An old and improved way to pay

What counts as a ‘need’ and what counts as a ‘want’? This is a debate that rages across the country--from households and boardrooms to GST Council meetings. Regardless of the subjectivity of the subject matter or the negotiation skills of the parties involved, it all comes down to one thing­--finances.

It is this aspect that defines our lifestyle, what we consider as essential or not, and more importantly, how we finance our expenditures. An unaffordable ‘want’ can easily be within reach if you could simply pay later.

A part of our core mission as an organisation is to help people spend intelligently and save more. We envision a sustainable form of expenditure for the future--‘Save Now Buy Later’ or SNBL.

Saving up to buy something expensive is no new concept, especially in India. The country’s savings rate hovered around 34% of GDP a decade ago, although it fell to 28% in 2021. Pandemic after-effects coupled with more aspirational lifestyles could result in further declines as high inflation continues to erode savings.  

The innovation of SNBL lies in how we incentivise a generation accustomed to instant gratification to being excited about planning ahead and saving up for future expenses.

Overcoming inertia

Historically, we have been a nation of savers. But we have never had easier access to credit than now. It's natural to want to use most of your first salary to splurge on something you’ve always wanted or on gifts for your family and friends without giving a second thought to saving. It's when such behaviour turns into a credit-fuelled habit that it becomes an issue.

The nature of today’s social media has moulded a generation of digital natives that expect instant gratification from every direction. Add to this the advancements in targeted advertising and one begins to understand the inertia towards saving. While every Indian gets handed down lessons in the value of money, they are almost never accompanied by lessons in money management. And as we attempted to find solutions to these issues, two keywords caught our attention - ‘inertia’ and ‘habit’.

‘Inertia’ helped us narrow our focus on what exactly was the problem we were trying to solve. ‘How do we get people to overcome the inertia to save?’. Everyone thinks they will start saving from next week or next month, but more likely than not, our good intentions end up remaining just intentions. The inertia or resistance lies in initiating the process. Rather than go against the tide and get people to save manually, our solution lies in simply automating the process.

From a technical perspective, all it takes is a few lines of code to automate your savings. But the question that remained was, ‘how do we get people to start automating their savings?’. That’s where ‘habit’ came in. We could use automation to inculcate a habit of saving and we could do that by making saving fun.

Making saving fun

Between ignorance towards money management and intimidating financial jargon, where was the space for fun? Forming a new habit is also not something people readily take to. We needed something that would not only seamlessly fit into people’s behaviour but something they would readily adopt.

And that’s how we came up with the concept of rule-based triggers to automate savings. The idea sprang from the cliche, ‘if I had a dollar for every time….I’d be a millionaire by now’. To make it contextual, we tweaked it to ‘If I had a rupee for every time I felt hungry, I’d be a crorepati by now’. And that’s how the food ordering-based savings rule came to be.

It looked something like this, ‘every time I order from Swiggy, save Rs 50’. Similarly, for shopping it was, ‘every time I shop on Amazon, save Rs 100’, and so on. You could simply activate these rules and save without even thinking about it. For the cricket fans, we came up with, ‘every time Virat hits a 6, save Rs 20’ and for the football fans, we had, ‘every time Ronaldo scores a goal, save Rs 150’.

With most of the heavy lifting done on making saving fun, all that was left to do was channel these savings towards financing a goal or a specific purchase.

Save Now Buy Later

Classical economic theory speaks of the rational consumer who takes every decision purely in their economic interests. By this theory, saving money in various jars labelled for specific goals like a car or a vacation is a redundant exercise. The rational consumer knows this is merely a bifurcation of their total existing funds which can be used for any purpose.

But a behavioural economist, or any consumer, be they rational or not, will tell you of the importance of goal-based savings. Saving up for a goal like buying your next phone or a pair of expensive shoes, by its very nature, implies delayed gratification. It helps to plan your savings, investments and expenditures.

If you know when you might need funds for certain purchases, you could create goals with a specific amount and time period. Linking these goals with multiple automated saving rules would passively channel your funds into savings and investment instruments of your choosing. A smart AI-based system could analyse your saving and investment patterns and nudge you towards your goals.

But it does not end there. With knowledge of the goal type, duration, and amount, this system could recommend the optimal diversification of savings and investment instruments to achieve your goals. And before you know it, you would have financed that big purchase through SNBL.