Community bankers tout their community engagement and personal customer service as competitive advantages. Mounting pressure from digital-first disruptors, neobanks and other third-party fintechs, however, are forcing many institutions to reevaluate and update the products and services they offer. The neobanking market is poised for significant growth, with transaction values projected to reach $7.36 billion this year and more than 386.3 million users worldwide, according to online data-hub Statista.
In today’s digital-first world, future success hinges on a bank’s ability to modernize processes, improving the customer experience. For many community banks, Health Savings Accounts provide a unique opportunity to not only connect with current accountholders, but also drive deposit growth, attract new customers and generate recurring revenue.
HSAs are tax-advantaged, personal savings accounts that enable consumers to set aside funds for qualified medical applications. For banks, HSAs can be a powerful business growth tool, providing an opportunity to expand relationships with existing customers while providing a vehicle to reach new consumers. According to ABA Banking Journal, the number of HSAs are increasing, with projected assets to exceed $150 billion by the end of this year. Younger generations are embracing HSAs, with 60 percent of accounts belonging to Millennials and Gen Z consumers. Additionally, HSAs are stickier than traditional savings accounts due to the restrictions around the account — a consumer can only withdraw from their HSA for medically eligible products and services, and unused funds roll-over year after year. Offering HSAs is an opportunity to attract a new generation to your institution and maintain core deposits.
Consumers look for HSAs that can help budget for immediate medical expenses as well as save for longer-term investments, presenting an opportunity for banks to offer a new account for these specific goals. Recently, Oklahoma-based First Fidelity Bank announced it is leveraging HSAs to grow deposits and deepen accountholder engagement. Offering a new product enables the institution to generate additional revenue on the accounts, but it wouldn’t be able to seamlessly launch this new product offering without first establishing the right technology infrastructure.
While HSAs offer significant revenue-generating opportunities, community banks cannot just launch an HSA account; they need tools in place to manage the accounts and need to embrace the same digital-first mindset that’s driving the success of neobanks. Capturing key customer insights, particularly during the account opening and onboarding process, can streamline the process to determine whether a particular customer is an ideal candidate for a particular product. In the case of HSAs, the bank can automatically see if a customer is a good fit for an account and offer the product as a targeted cross-selling opportunity. On the other hand, if the customer only has an HSA with your institution, you can assess their customer data and evaluate whether they are a good fit for other financial products.
Deploying technology that directly integrates within a bank’s tech ecosystem streamlines the information collection process, ultimately automating the HSA application process for new and existing customers. Additionally, banks can build auto-decisioning and fraud prevention features in the tool, giving customers the peace of mind that their data is secure and safe. Products like HSAs emphasize a community bank’s commitment to the communities they serve, empowering customers to plan for the future and take control of their financial lives, all while providing a new avenue for community banks to grow their relationships with consumers and attract a new, stickier, younger customer base.
Philip Paul is the Founder and CEO of Cotribute, an award-winning fintech platform for banks.