While money cannot buy love, it can be a relatively good measure of love in some cases — particularly when looking at consumer spending. When vast sums are being expended in an area, odds are usually good that represents something someone loves — or minimally, something they feel incredibly strongly about.
And by this measure, Americans love their pets. In 2018 American consumers spent $70 billion on their pets. The largest category of that spend is on food, a fact that surprised exactly zero dog owners. But in a close second place is veterinary spending, which reached $18 billion in 2018 and is expected to cross the $20 billion mark by 2024. On average, pet owners spend $200-$400 a year for routine check-ups and medical services for an animal that mostly healthy.
But when an animal is unwell, the costs quickly start skyrocketing, Scratchpay Founder and CEO John Keatley noted in a recent conversation with Karen Webster. In the event that a pet needs extensive medical intervention or surgery, the bills rapidly start climbing into the thousands of dollars. On the one hand, he noted, this is actually a sign of something positive — it is a sign that veterinary science is improving and that there are more and better medical interventions that can be made on a beloved pet’s behalf.
“And because of my background coming out of Klarna, I looked and thought to myself that this might just be a fantastic vertical where a new solution is needed. So that is what we set out to build,” said Keatley.
What they created, he said, was Scratchpay — an installment payment program for pet owners looking for a better method to finance veterinary care when those costs become a lot more than incidental.
Breaking Into The Market
Scratchpay is not quite first to the party — by far the largest and most established player in the game was Synchrony with its Care Credit platform.
“When we were first starting out, we found it hard to find funding because there was a perception that we couldn’t pierce the barrier in this vertical because the incumbent was just too strong,” remembered Keatley.
Strong in terms of size, he noted, but not necessarily in terms of offering.
Moreover, Care Credit as a product wasn’t really designed for veterinary practitioners or patients — it often doesn’t work that well for them. The credit requirements are fairly high, so many customers are turned away — after they’ve had their credit score dinged with a hard pull. Veterinary offices complain that it is both difficult to manage and creates administrative hassles. Plus, the products carry high APRs after their APR promotional period ends, as well as all kinds of ways to mess up and get hit with deferred interest payments.
“And what we realized, the more we looked at the problem, is that this kind of product just isn’t what is needed in this space. What they need is a fair offer for financing that is clear and transparent, even if it includes interest.”
So Scratchpay threw out most of the old model. The practitioner doesn’t have anything to manage, because the patient’s owner applies directly from their phone. Customers can seek financing up to $10,000 and be approved to pay it back in installments over three, six or 12 months, depending on the loan and its terms. And because they hold all of the loans to maturity on their own balance sheet, he noted, they aren’t beholden to FICO-based scoring and can use their internal proprietary algorithmic model to assess risk. This means they can safely approve more people. Customers with prime credit often get no-interest offerings, while those with more concerning issues pay interest. But everyone knows how much it is, what their total payments will be and how long they’ll be paying.
“Our product is different in that we aren’t deciding on a $5,000 line of credit, we aren’t giving you funds you can use all over, we are approving you for a single transaction for a single procedure, so that risk we are taking is boxed. We have to decide if you can pay off this $1,000 in 12 months — that gives us an edge in the types of risk we can take.”
Building Custom For A Unique Vertical
It’s easy to bust on Care Credit and other similar financing programs like it — but in some sense, it isn’t their fault they aren’t offering a great experience for veterinary patients. The product was designed as a financing tool for “elective care” — things like plastic surgery, cosmetic dentistry, vision benefits and specialized audiological services.
These things are medical, he noted, but not critical medical, and ipso facto voluntary. Veterinary care, on the other hand, does not appear even remotely voluntary or elective for pet lovers.
And the uniqueness of the vertical, he said, has to influence the product design. When pet owners can spend to save a pet, they will — it is binary and, unlike Botox, is not the sort of thing that a customer will be pushed toward with a good opening promotional offer. They want to know if they can possibly afford it, how it is possible — and then to make happen.
Second, he noted that while there is always the risk of default, in this area, people really really don’t want to.
“People see us as connected to their care providers, and they have very developed relationships of trust with them. Relationships that they protect and don’t want to damage with non-payment.”
And finally, he noted, there is really a need here. What they’ve heard anecdotally through the providers they work with, he said, is that treatment rates go up 5 to 10 percent when Scratchpay is on the table — a much stronger result than they’ve seen elsewhere.
“This isn’t a product where we had to create a desire for something better. Pet owners are already looking for it. And with a new method we can give them that better experience, give vets a better experience. And hopefully help keep people’s pets happier and healthier.”
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