Marshall & Ilsley Corp.'s technology subsidiary, Metavante Corp., is betting that health-care payments administration is the next big thing, and it is lining up bank partners.
"There has been a graying of the lines between health insurance and the financial services business," said John Reynolds, whom Metavante hired this year to run its health-care payment solutions unit as president.
Metavante in the past three and a half years has built health-care payment solutions to capture business in the growing field of consumer-directed health care, which includes flexible spending accounts, health savings accounts, and health reimbursement arrangements.
And it has opened its checkbook during the same period to buy the technology companies Printing for Systems, MBI Benefits, and AdminiSource Corp.
As the technology evolves to streamline insurance processing and payments, and to simplify life for end-customers by supplying things like a single eligibility and payment card, banks have an opportunity to offer linked transactional accounts, Mr. Reynolds said.
Though banks are best positioned to capitalize on the opportunity, however, they have by and large taken a noncommittal approach because of the low average balances the transaction accounts hold, he said.
"Banks have been very, very slow in response to this market opportunity," said Mr. Reynolds, who was a senior vice president and business director for health benefits services at Wells Fargo & Co.'s institutional trust service before joining Metavante. "The risk is that if banks don't step in someone else will."
Metavante has relationships with 200 banks in the health-care payment arena, he said, including Bancorp Bank, a $1.2 billion-asset company in Wilmington, Del.
Bancorp Bank focuses on private-labeling Internet-based banking services to partners that include affinity groups and insurance carriers.
Partnerships with carriers, third-party administrators, and others have given the bank 43,000 health savings accounts, with an average balance of $1,200, said Jill Kelly, a senior vice president in Bancorp Bank's four-year-old health-care division.
"We see a tremendous opportunity in health care," Ms. Kelly said. "We see that the bank can play a major role in processing transactions from the point of sale straight through and managing the money."
Metavante is the bank's core processor and plays a role in its ability to offer customers a "seamless" health savings account and flexible spending account, including the ability to manage accounts online and make payments with checks or cards, she said.
Despite Mr. Reynolds' view that banks are lagging in the health-care payments arena, several are working to be serious players.
Exante Financial Services, the banking unit of UnitedHealth Group in Minneapolis, is investing heavily in similar technology and is among the leaders in amassing health savings account deposits.
In September, Bank of America Corp. bought HealthLogic Systems Corp. in Norcross, Ga. HealthLogic develops technologies to move health-care providers from paper records to more automated processing, making them more efficient and reducing their costs.
"Without question banks are in the best position to maintain the consumer relationship as consumer-directed health care evolves," Mr. Reynolds said, citing banks' experience in transactions processing and payments.
But insurers are all too ready to step into the breach, as United Healthcare Insurance Co. demonstrated by creating its own bank, Exante, four years ago to focus on health-care opportunities, he said. The company is another unit of UnitedHealth Group, the Minneapolis insurer.
"And it's not out of the question that large mutual fund companies won't also look to step into the fold," he said. "It would be a logical extension of their 401(k) business."
Indeed, Fidelity Investments unveiled a health savings account late last year shortly before employers were to start reviewing their 2007 benefits plan offerings.
Part of banks' resistance to entering the field probably stems from low balances in products like health savings accounts, Mr. Reynolds said.
"In reality the opportunity may extend well beyond an HSA-type account," he said. "It's a battle for the consumer relationship that may ultimately entail products like auto loans and home equity lines."
