Changes in the deferred payments landscape could see more Australians gravitating towards private care to fund out-of-pocket health procedures, according to Chief Executive of Openpay, Dion Appel.
The last few years have seen attitudes towards credit changing, with consumers turning their back on credit cards to access funds in times of need. As of March 2022, just 13.1 million credit cards were in circulation in Australia, down from 16.2 million in March 2018.
Meanwhile uptake of embedded finance and cash management solutions, like Buy Now Pay Later (BNPL), has headed in the opposite direction. More than 3.3 million Australians (15.7 percent) used a BNPL service in 2021 financial year, up from 6.8 percent in 2018. Today, 75 percent of Australians are aware of BNPL services, and 39 percent prefer using this payment option for healthcare purchases.
Mr Appel believes this trend is logical, given that BNPL and embedded lending instruments like Openpay, offer a modern and cost-effective way to access funds.
“Cashflow management tools are ideal for young families who are more budget conscious, or who prefer to space their payments in line with the way they earn income,” he said ahead of the Health Insurance Summit, hosted by Informa Connect.
“Ultimately BNPL is a sensible, cost-effective way to access funds. If there are any fees associated with the Openpay service, they are fixed, so people can see in advance what it is going to cost them. Fees are also factored into the periodic payments, making them more manageable.
“In contrast, a lot of customers are no longer fond of credit cards and are cancelling their accounts in response to alternative access to consumer finance. That is where the deferred payments space has been born.”
While this disruption was underway pre-pandemic, COVID-19 has been a further catalyst for BNPL adoption, with the cessation of elective surgeries driving up wait times for procedures, and fuelling appetite for private care.
Despite usually being required within months, waits for certain category 2 surgeries have blown out to years, with even well-resourced clinics facing challenges. The Royal Melbourne Hospital recently stated its elective surgery waitlist had increased by 15.9 percent in the preceding six months.
In response to these delays, 32 percent of consumers have expressed interest in changing healthcare providers if offered alternate payment plans or digital payments, including BNPL.
Mr Appel has felt this change in consumer attitude in his own business undertakings, with his company now growing exponentially in a variety of healthcare verticals. Openpay entered the healthcare space six years ago, with a presence in dental, but has since established itself in hospitals, audiology, and optometry, amongst others.
Mr Appel mainly credits the success of his product in these areas to its flexibility. Previously lending average sums of $300 in the retail space, Openpay now offers loans of up to $20,000 repayable over 24 months for healthcare procedures.
“We have a more flexible deferred payment plan. Traditionally – with the smaller sums we lent for retail purchases – we offered a two month plan. Since then, we have extended that to 24 months, allowing us to expand into more industry verticals,” he said.
Additionally, transparency has been key to protecting Openpay consumers – 88% of whom are using positive cash flow to repay their debts.
“If a customer needs to pay for a dental treatment worth $3,000, they can repay that over six months and pay $3 at each point of the repayment – i.e. $39 in total. Meanwhile, they can leverage six monthly pay cheques to service the loan. It spreads out the cost and some people find it more manageable than having to repay a credit card loan of the same value when the statement falls due within 30 days.
With these funding solutions enabling more healthcare transactions, Mr Appel believes there will be positive knock on effects for health insurance and the healthcare sector more broadly. Sharing his expert thoughts on this, Mr Appel will present at the Health Insurance Summit, hosted by Informa Connect.
This year’s event will be held 28-29 June 2022 at the Swissotel Sydney.
Learn more and register.