The economics of patient finance: what actually drives profitability

Start with the right mental model

The biggest mistake practices make is simple: comparing finance to card fees.

• Cards: ~0.5%

• Finance: ~6 to 10%

The conclusion that follows ("finance is too expensive") is wrong. Finance is not a payment method. It is a conversion and growth system.

The real economic model

You don't optimise finance per transaction. You optimise it across the business.

Step 1: Define your target finance share

Decide upfront what share of treatments should use finance, for example 30%, 50%, or 70%. This is not theoretical. SmileDirectClub ran at around 70%, and leading Invisalign providers run at 40 to 60%.

Step 2: Build finance into your margin

For a treatment, take the price, your gross margin target, your expected finance share, and the finance cost, then ensure your blended margin still works.

Step 3: Stop optimising cost per loan

Once unit economics are correct, your goal is simple: maximise case volume.

What goes wrong in practice

Many groups try to improve finance by making it more attractive. Consider a real example, a 24-month 0% rollout.

A large group moved from 12 months at 0% and 24 months at 5.9%, to 24 months at 0%. The expected outcome was more finance usage and higher conversion. The actual outcome was no increase in usage, no increase in treatments, and a shift from 12 to 24 months. The result was higher cost and zero growth.

Finance adoption is driven by process, not product.

The role of APR, and why most get it wrong

Most practices think patients want 0% and that APR reduces conversion. The reality is that 0% is preferred, but APR has limited impact on completion. APR is a tool to control cost, shape behaviour, and create trade-offs.

How to design finance options

This is where most practices fail.

Principle 1: Keep it simple

Do not offer six to eight options or let staff choose freely. Instead, define three to four standard options per treatment size.

Principle 2: Use an APR ladder, not flat pricing

APR should increase with term. For a £3,000 treatment:

This works because patients choose based on monthly affordability, the practice avoids over-subsidising long terms, and economics become predictable.

Principle 3: Avoid large jumps

A bad structure jumps from 12 months at 0% straight to 36 months at 9.9%. A good structure increases APR gradually, which allows smoother decision-making and better distribution across options.

The myth of "lowest monthly wins"

A common instinct is to offer the lowest possible monthly payment. This fails. Lower monthly payments attract more applicants but lower quality, which leads to more declines and weaker conversion.

For example, Smile White tested a 60-month low monthly option and saw lower-quality demand and worse conversion. The better strategy is to position a slightly higher monthly payment, which attracts stronger applicants, improves approvals, and increases completion. The best customer is not the one who needs the lowest monthly payment.

The simplest winning setup

For most practices, this is sufficient. For treatments of £1,000 to £4,000, offer:

1. 12 months at 0% APR

2. 24 months at ~5.9% APR

3. 36 to 48 months at ~9.9% APR

Always offer all three, never customise per patient, and let the patient choose. As an optional optimisation, you can shorten 0% to 10 months to reduce fees by around 10 to 20%, or replace 24-month 0% with 20-month ~5.9%.

What actually drives profitability

It is not lowering APR or extending 0%. It is three things.

First, consistent usage: finance must be offered every time, not selectively. Second, standardisation: same options, same structure, no decision fatigue. Third, volume: once economics work, more cases mean more profit.

Final takeaway

The economics of patient finance are simple. Don't optimise for lowest cost per loan. Optimise for predictable margin, consistent usage, and maximum case volume.

Finance is not expensive when used correctly. It is expensive when underused.