Enhancing Dentist and Patient Software Experiences with Embedded Payments
Dental practices have had a great run over the past decade, as production and profits surged amid an expanding economy following the 2008-2009 recession. The industry didn’t feel the challenges that healthcare did during the pandemic, with 2021 proving to be a banner year, according to industry analysis.
However, the headwinds that healthcare has been enduring caught up with practices in 2022, as inflation, increased overhead, staff shortages, and lower productivity gains combined to hit profitability. Two-thirds of dentists reported that rising costs was their top challenge, with 69% reporting this problem. The forecast for 2023 was similar amid inflation pressures, higher interest rates, and less consumer discretionary spending.
Survey analysis advised that practices “need to focus on identifying strategies to increase production and offset rising overhead, which will allow them to maintain or increase practice profitability.” Dentists that add payment processing to a practice management system can collect more revenue while giving patients more payment options.
By adding an embedded payment solution, software vendors in the dental practice space can help their clients maintain or increase profits. Vendors also benefit through a new revenue stream and an important, value-add solution that enhances the client experience.
Embedded payments solutions like payment facilitation (PayFac) and PayFac-as-a-service (PFaaS) allow non-financial businesses like software vendors to act as payment facilitators without the upfront costs, risks, payment operations headaches, and time to market.
Help Clients Meet Patient Payment Preferences
According to recent market research, the dental practice management software market is poised for significant growth over the next five years, projected to grow from $1.5 billion to $2.3 billion by 2028. As practices seek to adopt software to streamline operations, independent software vendors (ISVs) and software-as-a-service (SaaS) companies in the dental market have a unique opportunity to enhance their products to better cater to the needs of dentists and their practices.
Collections are the lifeblood of any dental practice. According to the American Dental Association (ADA), the collection rate for a successful practice is 98% or higher, underscoring the importance of offering payment terms that appeal to patients.
More than 90% of consumers already pay recurring bills online, and a similar percentage want electronic payment options. Two-thirds want digital and electronic payment options, such as electronic statements and the ability to pay online.
There’s no question that patients want more electronic options, with many preferring providers who offer the payment options they want. ISVs and SaaS companies can embed payments into their software quickly and easily to help practices provide those options.
How Embedded Payments Benefit Vendors and Practices
Value-added features such as embedded dental payments processing can help vendors increase the “stickiness” of their products, which bolsters recurring revenue from software renewals. However, embedded payments also provide a new revenue stream. Vendors earn revenue through fees, and the percentage can vary based on the type of partnership a vendor uses to add payments.
Partnering with a PFaaS provider offers the best of all worlds, with low cost of entry and high payment margins. The benefits for software vendors are three-fold:
- Added revenue stream
- Better client user experience
- Robust features without compliance and operational headaches
Added Revenue Stream
The payment margin depends on the payment model, with margins varying between 35%-85%. You can choose from a variety of options, including a conventional referral partnership, partnering with a bank, creating your own payment mechanism, and partnering with a PayFac-as-a-Service provider. The latter option allows you to enter the space quickly, with high payment margins and little of the risk that a large development project might entail.
Better Client User Experience
Adding robust features such as dental payment processing makes your software more valuable to your clients. Practice leaders want turnkey solutions that quickly and completely integrate with their existing software. By reducing manual processes related to payment processing and providing more payment options, dental practices can increase their revenue.
Patients also want electronic payment options, with 30% of consumers saying they’ve ended more than one online payment transaction because the provider didn’t accept credit or debit cards.
Robust Features Without Compliance and Operational Headaches
Data security and compliance are critical success factors for a payment implementation. Any company that processes payment transactions must adhere to strict Payment Card Industry Data Security Standards (PCI-DSS), a difficult proposition for software vendors that don’t specialize in the financial and banking sectors. PCI compliance requires companies to implement security measures such as encryption, access controls, and regular security audits.
PFaaS provides automated and nearly instantaneous underwriting capabilities that perform vital risk and security checks. Those checks ensure that dentists and practices:
- Are in good financial standing
- Aren’t on the Mastercard MATCH list
- Aren’t violating anti-money laundering rules
- Pass OFAC (Office of Foreign Assets Control) screening
- Pass Know Your Business (KYB) and Know Your Customer (KYC) checks
Depending on the vendor, PFaaS solutions can include everything a dental SaaS provider needs to scale, such as end-to-end data security, comprehensive reporting, PCI compliance, fraud protection, flexible payouts, and quick onboarding.
PFaaS the ‘Secret Sauce’ for Embedded Payments
Partnering with a PayFac-as-a-Service provider makes the most sense for many reasons, including eliminating payment friction for clients, low risk, easy deployment, innovative payment experiences, and the ability for vendors to earn 50-80 basis points on net revenue.
Increasingly, integrated payments are the “secret sauce” that SaaS vendors and ISVs need to differentiate their products from competitors while bringing more value to clients. Bain & Company foresees significant growth for software firms that adopt integrated payments because it makes the software “more distinctive and valuable to merchant customers.” Up to 15% of the $35 trillion in annual payments could be addressed by ISVs, according to Bain.
Nearly half of respondents to a recent survey rated healthcare as the most difficult industry in which to complete a payment — 32 percentage points higher than other industries. A disconnected payment solution does not provide the convenience patients want or the streamlined workflows that dental practices need to maintain profitability.
Partnering with a PFaaS provider can take the headache out of accepting payments, helping practices increase their bottom line, providing patients the options they want, and helping ISVs and SaaS vendors gain a revenue stream.