Commercial credit solutions that allow patients to buy products or services now and pay later, are removing the financial barriers to spectacle purchases and even sight saving surgical procedures. In the process, they are helping practices increase their revenue with greater conversion of sales and higher average transaction values.
The promotion of consumer credit solutions with fast approvals is on the rise in the retail space and has crept into the healthcare space as well.
Millennials, in particular, have embraced these solutions over and above the use of credit card payments. ‘Afterpay’ was one of the first ‘buy now, pay later’ schemes to hit the market. It was started by Australian entrepreneur Nick Molnar and his business partner Anthony Eisen in 2014, and within less than four years had reached a market capitalisation of more than AU$3.3 billion.1
Afterpay, along with others like Zip and Humm work much like the old fashioned lay-by system, except that the consumer takes ownership of the product or service and then proceeds to make regular repayments to cover their cost.
Many consumers don’t have the money sitting in savings, ready to pay for a procedure, but they can afford to make repayments
As economic journalist Peter Switzer has explained, “The astronomical rise of Afterpay and Zip Money can be attributed to the key feature of their product which is the simplicity of buying a product and paying for it later without requiring traditional and costly credit, interest or upfront fees”.2
As long as payments are made within the agreed time, many ‘buy now, pay later’ offerings are interest free for consumers. However, if a consumer does not meet their regular repayment commitment, they will be charged a penalty.
Additionally, interest free credit providers typically charge the merchant a set-up fee and/or take a percentage cut from the total price of the product or service purchased… as my old economics teacher said, “there is no such thing as a free lunch”.
According to Mr Switzer, in the case of Afterpay, its annual financial reports exposed that ultimately 24.4% of income was generated through late fees while the remaining 75.6% was made up through merchant fees.2
PROVIDERS IN THE HEALTHCARE SPACE
Zip offers Zip Pay for smaller procedures up to $1,000 and Zip Money, which provides credit up to $15,000. Eli Hecht, head of healthcare solutions at Zip, says Zip Pay comes with “no interest ever and repayments from as little as $10 per week”, while Zip Money offers a flexible repayment schedule so that patients can decide how much to repay over the interest free period, as long as their minimum payments are met. Credit can be applied for and approved within as little as 60 seconds.
“Zip offers an interest-free payment plan to cover the full cost of treatment and allows patients to pay back in instalments that suit their lifestyle (weekly, fortnightly or monthly). This allows patients to focus on their health and well-being while alleviating the financial stress of large, upfront payments. Patients will have the freedom to make decisions according to their health rather than their financial situation.”
Zip charges the practice a small fee per transaction made. “There are no setup fees, no monthly charges, no commitments and no surprises. The merchant services fee varies depending on the interest free period of the payment,” said Mr Hecht.
See Now, Pay Later provides tailored interest-free credit for eyewear.
“Given that optical is both a retail business and a service, I was cautious about introducing a buy now pay later scheme to Australia and so I researched the provider with the best option for the clients and a product designed specifically for the industry,” explained Elisa McGough, director of See Now, Pay Later.
“I partnered with FlexiGroup, which has been around for over 30 years – they recently launched Humm, a merger of existing products and the response has been huge.”
Rebecca James, CEO of FlexiGroup said her company is passionate about making it more affordable for all Australians to care for their eyes.
“With See Now, Pay Later, practitioners can provide patients/clients with greater flexibility to afford the very best in care – whether that be high quality lenses, prescription sunglasses or an additional pair of frames for the fashion forward,” she said.
“Patients can either apply through the App, or the optometrist can apply for them with a simple three minute application process. There are no invasive questions asked and best of all, there is no interest ever charged to the client.”
Ms McGough said set up is free for practitioners. “When it comes to each payment plan, the practice is paid in full, the next business day, minus a small merchant service fee.”
Rather than offering a ‘buy now pay later’ scheme, TLC offers a number of ‘payment solutions for patients’ which all come with interest charges attached.
Established by Tim Boon who previously ran his own Consumer Loan Company for 12 years, TLC provides finance from AU$2,001 to $50,000. Interest rates start as low as 7.5% for good credit scores, and repayments are according to the applicant’s risk profile and current lifestyle.
“We are not an interest free or payday loan facility, which is why our applications take slightly longer to approve than the buy now pay later facilities (up to six hours). Our TLC consultants look after patients personally and we have to lend responsibly. Additionally, the finance arranged can not only be used for the specified procedure but all associated costs as well, like the hospital, anaesthetist etc. It cannot be redrawn for secondary purchases. However, patients can repay the loan early, and make additional repayments if they receive rebates from MBS or their private health fund, with little to no early penalties,” said Mr Boon.
“Many consumers don’t have the money sitting in savings, ready to pay for a procedure, but they can afford to make repayments. Some find it difficult to get finance because they don’t have the employment history to meet the credit requirements of banks and want to keep the treatment personal. We want to make sure the patient chooses the right treatment program rather than focus on its price point.
“We source finance from six different providers so we’re able to provide the best solution for each patient.”
TLC’s payment solutions for patients are negotiated directly with the patient and without any involvement from the practitioner – the practitioner simply informs the patient of the TLC option for funding via weblink or brochure. The practitioner is not charged a set up or transaction fee, and nor do they receive a commission for sending patient business to TLC.
“That means the provider can charge the patient the regular cost of the procedure without having to add any more to cover the finance provider’s fees.”
CHECK THE FINE PRINT
For practitioners and patients alike, consumer credit solutions are complex and should not be decided on without careful consideration. Although there is no doubt that the many solutions available will help provide access to sight saving products and treatments, there is still no such thing as a free lunch.
- www.news.com.au/finance/money/costs/how-arecession- gave-one-aussie-guy-a-billiondollar-businessidea/ news-story/47ea033152bfbdc85ccc4340e05580fe
- www.switzer.com.au/the-experts/harry-tyson/buy-nowpay- later/