Mellon Financial Corp. and Exante Financial Services are both preparing to offer banks a private-label health savings account platform.
"We are actively pursuing white-label health savings accounts," said John Prince, the chief executive of Exante, the banking unit of UnitedHealth Group of Minneapolis. The unit hopes to have its first banks as HSA clients by early winter, he said.
Darren Baer, a first vice president at Mellon, said the Pittsburgh company, which partners with Affiliated Computer Services Inc. in the HSA business, is close to signing a large bank client.
Mellon has worked closely with ACS since selling its human resources outsourcing business to the Dallas firm in May of last year.
Exante and Mellon say they are offering any and all parts of the HSA equation, from record keeping to call-center services to custody.
The newcomers' rivals include the Brookfield, Wis., financial technology provider Fiserv Inc., which has a significant head start. It began marketing its private-label product more than a year ago to the 8,000 community banks and credit unions with which it has core-processing relationships.
It has already signed up 600 financial institutions for various HSA services, said James Sizemore, a senior vice president and the chief information officer of Fiserv's Information Technology Inc.
Exante and Mellon are among the leaders in the health savings account business, which started nearly three years ago. Exante has 200,000 consumer accounts and $250 million of deposits, while Mellon has 105,000 such accounts and $75 million of deposits.
The private-label market for HSAs is developing as more banks seek to get into the business and those that already have programs seek economies of scale for the costly product, Mr. Prince said.
More than 600 banks offer the accounts, and this spring deposits surpassed $2 billion, according to Information Strategies Inc., a Palisades Park, N.J., firm that tracks HSAs.
The accounts generate relatively little income, so unless a bank's accounts number in the six figures, it is tough to recoup the investment needed to run the business in-house, Mr. Prince said.
"You have to spend millions of dollars to really be in this business," he said. "If you expect a couple of hundred thousand health savings accounts, it makes sense to invest in it." If a bank does not expect that many, third-party help from companies like Exante is a good alternative.
Some banking companies that are already in the business are looking to improve their back-end capabilities as they grow, Mr. Prince said. In many cases, he said, those functions are grafted on to technology platforms designed for other products, such as 401(k) plans.
"There is an inflection point where you have to invest more money," he said.
Instead of massive investment, many banks will turn to "a few key technology players" with the scale to provide lower costs, Mr. Prince said.
According to Mr. Sizemore, Fiserv's HSA clients use the company to fill a range of needs. Many financial institutions partner with Fiserv to allow retail customers to open health savings accounts, he said. "A couple of dozen" institutions have partnered with insurers and health-care service providers to package the accounts with the high-deductible health insurance plans with which they must be paired, he said.
Fiserv has helped another "couple of dozen" institutions expand their Internet portals to include health information, Mr. Sizemore said.
The HSA business has a huge administrative component, where competition is shaping up among Fiserv, Exante, and others.
Fiserv says its offerings are designed to speed the administration of insurance payments and include functions as esoteric as streamlining the adjudication of how much insurance will cover of a given charge. Mr. Sizemore said such a function could spare the account holder from being debited more than necessary.
Another typical administrative function that Fiserv provides is tying together elements of HSA reporting so that consumers can see at a glance everything from their balances to claims and payment information.
Mr. Prince said Exante also is jumping into the business of outsourcing such administrative work. In payment processing, for example, his unit is building a network of insurers and banks to replace the slow-moving icebergs of paper statements with more efficient electronic alternatives, he said.
