Every so often external forces require an industry to change. Presently, the headwinds of inflation, higher interest rates, macroeconomic volatility, a precipitous drop off in mortgage originations and shifting customer practices are bearing down on financial institutions. According to a recent report from McKinsey, bank profits reached a 14-year high in 2022, but only 35% of banks globally saw returns above the cost of capital. To weather the current environment, financial institutions need to reevaluate the way they’re doing business.
This includes reimagining their customer journeys by offering new products that bring cross-selling opportunities, partnering with their commercial customers to help them better operate their businesses, providing a modern, digitized customer experience and comprehensive support. Partnering with a commercially competitive Health Savings Account (HSA) provider, especially one that meets and exceeds customers’ expectations for ease of use, can help financial institutions achieve these goals.
How HSAs help financial institutions meet the current moment
Customers, both commercial and retail, want to see something new from their current financial relationships. They want services to be simple, intuitive, digitized, and all in one place. They want personal, human, and responsive customer service, not a call center or chat bot, and they want a true partner in operations. They want built-in education to help account holders understand what an HSA is, how it works, and what they need to do to get the most out of the product. They want many of the things as business owners that they expect as a retail customer. In fact, the lines between retail and commercial customers are often blurred since 90% of small business owners keep their personal account at the same bank as their business account.
One way financial institutions can better retain, engage, and increase commercial business and win a larger share of their wallet is by offering a tech-forward HSA.
HSAs provide businesses of all sizes with many advantages. These include:
- HSAs help businesses cut costs. Supply chain issues and inflationary pressure have many organizations looking to reduce their expenditures, and the cost of employing workers is right at the top of that list. A majority of employers expect that these costs will continue rising and the trend of high prices will persist. HSAs are paired with High Deductible Health Plans (HDHPs), which typically have the lowest annual premiums of the traditional health insurance options. The high deductible can give employees pause, but when paired with an HSA, the account provides an incentive for employees to choose the more affordable health insurance plan. That’s because HSAs give workers a way to save for the higher deductible tax-free. By giving employers a solution to increase adoption of their HDHP, financial institutions can help them lower the cost of employment, which helps them attract and retain top talent, while reducing operational costs.
- Providing an enterprise-level HSA solution with automated functions like enrollment or payroll contributions can help finance and HR teams save time, reduce errors, and ensure a better employee experience. Many small and medium sized businesses have lean finance and HR departments. That means they need an easy way to manage their everyday operations. By offering an HSA through the same financial institution they already bank with, it reduces the vendors with which they have to interact and can help solidify customer loyalty.
- HSAs help businesses recruit and retain talent. Many small and medium-sized businesses have a difficult time competing with larger organizations for talent. In addition, employers of all sizes are working hard to retain talent, as losing employees means a loss of productivity, intellectual capital, and can cost more than half an employee’s salary to replace them. But by offering an engaging, tech-forward HSA that offers features like investment options and account holder education, businesses can differentiate themselves in the labor market.
Offering an HSA also provides many advantages to financial institutions, especially for commercial customers. These include:
- They provide financial institutions with a pathway for cross-selling. If you offer an HSA to employees that are not current customers, and you perform well, you establish a positive relationship and have the opportunity to woo them from their current banking relationship. If you’re unsure how large of a demographic these customers represent, according to a recent study by McKinsey, people are currently 2x more likely to open a new account than they were in the past, 15% are open to a new banking relationship and 20% are considering switching their banking relationships. In addition, BAI found that half of the small businesses they surveyed at the end of 2022 expected to change their financial services relationship in the next two years.
- HSAs give financial institutions a new revenue stream that can increase the overall lifetime value of each customer. Banks and other financial institutions can earn revenue through net interest margin, interchange and employer administrative fees.
Why your commercial customers already want an HSA
Selling an HSA to your current customers won’t be a difficult task because more than half of Americans are already enrolled in an HDHP and are looking for ways to cut down on healthcare costs. These types of plans are growing in popularity because they offer the lowest monthly premiums and the greatest flexibility in terms of where employees spend their healthcare dollars.
Offering an HSA alongside an HDHP is essential to both securing employees’ adoption of the health insurance plan, but also in financially supporting their physical and financial health. That’s why a majority of HSAs are sourced through an employer.
In fact, over 55% of US employers offer an HDHP, so many of your customers are looking for an HSA for the first time, or they’re looking for a better one. Offering your customers a competitive HSA not only strengthens your relationship and opens the door to cross selling new products, but keeps the deposits, net interest margin, and fee revenue gained from HSAs from going to a competitor.
Why commercial customers need an alternative to traditional HSAs
Most HSAs offered by banks are focused on the individual account holder and aren’t equipped with an employer platform that enables administration of, and insight into, the plan. Without an employer dashboard that can run custom reports, APIs for benefits administration integration and payroll integration, census management, contribution management, education, and transparency, you won't be set up to serve and grow with your commercial customers. Because the majority of HSAs are sourced through employers, you want to make sure you are set up to serve their needs to offer the most competitive HSA and ensure it is easy for employers to administer and manage, as well as simple for employees to use.
Most traditional HSAs, including those offered by many financial institutions, are not equipped with built-in education that enables HR professionals to help their employees to get the most out of an HSA. While HSAs have existed for 20 years, many people confuse them with other tax-advantaged accounts like FSAs or HRAs. They also don’t understand that HSAs are designed for long term savings, causing them to ultimately miss out on the benefits these accounts provide from both a cost savings and financial planning perspective. Working with a provider that provides educational materials for HR administrators and account holders and folds education into the product experience can make a key difference in levels of account participation, ultimately driving higher levels of HSA deposits.
Partner with a forward-thinking HSA provider for success
Lively’s HSA is a best-in-class product that was built specifically with both employers and account holders in mind. Employers can easily manage and administer their plan from the employer platform, which provides an expressly designed dashboard, task automation, and clear and insightful reporting. Lively takes care of all account onboarding and employee communication, taking much of the administrative load off of business owners, and offers highly responsive, knowledgeable and personal customer service accessible via phone, email, and chat so issues are resolved immediately.
When a financial institution leverages Lively's HSA partner solution, they're not solely responsible for sales, administration or service. Lively’s technology seamlessly manages account set-up, administration, record keeping and service. In addition, Lively's sales enablement and customer success team help financial institutions efficiently grow and retain commercial HSA customers.
By offering a competitive product that meets the diverse needs which are currently top-of-mind for your commercial customers (and their customers, i.e. their employees), financial institutions can attract more high quality commercial customers, boost retention, and increase their revenue. An HSA product enables you to deepen a current relationship or initiate a new one, and cross sell other products to them and their employees in the future.
If you'd like to learn more about how we can help offer a modern HSA and gain and retain commercial customers, reach out to us today.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.