NEW YORK -- With an eye on separating health savings accounts hype from actual performance, Celent recently released the inaugural round of its semiannual HSA Benchmarking Survey.
Covering the period from December 2005 to January 2008, the study reveals how the HSA programs at the 14 financial institutions surveyed are performing.
The report found that while HSAs seem highly appealing for financial institutions, with HSA accounts increasing since 2006 by 73% and total balances growing by 140%, from an internal banking perspective the beneficial picture gets fuzzy.
Average account balances hit $1,400, up from $1,028 in December 2006, and there was no correlation between deposit levels and total balances. In addition, market factors have greater impact on consumers' behaviors than banks' activities.
The average cost per account ranges from $22 to $110 and average revenue per account ranges widely from slightly over $12 to $120. The study also found that demand on deposit account spread and monthly fees are the main revenue drivers.
"The HSA market is relatively immature and will experience steady growth, along with heightened competition and attendant quests for cost improvements, customer acquisition and retention. The race for customers will be fierce, leading to increased investment in remote customer support and price wars," said Red Gillen, senior analyst with Celent's banking group and co-author of the report.
Co-author of the report and Celent Senior Vice President Alenka Grealish added, "The long-run battleground will be in customer retention. Similar to the credit card industry, in which scale and retention are critical to performance, the HSA market will be concentrated in the hands of a small number of manufacturers, while distribution will be fragmented across a large number of banks and third parties."
Celent has invited financial institutions to participate in the second round of the HSA Benchmarking Survey, to take place in August 2008. Participants will receive extensive analysis at the individual level, delivered via a give back session with Celent analysts. Those credit unions interested in participating or for more information contact Steve Nawrocki at email@example.com.