B2B healthcare in the U.S.: The next frontier for digital payments
Disruption awaits an industry reliant on inefficient paper-based processes
While the world is increasingly moving toward digital payments, commercial healthcare has been slow to catch on. Nearly 85 percent of healthcare procurement, in which hospitals and healthcare providers purchase medical supplies and equipment, is paid manually via paper checks.1 This can result in significant operational inefficiencies and financial losses.
“Provider organizations need to be ready for the digital age, which means automating as many processes as possible to reduce unnecessary work and costs,” says Nasser Chanda, CEO of Paymerang, a provider of invoice and payment automation software for the healthcare industry.
Commercial payments in the healthcare industry, in fact, offer an estimated $2.9T opportunity for fintechs and financial institutions (FIs) ready to meet this demand.2 The U.S. wholesale medical supply market, which distributes dental and medical supplies and equipment, alone was projected to reach more than $268B in 2021 and to achieve a market size of more than $305B by 2026.3 Although substantial inroads have been made to automate healthcare procurement, a sizable opportunity to digitize it leaves fintechs and FIs a role to play to reduce friction and create automated procurement and receivable processes for the industry.
Disruption takes two
Healthcare fintechs have the opportunity to take the lead by innovating to improve procurement and address critical pain points, such as highly fragmented payments to small suppliers, multi-step purchase order processes, long days sales outstanding (DSO) periods and the need for healthcare-specific data to meet regulatory demands.
But fintechs can’t go it alone. They need the support and expertise of traditional FIs that can connect emerging solutions with the broader financial and payments ecosystem. Healthcare fintechs, in fact, can better facilitate payments by leveraging products and services provided by regulated FIs, such as credit and lending, card-based solutions like virtual card and traditional treasure management services.
“Visa remains very focused on the U.S. healthcare opportunity within B2B payments, one of the largest vertical opportunities in the market. We have taken an active role in engaging with the fintechs and financial institutions that are innovating and creating the solutions to meet the needs of businesses serving this industry vertical,” says Jay Darnell, Visa’s Head of North America B2B Fintech Partnerships.
Together, healthcare fintechs and FIs are poised to disrupt the challenges of this industry with products that drive efficiencies in areas such as regulatory compliance, working capital and supply chain management.