Businesses relying on the popular but contentious payments model are finding their operations increasingly difficult to stack up, reports Andrew Bevin.
Access to unfunded medicines has been hit hard by the sudden closure of New Zealand’s only healthcare-specific buy now pay later platform.
HealthNow’s namesake platform allowed consumers to pay for healthcare and medication in up to 12 weekly instalments.
It charged consumers less than the average market rate at only $7.00 per late payment, after allowing for an extra 24-hour penalty-free grace period. Those late fees were then refunded into the customer's HealthNow wallet.
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Giving only a few days notice, HealthNow told users it would retire the scheme at the end of last week.
Posting on social media, Nga Hua Pharmacy charge pharmacist and co-owner James Yu said HealthNow wrapping up the scheme so quickly had come as a major shock.
He said many of the Hamilton pharmacy’s clients relied on the scheme for unfunded medicines such as medicinal cannabis, and medicines for diabetes, weight loss and epilepsy.
Yu said the pharmacy was currently looking for alternatives.
Chief executive Mitch Cuevas of medicinal cannabis clinic CannaPlus+ said the platform was used by about 20 percent of its patients and was creating a lot of angst.
“Because of the abruptness it’s been a shock for many because they rely on the medications for things like anxiety, and all of a sudden to be told ‘sorry, you’re not going to be able to afford your anxiety medication any more’ is quite stressful.”
CannaPlus+ has already reached out to patients to try to create or find a solution for them that doesn’t involve CannaPlus+ needing to be a registered financial services provider.
He said companies such as Afterpay flat out wouldn’t work with cannabis medicine.
Better use
HealthNow chief executive Steven Zinsli said the company would put resources from BNPL into other aspects of its business it believes can better increase the accessibility and affordability of healthcare, mainly an employee benefit platform for healthcare access.
He said employers were the primary beneficiary of employee health and considering the relatively low cost of doctor visits (compared with sick days), “Why would they not make an effort to participate in promoting an outcome that they're benefiting from?”
In an update sent to platform users a few days after announcing the closure, the company said when it got into buy now pay later in 2021, there was momentum behind BNPL business models such as Laybuy, Klarna and Afterpay.
“Though invisible to end-users, BNPL models like ours require significant pools of operating capital to support the cost of extending all the short-term loans,” the statement read.
“When users and merchants loved HealthNow BNPL, that increased our daily transactions and put a large strain on our funding ability.”
The company said this coincided with global macroeconomic changes causing investors to sour on BNPL and an increased cost of capital.
BNPL
Buy now pay later was a darling of the fintech world for years, but interest-free loans are harder to swallow in a world with rising interest rates, and extra costs are hard to pass on to consumers.
This is coupled with increasing competition, a lack of profits and increasing regulatory oversight.
Questions are also being asked over the ethics of BNPL as the cost of living crisis pushes people into a debt spiral.
New Zealand-founded Laybuy is a clear example of the rollercoaster of the BNPL sector.
Laybuy listed on the Australian Stock Exchange in 2020, selling almost 60 million shares at A$1.41 heading into the listing, with the price ballooning to $2.30 in its first day.
The share price fell to around 3c before the company delisted earlier this year.
Australian BNPL business Humm backed out of New Zealand in September last year, receivers were appointed to Open Pay in February, while Genoa stopped offering its BNPL service in April this year citing uncertainty around the future regulatory environment.
The sector dodged a regulatory bullet earlier this month when Government did away with plans to check whether users could afford to repay the debt if they were to borrow $600 or more.
The short-term, low-value nature of BNPL loans made Commerce and Consumer Affairs Minister Duncan Webb conclude it would be “too onerous”.
It will, however, finalise BNPL regulations before the election, aiming for enforcement in 2024.
