The market analysis by Celent indicated that the
upward trend is due to the rising cost of health care and
the
increased adoption of HSA-qualified
consumer directed health plans (CDHP).
For the six-month period f
rom January to July 2008, accounts grew by 22%,
while total balances grew by 40%. "Given the financial
industry's current liquidity crisis, such balance gains
should come as very welcome news," Celent commented in
the report.
Celent admitted, however, that continuing widespread
weakness in the financial services sector will translate
into the need for continued investments to fund customer
service improvements.
"
Banks' declining revenues and need for ongoing
resource allocation indicates that the fate of many HSA
programs is still uncertain, and as such, the market
continues to await a shakeout," Celent asserted.
The researchers contended that the HSA market
represents a way for bank providers to grow deposit bases
and to remain relevant in a future where health care
banking products will increasingly be in demand.
Pressure on Fee Income
A significant problem is that there continues to be
considerable pressure on fee structures, Celent said.
Although some banks are charging higher fees as a
disincentive for paper applications, more than half of
all banks surveyed do not charge set-up fees.
The researchers said monthly service fees may be
weakening. Average monthly fees for the group market
increased from $2.80 in January 2008 to $2.85 in July
2008, but this was largely due to the addition of a new
participant bank. In the individual market, the average
monthly fee dropped from $2.93 in January to $2.84 in
July. Additionally, a few banks' weighted monthly fees
dropped below the $2 mark.
Average revenue per account ranges widely, from $21
to $100 in July 2008, Celent said. Revenue per account is
in decline because of a drop in interest rates, which is
squeezing spreads, and the softening of set-up and
monthly fees.
Celent found that debit cards are only used for 66%
of disbursement volumes, representing a revenue
opportunity for banks. Checks are holding onto about a
quarter of all disbursement volumes, a result of an
ingrained consumer payment process in the health care
space, the Celent researcher found.
The Celent report is available
here
.