Payment platform battles spread to tap rising demand in health sector

The financial sector war pitting banks and telcos’ payment platforms is now moving to healthcare. Though providers of payment solutions have been focusing on retailers, a robust private and growing public healthcare expenditure means an opportunity has arisen there too.

A low enrolment to health insurance, currently at less than 10 per cent, also means out- of- pocket payments for a majority of patients will be the norm. According to financial data from the 2015 household healthcare expenditure, more is being spent and judging from the shifting epidemiology, this will continue to rise as cancer and chronic lifestyle diseases take a toll.

Existing payment modalities in our ecosystem span cash, mobile money, cheques and electronic transfers with the latter two used especially for inpatient care. Outpatient visits demand on-the-spot settlement and proof of payment, making cheques and EFTs not acceptable.

Across different patient service units; pharmacies, labs, hospitals and diagnostics, an observation is that most small enterprises prefer cash but a few also have telco payment options. In the wholesale pharma segment, cheques and EFTs are popular given the higher volumes and values and lack of emergency.

Cash is still king as far as payments in outpatient retail health is concerned, but mobile money and banks have a stake.

Looking at our enterprises in terms of numbers, pharmacies are easily the most visible units with over 15,000 premises.

Medical facilities at about 10,000 come next followed by stand-alone diagnostic units.

The relatively high number of transactions in pharmacies provides a target for banks and telcos keen to tap into this revenue stream. The commissions in pharma, though low, have higher volumes.

For the medical outfits taking cash payments, there are advantages and disadvantages. Counterfeit bills, potential employee theft, burglaries and further need to bank collections daily makes cash less popular, creating a demand for virtual money.

Telco products like Safaricom’s Lipa na M-Pesa tills, which I have used, have an advantage over cash as they eliminate some of the above obstacles. However, their shortcoming is that a customer must first move funds from a bank account to M-Pesa and then pay to the till number, making it a two-step process with charges on both ends.

Similarly for the business, one must ultimately transfer funds to a bank account. An emerging rivalry between the telco market leader and the banking sector may tilt with the new unified mobile money platform allowing cross-banking transfers.

Individual banks are also trying out products modelled along M-Pesa tills. Equity Bank’s foray into the retail till payments has seen the “EazzyPay Till” deployed in health enterprises.

Its strategic advantage for me is that all funds are directly deposited to my business account instantly and at no cost. It also lets businesses make payments free, albeit only to Equity accounts.

For small businesses whose daily collections are a basis for credit, a bank statement can also be generated from the till and used in other banks. Presently few banks accept statements from telcos like M-Pesa as financial standing proof for credit for businesses seeking credit.

A positive development from the ongoing fight is that hurdles like cost, convenience and safety are going to be addressed and improved. Hopefully this will work to move enterprises off cash platforms.