Finance and Fido: Who's taking the lead in pet payments?

Providing goods and services to the millions of pet owners in the U.S. and globally is not just dog food, it’s really big business – as in worth billions of dollars. Americans own almost 90 million pet dogs, 94 million cats, 158 million fish, 20 million birds and 9.4 million reptiles according to study by the American Pet Products Association and they spent over $72 billion last year feeding and caring for them.

One of the biggest winners in the pet industry has been the online channel, as consumers are increasingly using it to purchase food, medicines, and bedding to reduce the number of trips to the pet store and veterinarian. Data from Slice Intelligence reveals that 57 percent of online spending is for food and treats while nine percent is for kitty litter and seven percent is for collars and leashes. The study also showed that dog buyers dominate online shopping from America’s largest cities. Dallas had 2.18 online dog supply buyers to every one online cat supply buyer. Houston had a 1.87 to 1 dog-to-cat buyer ratio, Austin had a 1.41 to 1 ratio and Los Angeles had a 1.23 to 1 ratio.

The opportunity for banks and financial services firms, as well as venture capitalists, to serve the pet industry is massive and not being overlooked. Companies such as Synchrony Financial and Wells Fargo have repositioned their human health care credit card programs specifically to serve pet owners to finance their veterinarian bills. Food delivery companies and subscription meal services business have been created to cater to pet owners while venture capital firms have been funding millions to serve this burgeoning industry.

The market for the care and feeding of pets in the U.S. is a major payments business with 2018 ringing up over $72 billion in sales according to the American Pet Products Association (APPA). Since 2010 the compounded annual growth rate has exceeded 4.5 percent. Annual growth has not been an even, linear progression with certain years more affected by consumer sentiment and the economy. Growth in 2016, for example, was almost 11 percent while the prior year, 2015 experienced a paltry rate of just under four percent.

The two most likely drivers in growing U.S. pet-oriented expenditures are a combination of increasing pet ownership, which has reached 68 percent, up from 56 percent 30 years ago; and new products which have transitioned from luxury or niche to becoming mainstream or “must have” items.

For example, when microchips that enable electronic monitoring of cats and dogs were first introduced in 1996 in the U.S., they were considered a luxury item reserved only for the wealthy and embedded into just expensive purebred animals. In the 20+ years since their introduction, embedding microchips into pets has enabled faster recovery of lost animals as well as aided in health care management. Based on the APPA’s 2018 survey, 43 percent of dogs have an electronic tracking device (both internal and external), up from 36 percent in 2017. Twenty-seven percent of cats were reported to have a similar device in 2018.
The APPA reported that food was the biggest expenditure category in 2018, capturing 41 percent of dollars, down from 42 percent in 2017. The two categories that each gained roughly 50 basis points of market share were veterinarian care and supplies/OTC medicine. Pet insurance is included in veterinary care while nonfood items such as leashes, collars, and kitty litter are included in the supplies/OTC medicine category.

Possible factors contributing to the food category’s one percentage point share loss have been a gradual pull back by consumers away from premium dog food and a growing trend to shopping online for food. According to the 2017-2018 APPA pet owner survey reported on, only 41 percent of dog owners purchased premium dog food, which is down from the all-time high of 47 percent in 2014.

The same trends that drive down prices in human food — subscription services and online ordering and delivery — are playing out in pet food. specializes in bulk pet food delivery services, while Instacart and promote adding pet food to their deliveries from traditional grocery stores. Pet Plate, Butternut Box and The Farmer’s Dog are all new subscription meal services that emphasize quality, home delivery and lower prices to pet owners. These services are similar to human food delivery services such as Blue Apron and Hello Fresh, but geared toward dogs.
According to the ASPCA, the first year's pet capital and health care costs are the highest for dog owners, followed by cat owners. The capital costs do not include the purchase price of an animal and are mostly health care related items such as vaccinations, spaying/neutering costs and initial medications.

Due to the high initial costs, as well as ongoing costs for pets, several banks and financial institutions have been offering consumers payment products to help them meet this need. Some companies have taken their human medical care products and extended them to pets, while others have taken direct lending products and marketed them through veterinarian practices and pet stores.

CareCredit, a unit of Synchrony Financial better known for financing cosmetic, vision, medical and dental treatments, is a leading provider of financial services to U.S. pet owners. CareCredit offers a private label credit card that can be used to financed routine veterinary pet visits as well as emergencies services. The card does not have an annual fee, provides periodic no interest promotional offers and charges a 26.99 percent APR on revolving balances.

Wells Fargo offers a similar program that is promoted through veterinarians called the Wells Fargo Health Advantage Veterinary Client Financing. Essentially the program is credit card-based, and can be used by both the veterinarian to grow his or her practice as well as by clients to fund pet health care costs ranging from routine visits to emergency and long-term care.
One Click Retail reports that Amazon’s sales of pet consumables (including dog and cat food) grew to $1.4 billion in 2017, up 38 percent from its 2016 sales. Pet consumables made up 73 percent of pet product sales on Amazon, giving it a total pet category business of over $1.9 billion.

Amazon is using its Prime membership and subscription sales program to grow its pet consumables business at the expense of traditional small business pet stores, chain pet stores and veterinarian practices. Currently, Amazon is offering a 25 percent discount on the first order of eligible cat and dog food, up to $25 in value. Amazon is also using its “Subscribe & Save” program, which offers free shipping and discounts ranging from 5 to 10 percent for Prime members who sign up (or subscribe) for auto deliveries. Convenience and competitive pricing are major factors that are swaying consumers, especially since many products are eligible for same day and next day delivery.

Competitive pressure from Amazon, as well as other discount online pet supply merchants, has not gone unnoticed in the industry. Falling profits and heavy debt forced the largest U.S. pet retailer, PetSmart, to hire advisors to restructure its $8 billion in debt according to Reuters. The company had been acquired by BC Partners, a private equity firm, for $8.7 billion in 2014 in an effort to take advantage of growing pet industry sales. Unfortunately, the consumer trend toward online pet supply purchases placed the brick-and-mortar retailer at a major disadvantage. The company acquired an online discount pet supply retailer, in 2017 for $3.35 billion, but that has failed to turn the tide and only added to its massive debt load.
According to Crunchbase, a company that tracks investments in private tech startups, there have been millions of dollars flowing into new companies seeking to serve pet owners with new and unique offerings. Most notable are firms that sell consumables through online subscription meal services such BarkBox and digital bulk pet food delivery services such as as well as app-based services such as Wag. raised $451 million in seven different funding rounds between 2013 and 2017, according to Crunchbase. Notable investors included BlackRock ($75 million), Lone Pine Capital ($125 million) and Wells Fargo Finance ($90 million in debt). was purchased for $3.35 billion by PetSmart in an effort to drive the physical retailer's online sales effort. As a frame of reference, when Walmart purchased in 2016 to energize its online business it spent only $3.3 billion.

The on-demand dog walking app, Wag, has raised over $361 million according to Crunchbase. Its most notable investor to-date has been Softbank which invested $300 million in 2018. The startup was launched in 2015 in New York City and Los Angeles and now serves over 100 cities in the U.S.
Back in 2013, Barclays uploaded an April Fool's joke depicting an ad for PayWag, a contactless payment system built into dog collars. Though the product was clearly a joke, the talking points for PayWag made some degree of sense.

"It's great if you've got your hands full and you can't get to your wallet," said a Barclays "customer" depicted in the ad, who said she often goes jogging with her dog but leaves her wallet and smartphone at home.

Even if pets aren't literally making payments, it's clear that their needs are directing owners' payments. And if it's more convenient for owners to buy pet supplies digitally or to leave cash at home when visiting the dog park, banks and retailers must cater to that trend.