers and its own funds.
Multipl has a Sebi registered investment advisor (RIA) licence in one of its group entities. It allows you to either invest your money in mutual funds, using portfolios suggested by it or to use the money as payment advances. In the former option, you can ‘tag’ merchants and allow them to make you offers for discounts. These offers get crystallised when you eventually buy from them. However since the money sits in a mutual fund in your name, you are free to buy from a third party altogether or not buy at all. Multipl also permits you to save money directly with the merchant concerned and avail discounts.
The third platform Tortoise currently holds money with a payment gateway but plans to eventually remit your money to the merchant straight away.
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