The Economics of Patient Finance: What Actually Drives Profitability

Chapter Four

Start with the right mental model

The biggest mistake practices make is simple:

comparing finance to card fees.

• Cards: ~0.5%

• Finance: ~6–10%

Conclusion:

“Finance is too expensive”

This 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 % of treatments should use finance?
  → e.g. 30%, 50%, 70%

This is not theoretical.

• SmileDirectClub: ~70%

• Leading Invisalign providers: 40–60%

Step 2: Build finance into your margin

For a treatment:

• Price: £X

• Gross margin target: X%

• Expected finance share: X%

• Finance cost: X%

You 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.

Real example: 24-month 0% rollout

A large group moved from:

• 12 months 0%

• 24 months 5.9%

To:

• 24 months 0%

Expected outcome

• more finance usage

• higher conversion

Actual outcome

• no increase in usage

• no increase in treatments

• shift from 12 → 24 months

Result

higher cost, zero growth

Key insight: Finance adoption is driven by process—not product.

The role of APR (and why most get it wrong)

Most practices think:

• patients want 0%

• APR reduces conversion

Reality:

• 0% is preferred

• but APR has limited impact on completion

What APR actually does

APR is a tool to:

• control cost

• shape behaviour

• create trade-offs

The correct way to design finance options

This is where most practices fail.

Principle 1: Keep it simple

Do not offer:

• 6–8 options

• or let staff choose freely

Instead:

define 3–4 standard options per treatment size

Principle 2: Use an APR ladder (not flat pricing)

APR should increase with term.

Example for £3,000 treatment)

Why this works

• patients choose based on monthly affordability

• practice avoids over-subsidising long terms

• economics become predictable

Principle 3: Avoid large jumps

Bad structure:

• 12 months → 0%

• 36 months → 9.9%

Good structure:

gradual increase in APR

This allows:

• smoother decision-making

• better distribution across options

The myth of “lowest monthly wins”

A common instinct:

offer the lowest possible monthly payment

Why this fails

Lower monthly:

• attracts more applicants

• but lowers quality

Result:

• more declines

• weaker conversion

Real example

Smile White tested:

• 60-month low monthly option

Result:

• lower-quality demand

• worse conversion

Better strategy

Position slightly higher monthly:

• attracts stronger applicants

• improves approvals

• increases completion

Key insight: 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 £1,000–£4,000:

Offer:

1. 12 months — 0% APR

2. 24 months — ~5.9% APR

3. 36–48 months — ~9.9% APR

Rules:

• always offer all three

• never customise per patient

• let the patient choose

Optional optimisation

You can:

• shorten 0% to 10 months → reduce fees by ~10–20%

• replace 24-month 0% with 20-month ~5.9%

What actually drives profitability

It’s not:

• lowering APR

• or extending 0%

It’s:

1. Consistent usage

Finance must be:

• offered every time

• not selectively

2. Standardisation

• same options

• same structure

• no decision fatigue

3. Volume

Once economics work: more cases = 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

• maximum case volume

Closing insight

Finance is not expensive when used correctly.

It is expensive when underused.

Transition

With economics defined, the next step is:

How to operationalise this into a consistent, scalable system across practices.