Save now, buy later: what it is, how it works, and how it benefits merchants

You’ve heard of buy now, pay later (BNPL): a form of short-term credit enabling consumers to purchase goods or services, while spreading out the cost over future installments.

But there’s an emerging, exciting way to pay that sounds similar, while sidestepping the issues and implications of BNPL – and offering big benefits for consumers and merchants alike.

It’s called save now, buy later (SNBL). Also known as save now, pay later (SNPL), the model is a forward-thinking fusion of saving, investing, and spending that’s already taking the embedded finance space by storm – and, in the coming months and years, only stands to get more and more popular.

So what is SNBL, exactly? How does it work, and how does it differ from the established BNPL model? Below, we’re exploring the pros and pitfalls of SNBL – and how, with the help of Checkout.com, you can bolster your payments strategy to offer your customers fresh, innovative, and more convenient ways to pay.

What is save now, buy later (SNBL)?

Save now, buy later refers to a strategy your business can employ to help your customers save up for goods and services you sell.

Most customers, of course, do this anyway – especially for big purchases. What SNBL does is provide a platform to enable and incentivize these customers to save with a purchase in mind. 

Through various features and functionalities, SNBL apps support consumers in setting savings goals – then facilitate the completion of the purchase when they’re met.

For the customer, it’s essentially a short-term savings account; for the merchant, a line of interest-free credit. SNBL, then, has the ability to work for all parties: you make the sale, and your customer gets what they want – without having to take on debt to get there.

So how does SNBL work?

How does save now, buy later work?

To explain, let’s use an example.

Let’s say you run a department store: selling everything from TVs and furniture to white goods and gardenware. Some of the items on your shop floor – and in your online store – are high-value; meaning they can take a long time to save up for.

However, because a lot of it is homeware, many of your customers are first-time home buyers. Meaning they often don’t have the funds to purchase items outright – or the willingness to take on debt (through BNPL, for example) to fund the fit-out of their new home.

So, you decide to set up an SNBL scheme. You set up an app through which customers can create an account, select the items they’re most interested in buying from your store, and set up a pot to fund it. (You’ll need to partner with a bank or other form of finance provider to be able to set up this functionality – but it’s generally more simple than it sounds!)

Over time, your customers can deposit money into this pot – keeping it out of their checking accounts, and avoiding the temptation to spend it – and see it grow. They can also set a savings deadline, which your SNBL app can take into account, run the calculations, and provide guidance around how much the customer needs to be saving every day or month to achieve it.

As a business, you can also incentivize your customers to continue adding to their savings pots with you. You might offer a $5 credit for every $100 saved, or give them a free treat once they reach a particular milestone. When your customers have saved up enough to make the purchase they desire, you can send them an automated push notification.

From here, they can follow through on their long-awaited purchase, quickly and seamlessly, through your online store – for a clean, convenient, and cohesive experience.

Your approach to SNBL can be as comprehensive as you want it to be. It could be simply a pot, linked to your customers’ loyalty program account, which helps them save. A more advanced setup could encompass budgeting functions, a savings schedule, automated deposits – plus a plethora of deals, discounts, and incentives to keep the customer on track. It’s up to you!

What’s the difference between BNPL and SNBL?

Both BNPL and SNBL are forms of embedded finance.

Embedded finance is the integration of financial products and services (like, for instance, the ability to save money and budget for the future) into non-financial technology: mobile apps, ecommerce websites, and social media platforms. The industry is growing, too – and 19.6% of retailers intend to offer in-app embedded finance solutions going forward.

Yet, that’s essentially where the main similarities end. Because, as you’ll have already gleaned, BNPL and SNBL – buy now vs save now – are entirely different propositions.

BNPL encourages customers to make purchases they may not yet be able to afford.

They’ll receive the goods or services immediately (satiating that need for instant gratification), and repay this loan over time – usually in up to four installments, but sometimes more. There’s often no interest charges to the customer for this short-term credit line. But, should they fail to make a payment on time, they’ll be hit with potentially hefty fines – which can add up, in the long run, to make the debt unpayable.

SNBL, on the other hand, invites customers only to make a purchase once they have sufficient funds to do so. No credit is extended by the BNPL service to the customer. Instead, that credit line runs the other way. Since the customer is paying into a savings account they have with your business, it’s essentially them extending a credit line to you.

One example? Starbucks’s loyalty program, where customers can top up their accounts to access deals and discounts.

Starbucks earns yield on this money – especially the $155 million per year the coffee chain sees sitting, unredeemed, in its users’ accounts – which allows the company to offer those incentives, and reinvest in the features that make its loyalty program so effective.

Like BNPL, SNBL has the effect of making products seem more affordable – while also inviting the customer to think harder about the purchase’s impact on their overall finances, and whether they really want it or not. Through this lens, the retail and fashion industries stand to benefit – particularly the businesses purveying high-ticket, aspirational items.

Essentially, BNPL creates debt; SNBL doesn’t. While customers paying with BNPL must undergo a credit check to be eligible, and – if they fail to meet their obligations – see their credit score decline, SNBL is available to everyone: expanding the size of your potential customer base, and allowing them to enjoy risk-free purchases.

That’s not to say you shouldn’t offer BNPL – quite the opposite. There are many advantages to letting your customers buy now and pay later; so many, in fact, that we’ve compiled a list of the top 6 reasons why merchants offer BNPL to unpack them.

We’ve also spoken to three of the model’s leading experts to understand the future of BNPL – and what you can expect to see going forward – so be sure to check that out, too!

Advantages of save now, buy later

Save now, buy later offers plenty of benefits – for both the customer and the merchant.

For the customer, these include:

• Less risk and debt: SNBL doesn’t require the customer to take on debt to fund their purchase – lowering the risk that they’ll be unable to pay it back, risk falling into a cycle of debt, and become eligible for harsh financial penalties.
• No credit check required: because the customer isn’t taking on debt, they don’t require a credit check to get started. This helps even consumers without access to credit options get involved – something important for financial inclusion, too.
• More payment flexibility: SNBL doesn’t – and shouldn’t – work in isolation. By offering it as one option in a varied, diverse mix of alternative payment methods, merchants can give customers more choice over how they pay. (SNBL can even work in tandem with BNPL solutions for a comprehensive suite of payment tools.)
• Rewards available: many SNBL programs offer rewards to incentivize savers. These might be cash or investment returns (depending on the SNBL scheme’s underlying financial instrument, these returns could be higher than those many savings banks offer). It could also be deals and discounts on products, or with brand partners, when a customer reaches specific savings milestones.
• Help achieving their financial goals: through encouragement, incentives, and intuitive budgeting tools, SNBL apps help customers set and stick to their savings targets.

For merchants, SNBL’s advantages include:

• More choice at checkout: payment flexibility isn’t only good for the customer; it’s good for the merchant, too. Increased payment choice makes it more likely the customer will be able to pay in the way they’re most comfortable with: boosting conversion rates, while sending cart abandonment rates in the opposite direction.
• Stronger, longer-lasting customer relationships: the SNBL model encourages and incentivizes long-term customer engagement with your brand, while the rewards and returns on offer engender loyalty – and build better relationships.
• Bigger-ticket sales: the whole idea of SNBL programs is to help customers save up for those items they wouldn’t typically be able to afford paying for in one go. These tend to be larger, higher-value products and services – with larger profit margins!

Challenges of save now, buy later

SNBL isn’t without its drawbacks. And, as we’ll see below, these aren’t restricted to logistical or cost limitations, or to the SNBL model itself – but lie rooted in wider, cultural considerations.

SNBL’s challenges include:

• Longer purchasing process: unlike BNPL or paying at the checkout in full, SNBL can take weeks, months – even years to complete. Customers can withdraw their money and abandon their efforts at any time during this process – leaving you, as the merchant, without the big-ticket sale you’d expected.
• Initial cost outlay: the SNBL model requires retailers to invest in updated payment systems – which can be costly to get set up.
• Combating instant gratification: getting your SNBL platform and financial provider in place is one thing – changing the behavior of your consumers is another. We live in a world that demands instant gratification: we want to own our goods, touch our goods, now, and think about how to pay for them later – not several months down the track. Changing these behavioral patterns, then – and encouraging a shift to a longer-term, more sustainable mindset – remains a key challenge for SNBL-interested merchants. 

Offer more payment methods with Checkout.com

Save now, buy later is a concept so ingenious – yet so simple – that it’s hard to believe it’s still only an emerging payment method. That said, it’s one we expect only to gain in popularity and traction in the coming years – so it’s something your business needs to start thinking about.

Fortunately, though, it’s not something you have to think about alone.

Here at Checkout.com, we can help you with all your payment processing needs – be it the tools, the technology, or simply a bit of information. Together, we can review and rejuvenate how you take payments: working with you to reach more customers, expand into new regions, and accept a diverse range of established and evolving payment methods.

We’ll also help you keep your finger on the pulse of embedded finance – and how its slick, customer-friendly blend of technology and ecommerce can help you drive sustainable sales, loyalty, and engagement with your brand.

Sound good? Get in touch with our team today to start the conversation.