Buy now, pay later is the latest trend in flexible payment services. With financial providers racing to grab their share, what impact is this having for the eyecare sector in terms of new customers, product sales and cash flow? RHIANNON BOWMAN reports.
Buy now, pay later (BNPL) options are rapidly imposing themselves on the healthcare sector, with optical businesses and their strong retail element proving a lucrative segment for the new form of financial service.
While BNPL plans remain a small percentage of optical industry sales, the eyecare sector’s sharpest business minds expect this to increase year-on- year in line with overall BNPL growth.
Around 30% of Australians now have an account with a BNPL provider, equivalent to 5.8 million people, according to consumer website Mozo. Now, homegrown companies like Afterpay, Openpay, Sezzle, Splitit and Zip have mushroomed into megaliths and household names.
Millennials (aged 24 to 39) were the first adopters of BNPL, and while they still account for the majority of purchases, other generations are catching up. Gen Z (aged eight to 23) account for 13% of spending on Afterpay, but it’s the fastest growing cohort – spending is increasing at 126% year-on-year.
BNPL companies have also spread into ophthalmic surgery where expensive procedures including laser eye surgery – starting at around $2,500 per eye – can now be financed through BNPL plans.
Despite the benefits its brought to businesses and consumers, consumer groups have urged caution. A 2018 review of BNPL providers found one in six users reported experiencing a negative impact, such as being overdrawn, having to delay paying bills or borrowing money from friends to meet scheduled repayments. Australian consumer advocacy group CHOICE has reported BNPL services and merchants are reaping great benefits, but some users end up paying late fees – which is effectively the same as interest.
In optometry BNPL services like Openpay are opening up new opportunities for patients and practices alike, particularly in terms of higher value sales, while also spelling the end of the more labour intensive payment method, lay-by.
“We are seeing an increase in the number of optometry practices that are offering Openpay as a flexible payment option to their patients,” Openpay’s head of health Mr Nick Grant says.
“It allows practices to focus on providing the best level patient care, and giving patients the ability to manage their repayments with peace of mind. We know that eye conditions deteriorate without the appropriate care or treatment so it’s important for patients to have flexible options that allow them to pay smarter and avoid deferring the care they need.”
An open and shut case
Ms Keira Hackett, practice manager at Kevin Hackett Optometrist in Geraldton, Western Australia, has driven the implementation of BNPL in a practice that is notching up nearly four decades in business.
The practice, a ProVision member, first started offering Openpay to patients in 2018 when ProVision approached the provider and expressed interest in bringing the optical industry on board with its BNPL service.
“We were the first optometrist in the Midwest to start offering a buy now, pay later service, and the reaction was nothing but positive, from both staff and patients,” Hackett says.
She says one of the benefits of Openpay, compared to other BNPL services, is the patient can choose a payment schedule that works for them, rather than, for example, four equal payments over four fortnights.
The practice has always offered lay-by in store but these were becoming increasingly messy and time-consuming, with staff having to follow up payments fortnightly.
“Previously – after we had some patients enquire as to whether we would consider bringing on a buy now, pay later service – we began to look into it, especially as it seemed to be the ‘way of the future’. However, it never eventuated; we found it hard to access information from other BNPL services as, at the time, no optical groups were offering a BNPL service,” Hackett says.
“Admittedly, we were also quite nervous – none of our staff members had personally ever used a BNPL service. However, once ProVision and Openpay collaborated and we came on board, the Openpay customer service and online training portal put our minds at ease.”
She says Openpay has essentially replaced the practice’s lay-by service.
“This is a win-win. For us, it means we are no longer having to spend time chasing up payments, holding stock aside or in store, and we receive payment from Openpay for the goods within 24 hours.
“For our patients, it means that not only can they pay their purchases off over a timeframe that they select, they are also able to take their purchase straight away, rather than collect on their final lay-by payment.”
While the practice pays a minimal fee per transaction, Hackett says it is insignificant compared to the cost of bookkeeping and managing lay-by accounts.
When Kevin Hackett Optometrist initially brought on Openpay, they expected a younger demographic would utilise the service, but to their surprise, it’s being used by patients of all ages.
“Some of our older patients were initially hesitant to change from their usual lay-by to Openpay, as the idea of the new payment system was overwhelming. However, the fact that patients don’t have to download the app if they don’t wish to – they can use an email address instead – was a huge draw card, and at the end of the transaction they would comment on how simple it was,” Hackett says.
While there are no restrictions as to what patients can use Openpay to purchase, the majority of Kevin Hackett Optometrist’s Openpay sales are for prescription spectacles, sunglasses, or plano sunglasses.
Aside from the efficiency benefits compared with lay-by, the team in Geraldton have noted many additional positive changes in terms of sales.
“We have gained new patients since bringing on Openpay – and those that have come to us because of Openpay have returned and utilise the service each time. With so much economic uncertainty, people have become quite cautious when it comes to spending. Since offering it, we have found that people aren’t so cautious or reserved with their frame and lens choices; they are purchasing what they really want rather than cost dictating what they choose. The buy now, pay later service means money is not a barrier,” Hackett says.
BNPL is also changing consumer behaviour in other ways, evident in patient’s eyewear purchases at Kevin Hackett Optometrist.
“Not only have we noted repeat business and purchases by patients, but the timeframe in between those sales is also generally shorter than what we had previously seen, especially for the fashion-forward eyewear purchases. Patients are returning to update their look each season and can justify it because ‘they can pay it off’,” Hackett says.
“And patients who can’t choose between two pairs of glasses don’t have to make that choice – they can purchase multiple pairs at one time. This is something that patients previously wouldn’t really even consider as not wanting to be exorbitant but being able to pay off makes the dream more attainable.”
Lost or broken spectacles presents yet another sales opportunity.
“An emergency replacement is an unexpected expense, but rather than ‘settling’ for the cheapest option as a quick fix to get them out of trouble, BNPL means patients can afford to get what they want – which usually means a better-quality pair,” Hackett explains.
Benefits and misconceptions
In 2018, ProVision partnered with Openpay, recognising the upswing towards BNPL options and the potential for addressing affordability concerns for high value purchases.
Openpay was ProVision’s preferred choice and went on to become a ProVision Referral Partner, as it allowed for extended payment periods.
Ms Margarida Faustino, ProVision business coach for WA and Victoria, says their own data revealed that on average 75% of plans are over a four- month repayment period, supporting the need for payment terms beyond competitor Afterpay’s six-week terms, and competitive merchant fees.
“We estimate that at present approximately 25% of ProVision practices are currently offering a single or multiple BNPL option,” Faustino says.
Offering the new payment solutions to patients has many benefits.
“Interest-free repayments and repayment plans that can be spaced over two to six months – pre-selected by patients to suit their circumstances – means patients do not need to compromise on the best eyecare and eyewear solutions,” Faustino explains.
“It reduces the reliance on credit card use, empowering patients to make better budgeting decisions by giving them more time to pay, which means patients can get the prescribed product or service they need today, with the comfort and peace of mind in knowing that they are able to pay over time.”
According to data from Afterpay, credit spend decreased by 10% for the year 2020, while spending on BNPL was up 60%, despite the COVID-19 crisis.
Offering BNPL payment to patients also provides practices with several opportunities. Beyond paying for frames and lenses, Faustino believes it can be a helpful platform to increase uptake of other services such as orthokeratology, dry eye treatment, and vision therapy.
“It can increase word of mouth in the community, as to your point of difference and the services you provide. By offering greater choice and payment flexibility, patients are less likely to ‘compromise’, and optometrists can provide the best level of customer care and meet a patient’s lifestyle needs.”
She also thinks giving patients options to manage their funds can help reduce any potential financial barriers or objections.
“With BNPL, practices can move away from in-practice payment plans and lay-bys, which are higher risk and have a greater drop-out rate. Data also shows that BNPL plans are considerably higher in value compared to the average practice patient spend,” she says.
Despite the myriad benefits, Faustino says misconceptions continue to swirl in the profession, but “working closely with Openpay gave ProVision and our members a greater understanding and helped dispel some of these myths”.
To clarify, Faustino says Openpay can, and is, being used across all age brackets, in both metropolitan and regional practice locations, regardless of demographic profile.
“This service is not only in demand by younger demographics. In fact, month after month, reports show 30 to 49-year-olds represent 50% of ProVision member practice plans, with a surprising 41% of plans taken up by the 50-plus age group.”
A report on consumer spending trends released by Afterpay shows BNPL spending is trending up across all generations, however younger generations are leading the charge. As of November 2020, Millennial BNPL spend was up 48% since January and 80% for Gen Z.
Triple the choice
Independent optometry network Eyecare Plus has agreements with Afterpay, Zip, and Openpay, three of the leading BNPL providers in Australia.
Mr Philip Rose, national business development manager based at Eyecare Plus head office in Sydney, says Afterpay is the most popular among its practices.
“BNPL is not as popular in optometry as it is in other retail areas such as fashion and beauty – mainly because the main demographic using BNPL is younger than the usual independent optometry demographic,” he says.
“At the same time, this is also one of the major benefits, attracting new and younger patients is essential for most practices.”
Rose is aware some independent practices worry about the transaction fees but notes there is evidence patients will spend more on purchases with BNPL.
“We feel that practices should offer this form of payment as in today’s environment it is like accepting payment via credit card. Payments can now also be made via smartphone,” he says.
“It also increases exposure of practices via the BNPL company’s websites – we have heard stories of practices getting referrals from the BNPL companies own websites and apps.”
He adds: “For independent optometrists who embrace this trend, the chances of reaching new patients and becoming even more attractive to existing patients far outweighs the participation or transaction costs.”
Staff on board
For optometrist and practice owner Ms Kylie Gough, supportive staff who were already familiar with BNPL spurred her decision to introduce it to her patients.
Gough, an Eyecare Plus member who operates practices in Nambucca Heads and Macksville in NSW, says her staff were using BNPL in their personal lives and found it convenient, and their children – young adults – were using it regularly.
She signed up for Afterpay and Zip about 18 months ago and says it has allowed patients greater financial flexibility.
“I offer a three-month lay-by, and BNPL has allowed patients to split payments, often by paying half on lay-by, and half on BNPL,” she says.
Gough described the Nambucca Valley as a lower socio-economic area where locals often live week-to-week. Despite being only 10km apart, her two practices attract a different demographic; mostly retirees and tree-changers in Nambucca Heads, and families who have been farming for generations in the area surrounding Macksville, on the Nambucca River.
“I get patients making all levels of purchases using BNPL; from basic, budget spectacles, up to premium products, which they find easier to pay off in installments,” Gough says.
“I find the book-keeping side of BNPL a minor annoyance because it doesn’t sync with my practice management software, so it can be a bit fiddly. But patient’s love it – they can take their purchase immediately, and don’t need to use their credit card.”
Aside from purchasing frames and lenses, Gough says patients also use BNPL to purchase contact lenses, low vision aids, or dry eye products.
O-Show starts the conversation
Bill Wilkinson Optical Centre in Bendigo has been in business for more than thirty years. Originally owned and operated by the practice namesake, optometrist and long-term employee Ms Nicole Baines and her husband, optical dispenser Mr Jason Richter, purchased the practice in 2012 when Wilkinson retired.
Richter, who joined the business with 15 years’ experience as an optical dispenser, says he and Baines introduced Humm, a BNPL service, to patients at the wholly independent practice in July 2016 – almost five years ago. The first step in that decision came when Richter attended the inaugural O-Show in Melbourne that year.
Patients at the practice had started asking about alternative payment methods other than traditional lay-by, prompting Richter to start making enquiries.
“Humm offered higher limits to start with, up to $800 or $1000, for a new customer to spend, which was more than other providers. They also had facilities to take it higher again, with credit checks et cetera,” Richter says.
“Humm’s fee was only 4%, compared to other providers, which were as high as 6.5 to 7%, from memory. It also provided overnight payment, or within two business days – other providers took up to a week.”
Richter says implementing Humm was similar to applying for a bank account and the practice didn’t need to disclose any financial records.
“It hasn’t been a game-changer but it has given our patients options. In terms of processing payment, it works quite well. Patients submit their details and are approved for a certain amount. We’ve found patients predominantly use Humm to purchase prescription spectacles, and occasionally for sunglasses,” he says.