Accrue Savings debuts ‘save now, pay later’

As BNPL use continues to grow, consumers are finding themselves under a growing debt load. Accrue Savings has spotted an opportunity to introduce a new payment mechanism built around increasing savings. The firm calls it ‘save now, pay later’, as an alternative to BNPL. 

Accrue Savings describes its services as “a merchant-embedded shopping experience that rewards customers who save for their favorite products and services.”

How does the firm actually do that? 

It starts with a shopper finding an item they like on a retailer’s website, or directly on Accrue’s website, and planning a future purchase. If on the retailer's website, they are redirected to Accrue’s website, where the customer is presented with savings plans for that product, with a cash reward attached to reaching certain savings goals. 

Shoppers have three options to choose their preferred savings plan from: two generated by Accrue, and a custom option. The Accrue-generated plans offer biweekly or monthly deposits (the amount and duration of the plan vary from retailer to retailer). From the custom option, the shopper can choose his/her own savings schedule, set by the amount or target date, with deposits made on a weekly, biweekly, or monthly basis.

Once the shopper has chosen a savings plan, Accrue Savings opens them an FDIC-insured savings account through Blue Ridge Bank. The user can collect funds in that account through self-deposit, receiving contributions from friends, and rewards from retailers. 

As the user hits different milestones in their savings journey, they are rewarded with cash contributions from the retailer, incentivizing them to continue saving. Once the funds have been raised, the transaction is completed as the shopper buys the item she's been saving for. If, for any reason, the shopper changes her mind about the purchase, she has the option to withdraw the funds minus any cash rewards that they’ve received.

For example, Allbirds advertises that buyers can save up to $35 with the brand if shopping through Accrue. Let's focus on a specific product: Allbirds women’s wool runners. The shoes are advertised for $98 on Accrue, with a $10 cash reward for a customer who is just setting up an account. To save up for the product, there are two 3-month Accrue-generated savings plans advertised: one requires a deposit of $15 every 2 weeks, the other $30 every month. A shopper could use the custom schedule option to set up a plan for 2 months, for instance, depositing $40 a month, or $10 a week.

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Alternative to BNPL

“For the past 40 years or so, innovation in the payment space has been focused on credit options,” Michael Hershfield, founder and CEO of Accrue Savings told Tearsheet. “It has not been aimed at helping consumers save - there are no incentives, no rewards, no integration that makes it easier for shoppers to put money aside for things they want. Not only does this result in unnecessary debt for consumers, but it comes at a long-term cost to brands: it’s hard to say you truly care about customers and want to help them, but only offer forms of credit.” 

While credit cards had the highest market share among payment methods in 2020, BNPL has risen to become a significant player in recent years. CB Insights estimates that the BNPL industry will swell up to a GMV of $1 trillion by 2025 — roughly an eighth of the credit card industry.

On the flip side, analysts fear BNPL might become a notable source of consumer debt in the coming years. Many firms operating in the space currently do not report to credit bureaus -- Fitch Ratings called the sector’s debt performance reporting “opaque.” Additionally, the quality of credit checks in BNPL offers is a cause of concern. 

In this environment, Accrue entered with the philosophy that helping people achieve savings targets, and consequently move away from credit, will change the relationship between brands and consumers, and promote sustainable financial growth in the country. 

“Contrary to a popular narrative, we found that consumers are saving,” Hershfield said. “Our research shows that Americans are saving for travel experiences, cars, electronics, down payments for homes, and home investments or renovations.”

“Americans improved their savings habits during the past 18 months of uncertainty with the pandemic for the first time in 45 years, according to a survey conducted by NerdWallet. This is an incredible opportunity for brands to capture savers early in their journey, and help them reach their goals.”

The value proposition for merchants

While retailers optimize their checkout flow, they have been less successful at bringing consumers who don’t make it to the checkout page into the funnel. Accrue Savings wants to help convert those customers, by helping brands to meet potential customers before they’ve decided on a purchase. 

Accrue Savings’ services can be directly embedded into retailers’ websites, enabling them to also put the feature in a targeted email or SMS campaign.

“While consumers earn cash rewards toward their purchases, brands that partner with Accrue Savings are seeing an immediate impact on their top-of-funnel marketing efforts,” Hershfield said. “Retailers can engage with customers earlier in the consideration phase by offering a savings-based purchase plan on their website and in targeted email or SMS campaigns. By alleviating shopper concerns about debt-based payment plans, partner retailers are reducing friction points between consumers and their purchases.”

Accrue Savings claims it helps expand a business’ addressable audience. Providing consumers with incentives to save up for a particular purchase can make a retailer’s products accessible to people that previously may have shied away. 

Additionally, this can reduce consumer acquisition costs. By allowing brands to reach consumers earlier in their consideration funnel, Accrue Savings may help reduce retailers’ dependence on search engine and social media advertising and also accelerate the decision to make a purchase.

About the firm

Accrue Savings was founded by Hershfield, a technology-industry professional who previously spent three years performing different roles at WeWork, most recently as the svp of sales.

Accrue launched in November 2021, raising an initial seed round of $4.7 million, with 15 retailers as clients, including Allbirds, Camp, Casper, and Mark Henry. The firm claims it’s already doubled the number of merchants it’s working with since its launch.

Earlier this month, the firm completed its Series A, raising $25 million and bringing its total funding to about $30 million. The firm wants to use this money to increase its retail partnerships and bolster hiring efforts across all departments. It’s actively hiring marketing, product, and leadership talent.