BB&T Corp.’s move to offer health savings accounts through its branches is exciting, analysts said, but could encounter the same difficulty that has hampered other banks trying to offer the product to retail customers.
The Winston-Salem, N.C., banking company announced Tuesday that it will begin offering health savings accounts to retail clients who are covered by high-deductible plans and to institutional and commercial clients as an employee benefit.
Analysts applauded the move but said other large banks, like Citigroup Inc. and Bank of America Corp., have found it difficult to train branch employees.
Ray McCulloch, the division manager for BB&T Institutional Services, said the company had decided to wait to introduce its health savings account platform until it could offer the product to both institutional and retail customers simultaneously.
“We wanted to be in a position where we could offer this through our retail branch network,” he said. “Many competitors don’t have this retail HSA yet. So it took us a little longer to put this product together, but we felt the competitive advantage of offering both simultaneously was important.”
Donald Mazzella, the editorial director of Information Strategies, a publication that tracks health savings accounts, said banking companies like Citigroup and Bank of America have had limited success while trying to bring health savings accounts to their retail customers.
“Bank of America’s plan was to offer it through branches by the fourth quarter,” he said, “but they haven’t been able to accomplish this yet. It is unclear if they are going to be able to do this.”
Julie Davis, a spokeswoman for Bank of America, said the Charlotte, N.C., company began offering health savings accounts to consumers and small-business customers in June strictly through its online channel. It is evaluating opportunities beyond that channel, she said, “but at this point we aren’t planning, and we were never planning, to offer HSAs through our banking centers before the end of the year.”
The HSA “market is so new that it does not require mass-market fulfillment through our banking centers,” she added. “We are continuing to monitor and evaluate the situation, but we find that most folks that are comfortable with this kind of product are comfortable with online enrollment.”
A representative from Citi did not return phone calls seeking comment.
BB&T’s Mr. McCulloch said that, though he expects the bulk of HSA deposits will come through institutional and corporate customers, offering the product through the branches was essential.
“This is a great way for BB&T to gather more deposits on the retail side,” he said, “and it is also important to package and bundle HSAs with our other employee benefit products … such as 401(k)s, flexible spending [accounts], group health care, and payroll services.”
On the retail side, he said, “this is a powerful way to maintain a relationship. … If someone leaves an employer, we will be able to maintain their HSA assets by rolling it into a retail HSA account.”
Mr. Mazzella said it is very difficult for banks to educate all of the people in their branches about what an HSA is and how to sell it.
“If BB&T is able to educate its branch personnel properly, they could collect a lot of assets,” he said. “But if the branches aren’t educated, BB&T is going to find what the other banks have found, and that is, if customers can’t get the information they want, they will get upset and take their business elsewhere. Banks only get one chance at this to make a first impression.”
Last year the number of financial companies offering health savings accounts grew sixfold, to 600, and deposits in them had surpassed $2 billion by this March, according to Information Strategies.
Alenka Grealish, the manager of the banking group at the Boston consulting firm Celent LLC, said adoption of the product has been gradual as financial companies focus on developing scale quickly by targeting large customers.
“Big players have built infrastructure in order to bring in big accounts,” she said. “Wells Fargo, JPMorgan, and Mellon are developing a pipeline to go for large employers. That is a long way from going after customers in the branches. It takes a lot to educate and train the branch personnel about a relatively complicated product.”
Mr. McCulloch said BB&T’s health savings account would be bundled with other products to create an employee benefits package for small and large businesses. BB&T will offer HSAs to institutional and commercial clients through its subsidiary Stanley, Hunt, Dupree & Rhine.
Most banks are more focused on delivering health savings accounts to corporate and institutional customers because that is where the bulk of the assets are, Mr. Mazzella said, but “it is smart to deliver both because the commercial side will feed the retail side and vice versa.”
About 38% of 1,400 businesses surveyed by Information Strategies said they began offering health savings accounts to satisfy employee demand, he said.
Mr. McCulloch said this is still an industry in its infancy. “Most banks are still just coming out with this, at least among our competitors,” he said. “There have been a few in our footprint that have begun to offer this, but we are not that far behind.”
