A new generation of startups is turning to the concept of ‘Buy Now Pay Later’, or BNPL, on his head. Fintechs such as Multiple, Hubble and Tortoise operate on a ‘save now pay later’, or SNBL, model, in which users save money with merchants and take advantage of discounts that come with upfront payments. All three platforms, Multiple, Hubble and Tortoise, have raised funding. On May 12, Multiples announced a pre-series round from Kotak Securities and others.
Here’s how it works
Let’s say you want to buy an iPhone. phone price 1 lakh and you can set aside 10,000 per month in 10 months for this. There are many ways in which you can buy a phone.
Previously, you can buy it now using a credit card or BNPL Pay the loan back to the lender in 10 installments (EMIs). Second, you can put the money in a bank FD or debt mutual fund and buy it when you have savings 1 lakh (help including interest). However, there is a third option. In this option, your installments go to the merchant as an advance or they sit in an escrow account from a specific merchant (for example, an iPhone) with a third party designated for the specific product. In return the merchant gives you a discount. If you take into account merchant discounts, your ‘return’ on savings is much higher than just keeping money aside in the bank.
“Users of our iPhones plan will get a cashback of 10%. We have partnered with Imagine Stores (Ample) and have also partnered in the Travel and Electronics categories. We will initially focus on travel, electronics and jewellery. Your money will go to merchants as an advance, but you can change your mind and withdraw your savings at any time before the actual purchase is completed,” said Vardhan Koshal, Co-Founder, Tortoise.
Startups have adopted different models. According to Hubble’s website, your money is deposited into an escrow account of its partner bank and you get a 10% discount on your purchases through the platform. Hubble is able to offer this flat percentage through a mix of merchant offers and using its own funds. Multiples holds a SEBI Registered Investment Advisor (RIA) license in one of its group entities. It allows you to either invest in a mutual fund, using the portfolio it suggests, or to use the money as a payment advance. In the former option, you can ‘tag’ merchants and allow them to make offers to you for a discount. These offers crystallize when you finally buy from them. However since the money sits in the mutual fund in your name, you are free to buy from a third party completely or not at all. Multiple also allows you to save money and avail discounts directly with the merchant concerned. Third platform Tortoise currently stocks money with a payment gateway but eventually plans to send your money directly to the merchant.
As a consumer however, there are some risks. The platforms say you can change your mind anytime. However, the merchant may be in dispute with the Platform and may not honor the discount or refund your money. Also, the platforms do not pay any interest if you change your mind and withdraw your money. You only get your principal back. Once you start paying upfront to a particular merchant, you can lose out on competing deals. However, for fans of particular brands, this can be a common way to get some discounts.