A new way of paying for healthcare is rapidly gaining pace and helping to fuel significant growth in self-pay business. In part 1, Richard Gregory introduces point-of-sale finance and its impact on customer service and sales.
Much modern consumerism is fuelled now by the emergence and development of retail finance.
All medium and large-ticket items are offered alongside a variety of ways for the consumer to pay at point of sale, even for luxury car brands such as Rolls Royce.
Often the payment of a product or service is either through interest-free credit or interest-bearing credit and over a fixed term.
Virtually all payment offerings are through a third-party lender. Credible lenders undertake a credit check, performed to ensure the purchaser is credit-worthy, a credit agreement is signed, direct debit set up and the purchaser walks away with the product.
This is all done on virtual and electronic systems. In recent times, other products have emerged, the most commonly quoted one being ‘buy now pay later (BNPL)’ offered by firms such as Klarna, or deferred interest-free credit whereby the consumer is initially offered payment holiday periods.
Some of these BNPL schemes have, however, attracted adverse publicity because of irresponsible and unregulated lending.
Credit is, of course, not free. In the case of interest-free credit, it is the retailer who pays for the cost of credit and it is, of course, the consumer who pays the interest on interest-bearing products.
Most consumers traditionally pay either with point-of-sale (POS) finance products or they put the cost on their credit cards. What are the merits of each approach?
There are certain credit cards which have their merits. For example, there are those with interest-free periods on purchases of over two years. Some even give you the opportunity to earn rewards.
But careful consideration should be given. As I said, credit is never free, despite some dubious and aggressive advertising.
We are tempted by credit card companies into these deals because many of us will not pay off the debt within an initial interest-free period, if offered, and will find ourselves with a balance subject to high annual percentage rates (APRs).
In other cases, we may only pay the minimum repayment each month and not realise to what extent we are extending the period of debt or how much we are increasing the total cost of credit.
In this respect, point-of-sale (POS) finance products provide a more transparent alternative. Both the APR and the total cost of credit are fixed and the repayment period and instalment amounts are therefore fixed too.
Also, the APRs offered through POS finance products are very competitive and, in many cases, 0%.
In a fast-moving world, customers increasingly expect a more dynamic set of payment options. POS finance products certainly fit the bill, particularly for larger value purchases over £1,500.
They remove the deterrent of a significant up-front cost and allow us to sensibly pay off the cost of the purchase over a period of monthly instalments, even for individuals with significant savings or assets.
It is a frictionless process with an instant decision, it makes purchases affordable and makes it easy to budget. For retailers, there are three further fundamental advantages:
1. Boost to sales
Ask yourself the question. Would you rather pay £1,000 up front for a product or make ten monthly repayments of £100?
POS finance products allow the item to be promoted in a more-affordable way, which is highly inclusive, as those with smaller disposable incomes don’t have the same barrier to buying.
Equally, even for those with larger incomes, it often makes good budgeting sense to purchase goods with low-cost or 0% finance rather than dip into savings or pensions. For very little effort, retailers will see increases in sales
2. Increase transaction value
You have a customer ready to purchase, so by offering POS finance products, you effectively reduce the initial hit to their budget. In many cases, depending upon the nature of the purchase, this can encourage a customer to buy more or buy better.
3. Better customer retention
What drives customer loyalty, more so than the best price, is our experience when dealing with a retailer.
If a patient, for example, experiences a convenient, seamless journey with the ease and affordability of paying through a slick POS finance scheme, they are more likely to return for any future treatment and to tell others about their experience.
Offering POS finance products also attracts a wider audience to your products and service, drives customer goodwill and enhances your brand image as being customer-friendly.
Industry statistics strongly support these points:
69% of customers who used POS finance products said it enabled them to buy the product sooner (Barclays).
55% of customers said they bought because of the availability of POS finance products (Hitachi Capital).
Sales increases lie on a spectrum between 17% and 40% according to global market research company Forrester, with some outliers who have experienced sales uplift in excess of 60%.
A Forrester study found that POS finance products increased order value by an average of 75% and that 78% of consumers said they would purchase high-ticket items using POS finance products.
34% of consumers – in this case, patients – said they would be more likely to spend with an organisation that offers POS finance products (Chrysalis Finance).
Richard Gregory runs an independent healthcare consultancy, specialising in self-pay