CheapOair has joined forces with savings platform Accrue to offer consumers based in the United States a save now, buy later (SNBL) option for their travel.
While buy now, pay later (BNPL) has caught on in the past several years through companies including FlyNowPayLater and Uplift, SNBL is in its infancy.
A number of online travel players have recently established partnerships in the space, including Booking.com and Expedia with Monkee and Indian online travel agency MakeMyTrip with Multipl while EaseMyTrip has developed its own initiative.
Research shows that consumers want flexible travel payment options, with an Amadeus study last year revealing that 75% were more likely to pay in installments in the coming 12 months, 44% were more likely to pay with credit cards, 26% would use a payday loan and 24% would use a personal loan.
As the name suggests, SNBL enables travelers to save for trips and earn cash rewards along the way as they reach saving milestones or access travel offers and discounts. Accrue also enables friends and family to make a contribution to the cost of a trip.
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Michael Hershfield, founder and CEO of Accrue, said the company's aim is to make travel more inclusive but without consumers getting in debt.
CheapOair is Accrue's first travel partner, and the company's vice president of partnerships, Andrew Stein, said the move fits with parent company Fareportal's aim of making travel accessible.
"It also enables us to engage with our customers in a new way that goes beyond traditional marketing and loyalty programs," he said.
Stein views it as an additional payment option to buy now, pay later for travelers and said that in the current economic climate travel companies need to provide "innovative solutions that bring added value to customers."
Hershfield agreed that the challenging environment makes SNBL an attractive alternative for travelers.
"As more Americans struggle with inflation and rising credit card delinquency rates, Accrue is an essential and sustainable approach for Americans. With Accrue Savings, consumers also earn cash rewards as they continue toward their goal for ultimate savings."
While SNBL may not be for everyone, Maximilian Franz of marketing and strategy consultancy Simon Kucher said it does fit a certain customer segment.
"The majority of people want to consume instantly (either they have the money or they finance it via BNPL, credit card, loan etc.). However, especially with larger amounts (e.g. travel or luxury) SNBL can make sense: 'I plan my holiday for next year, and I already start to save today considering a certain discount when booking.'"
Franz added that SNBL has the advantage of potential discounts and the avoidance of debt for consumers while for travel providers, it can mean lower acquisition costs and boost conversion.
Meanwhile, Accrue's Hershfield believes the current economic environment could help SNBL catch on for travel.
"With record-high airfares, Americans are looking for alternative payment methods to pay for their trips that won’t put them in debt," he said.
"In fact, a recent survey we conducted found that 1 in 5 consumers have gone into debt because of a vacation. Furthermore, 81% of those going into debt from a vacation incurred over $500 worth of debt, [according to] Penta Group. Now more than ever, there's a need for an alternative payment solution for consumers that doesn’t put them further into debt."
Growing pains
However, there are challenges to the growth of SNBL. Hershfield said that airlines, hotels and online travel agencies, more familiar with long-standing credit options and loyalty programs, need to embrace it as a payment option.
Dylan Tan, co-founder of SNBL platform Sugar, said the company hasn't seen great take-up for travel yet and sees other challenges.
"An uncertain future of the economy means that consumer spending patterns might change towards more essentials rather than discretionary goods and services (which we primarily serve now). In addition, because revenue is recognized in the future when the transaction is made, higher cancellations will impact our top line growth; therefore a key challenge would be finding additional monetization opportunities," he said.
Tan added that the platform has seen lower average spend from consumers and a rise in cancellations of savings plans because consumers "need the cash for other urgent uses."
A further potential challenge to SNBL startups could come from banks offering similar options, which could dilute what companies such as Accrue, Monkee and Sugar are doing.
Franz said the consultancy has already noticed the trend with large banks and neobanks offering consumers "pockets or sub-accounts to save for a certain target."