Understanding SNBL vs BNPL

This week I had the privilege of participating in an event about small business technology in beautiful Cape Town, South Africa. 

One of the many conversations that took place on stage involved understanding the distinction between two relatively new ways for consumers to pay for the things they want.

The speaker was Andrew Katzwinkel, the young founder of the South African fintech Layup Technologies

The first payment model is buy now, pay later (BNPL). This is a very popular and also controversial payment methodology that we have covered extensively at Localogy Insider. BNPL’s controversy stems largely from the growing evidence that it has contributed to rising indebtedness among consumers, particularly younger consumers. 

In BNPL,  consumers choose a product, choose BNPL as the payment method, make a deposition, and pay it off in installments. 

The contrasting model was save now, buy later (SNBL). 

Move Over BNPL, It’s Time for Save Now, Buy Later

This payments model, which Katzwinkel champions and offers through his company, is in many respects the opposite of BNPL. In SNBL, consumer set aside funds over time. And once they have saved the purchase price of the items they have selected (couch, shoes, funeral plot) they take possession.

As Katzwinkel noted in his presentation, save now, buy later tends to make more sense for higher ticket purchases. Hence its popularity as a way to pay for funeral plots, according to Katzwinkel.

While Katzwinkel is one of relatively few SNBL platforms operating in Africa, the model is slowly expanding around the world. For example, former WeWork executive Michael Hershfield founded Accrue Savings. This company has raised almost $30 million to pursue SNBL in North America and beyond. 

Katzwinkel offered a concise breakdown of the difference between BNPL and SNBL. Here are some of the more important differences.

First, BNPL is an immediate gratification model, which means immediate possession of the goods. SNBL, on the other hand, is a delayed gratification model, where possession only takes place once the goods have been paid for in full.

Which model would dad approve of?

Next, BNPL charges late fees and sometimes interest. While SNBL does not. If anything, it should pay interest since it is billed as savings. Katzwinkel says consumers who change their minds about a purchase they are saving for can cancel and get a full refund. 

Another point Katzwinkel made is that SNBL is available to any consumer since it involves pre-payments rather than post-payment. The risk is much lower all around. This provides a good PR opportunity for SNBL in an environment in which debt is not especially popular. 

While SNBL purveyors like LayUp and Accure make valid points about the advantages of their model, it is easy to see why consumers prefer the dopamine rush that BNPL provides.

Still, we have seen cracks in the BNPL business model. And these cracks have been widening recently in a rising interest rate environment. The balance of 2023 will likely tell the tale of which business model will prevail. Will it be the dad-approved, financially responsible SNBL? Or will it be “live for today” BNPL?

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