Specialty Lenders Are Outperforming Legacy Credit In Medical Verticals

Medical practices used to rely almost exclusively on traditional healthcare credit cards. Now they’re turning to specialty lenders built specifically for modern patient behavior.

The need for healthcare financing spans dental, aesthetics, dermatology, vision care, veterinary medicine, and elective medical procedures. But providers across these verticals are increasingly de-prioritizing legacy financing models in favor of faster, more flexible solutions built around today’s fintech environment.

Let’s explore how and why that’s happening.

Legacy Healthcare Credit Built the Market

Legacy providers like CareCredit paved the way for financing in medical verticals. Financing helped normalize elective procedures and ensured services weren’t strictly limited to patients who could pay entirely out-of-pocket.

Visa-owned CareCredit popularized revolving credit lines for healthcare consumers. Their deferred-interest offering was particularly influential. Promotional financing periods would allow patients to pay over time, but retroactive interest would be assessed if the balance wasn’t paid in-full during the promotional period.

That model served practices well for many years. But then fintech lenders entered the healthcare space and started identifying friction points.

• Patients didn’t like hard credit pulls

• Mid-credit score borrowers were being denied too frequently

• Deferred interest offered bad customer experiences

• Online applications weren’t instant

• Mobile wasn’t prioritized

• Repayment calculations were not transparent

As fintechs disrupted other industries, many of them saw opportunity in healthcare.

Specialty Lenders Were Built Around Modern Consumer Behavior

Healthcare-focused lenders like Cherry and Sunbit had several advantages. They understood how modern consumers interact with payments technology, and they weren’t anchored to legacy processing techniques.

Instead of mimicking traditional credit cards, many newer lenders focused on installment payments. Installments remove some of the uncertainty around monthly payments and create a simplified payment process over time.

Modern financing heavily emphasizes soft credit pulls, quick financing decisions, and simplified repayment terms.

Treatment can be emotional enough. A financing experience that doesn’t cause additional stress can help improve acceptance.

That behavior spilled over into how patients approached healthcare financing. Cherry highlights that modern consumers and providers want, “instant approvals, transparent payments, soft credit checks, mobile-friendly applications, and predictable monthly payments.”

Approval Rates Have Become a Major Competitive Advantage

Specialty lenders have gained major ground on legacy providers because they approve more customers.

Traditional credit providers focused on upper-credit borrowers. But specialty lenders realized that healthcare spending was unique, and patients with imperfect credit could still make monthly payments.

Many fintech lenders adopted alternative underwriting methodologies and soft credit checks to expand approval odds. It’s paid off.

When a patient is denied financing it hurts practice revenue. Denials create friction, and many elective treatments are put on hold by discouraged patients.

Modern financing platforms can approve up to 90% of patients regardless of credit profile. Meanwhile, other industry reports cite that legacy financing options are slower to innovate beyond traditional credit approval methods.

The ability to approve more patients directly leads to more accepted treatments.

Medical Verticals Have Unique Financing Needs

Financing isn’t one-size fits all, especially in healthcare.

Each medical vertical has specific treatment acceptance considerations. Specialty lenders have an edge because they understand how each vertical works.

Many healthcare purchases are emotional. Sure, patients are buying a product, but they’re also buying confidence, wellness, comfort, or saving a life partner.

Think about a patient deciding between financing or paying for:

• Orthodontics

• Cosmetic surgery

• Dental implants

• LASIK surgery

• Fertility treatment

Those aren’t typical retail purchases. Each vertical also has different financing considerations.

• Pet owners tend to spend on veterinary care in emergency situations’

• Cosmetic procedures often require larger payment plans

• Dental care is typically serviced in phases

• Wellness & medspa services benefit from repeat elective spending

• Vision care is a depreciating expense often hindered by insurance

Providers want flexibility for unique services. That’s why one-size-fits-all financing is losing ground to specialized lenders.

BNPL Models Changed Patient Expectations

Buy now, pay later lenders have trained consumers to expect installment payments.

Affirm and Klarna didn’t specifically target healthcare verticals, but they certainly impacted them. As consumers became accustomed to alternative payment options, they started expecting those experiences within healthcare.

Patients don’t want to wait for approvals. They want financial decisions to take seconds, not minutes. They can do credit applications from their phone while sitting in the dentist’s waiting room.

Specialty lenders made quick adaptations to focus on speedy, transparent approvals.

When was the last time you received a monthly payment statement from your credit card company? Revolving credit is nowhere near as transparent as installment lending.

Providers are noticing these changes. They see the benefits of flexible financing tailored to their specific business, and they want those features.

Providers Care About More Than Just Patient Financing

Switching lenders is about more than just finance charges and monthly payments.

Provider priorities include:

• Merchant fees

• Speed of funding

• Exclusive approvals

• Seamless integrations

• Learning curve for staff

• Patient conversion

• Revenue predictability

It used to be that CareCredit financed procedures across all dentists. Today, lenders can tie financing to a single practice.

Providers don’t want revolving credit lines that patients can use at any provider. They want treatments financed through their own practice.

Here’s how Cherry [explains the value of third-party financing for healthcare practices. ][1]

Providers will always weigh total cost when evaluating partners. But there’s much more to financing than annual percentage rates.

Competition Is Accelerating Innovation

Healthcare lenders aren’t flying blind here. They know what keeps providers up at night, because there are over a dozen fintech lenders competing for their business. 

Healthy competition = better products.

Providers can negotiate for extras like reduced merchant fees, comprehensive onboarding experiences, advanced integrations, and powerful provider tools.

Competition pressures legacy lenders as well. Every provider finance platform has to innovate or lose ground to the competition.

The Future of Healthcare Financing Is More Personalized

Healthcare financing is:

• More flexible

• More digital

• More focused on individual treatments

Patients want financing that works for them, and providers don’t want one-size-fits-all payment programs. They want flexible financing that adapts to each patient while driving better acceptance rates.

That’s why specialized lenders are gaining ground. They care about providers almost as much as patients.

Traditional lenders won’t disappear overnight. Huge networks like CareCredit will survive because of brand recognition, and providers who’ve used them for years aren’t likely to change course.

But as medical verticals grow, financing will play an increasingly important role. The right financing provider can improve both the patient and provider experience.

Specialty lenders are leading the charge on both fronts.