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Have you used "buy now, pay later" for healthcare?
Tell me your story.
SFGate published a story a couple weeks ago on Gen Z’s use of so-called ‘buy now, pay later’ (BNPL) companies, like Klarna or Afterpay. It can get a bit local TV news-style scaremongery anytime someone writes about The Youths and what they’re up to, but it is a frightening piece—because of the poorly regulated industry taking advantage of them, not the moral character of teens. With increasing cost of living and the general societal pressure to constantly obtain stuff, it’s no wonder the kids (and everyone else) are turning to these loans, which aren’t really portrayed as loans at all. They’re certainly not pitched as having the stakes of a loan: The copy always emphasizes that many people will pay 0% interest, and most people will pay the loans off in four easy, small installments.
As SFGate noted, they’re known on social media and in memes by their brand names, our friends who let us buy more skirts—not as layaway or loans, which is all they really are. It’s a growing industry, popping up everywhere from Six Flags to burritos to guns (guns!), and only recently beginning to attract scrutiny from regulators.
The main thing that makes BNPL different from regular loans or credit cards is the lower barrier to access. The companies don’t perform traditional credit checks, and it’s actually quite difficult to find out how they’re assessing consumers’ ability to pay back the money they’re lending you, if not with traditional credit scores. According to TechCrunch, some of these startups do something called “cash-flow underwriting,” in which the company “connects to users’ bank accounts to see daily income, spending patterns and savings to see if a loan will likely get repaid by the end of month.” The infuriatingly named Sezzle says it “sample[s] the shopper to model where they are on that FICO scoring range,” and uses “50-plus data sources in a number of these models to really help get a better picture of identity and credit worthiness with where the customer actually is in their journey today.” Okay!
The most successful startups all seem to take an existing idea, like “the bus,” and claim to reinvent it with tech. BNPL loans do the same—in this case, layaway—add some opaque and proprietary tech, slap on some millennial branding, and attract billions of dollars in investment. Once you’ve had that basic idea, and it starts making you big money—Afterpay was purchased by Square for an insane $29 billion—why wouldn’t you branch out beyond clothes and consumer products? Once you’ve conquered the indulgences, why not go for the necessities—like healthcare?
There are a couple of major BNPL companies in the healthcare industry. WellPay partners with Affirm, one of the biggest BNPL companies, and offers loans to patients through their providers. WellPay charges healthcare providers a fee for this service—but only if they’re in the 30-day free trial period. After that, according to their website, they only charge “at cost.” Perhaps this means they’re expecting to make most of their money from interest charged on loans, which can reach up to 30 percent, depending on creditworthiness. Essentially a payday loan rate, but for like, a colonoscopy. A practice called Texas Foot Surgeons uses Wellpay, promising “no hidden fees, no late fees, and no effect to your credit.”
The other big player is Walnut, which works with providers like WellPay does, or directly with patients who have already been billed. In its pitch to providers, it boasts: “Traditional patient financing companies reject 50% of patients. Our proprietary underwriting algorithm helps you approve more patients.” They’ll even give patients a credit card to swipe at the doctor’s office. Coverage of the company on sites like TechCrunch and Nerdwallet says they don’t charge interest, but their website says they “may” charge interest depending on the loan, and other press releases simply say their interest rates are “as low as” 0% APR. I emailed them to ask what the actual range of interest rates charged is and I do not expect a response.
According to TechCrunch, Walnut’s “extensive underwriting model” uses “thousands of data points from different providers, from side hustle income to spending habits on things like groceries and bills.” (If I had to put money on it, I would guess that the vast majority of BNPL customers have no idea these companies have access to such granular data about them.) Walnut raised $110 million in funding just last month. Another company called PayZen, which describes itself as a “care now, pay later” company, says it uses “data and AI to create individualized patient payment options that families can afford.” Data and AI? Sign me up!
It’s one thing to go into debt to buy a skirt or a lamp; it’s quite another to go into debt for medical care. Customers with little money and no credit are left with few options. Do you get the treatment, and sign up for an installment plan, or just go without? Will the ding on your credit come from a medical bill or a high-interest loan? In a country where healthcare is so expensive, it’s no surprise that companies have popped up to offer just four easy payments to get treatment. I’m sure it has made the difference between getting care and not for many people; the price for those stories is the others, the ones who end up paying the interest.
Again, it’s important to emphasize how these services are different from credit cards—not as different as they’d like you to think, of course. BNPL offers are likely to be attractive to people who don’t have the credit for a traditional credit card, which makes them inherently riskier. The Wall Street Journal noted this week that subprime customers account for 43% of customers who apply for BNPL plans. A CreditKarma survey found that one third of people who had used BNPL services missed at least one payment.
Plenty of financial services companies, including payday loan companies and snazzy ‘fintech’ payday loan companies, pretend that they’re actually being noble by charging poor customers massive interest rates, because it allows ‘access to credit,’ or the opportunity to rebuild credit. This self-serving lie is enough to give policymakers the barest pretense to allow extremely profitable usury. In the case of BNPL, it’s not even true: SFGate reports that while more and more BNPLs are reporting missed payments to credit agencies, “few are reporting successful repayment histories,” meaning it’s hard to use them to build credit. Better still if the companies in question can pretend they’re not like other lenders. An Afterpay spokesperson told SFGate the company was merely a “budgeting tool,” not a lender.
So, tell me: Have you used a service like Walnut or Wellpay to pay for medical bills? What was it for? Did you have insurance? Did you make the payments, and did you have to pay interest? I’d love to hear from you. If you want to be anonymous, that’s totally fine. Email me at email@example.com, and tell me your story. I’ll publish what I hear from readers soon.