Fintech Focus: First Dollar
Fintechs are leading the way in launching new innovations in financial services. We're shining a light on companies that are breaking new ground in the industry, and how they're using embedded finance tools to make an impact. Our first profile of the series is on health wallet company First Dollar.
First Dollar provides a modern health wallet for member-driven plans. It allows employers to run all consumer-directed benefits through a single platform with a unified experience, including over-the-counter (OTC) grocery card, healthy rewards, health savings accounts (HSA), flexible spending accounts (FSA), health reimbursement arrangements (HRA), and commuter benefits.
How they’re using embedded finance:
First Dollar provides physical and virtual debit cards and member wallets through a modern interface so that users can pay for various health care expenses more easily.
Consumer pain points they’re addressing:
A lot of money set aside to pay health benefits are being lost and not used by the members who paid for them. An estimated $400 million to $500 million ends up being forfeited each year in FSAs. A major reason is that these consumer-directed benefits are difficult to use. Why does it have to be so hard? Sadly, many players in the industry don't care whether benefits are being utilized, as long as they get paid. Worse, some companies make more money when benefits aren't used. First Dollar’s technology platform allows consumers to use their HSA, FSA and HRA benefits with a swipe of their First Dollar card, without worrying about multiple cards or scanning receipts for reimbursements.
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Embedded finance products built with Treasury Prime:
First Dollar partnered with Treasury Prime to offer members an individual consumer checking/health savings account with debit card.
Treasury Prime matched First Dollar with a bank, establishing a business umbrella FBO account on the bank’s core, which allows them to issue white-label virtual accounts to customers. Treasury Prime manages the FBO ledger, operations, and money movement via API integration with First Dollar. Critical functionality includes:
- Account creation with individual account numbers and real-time balance inquiry as well as transaction history
- Electronic transfers: ACH (standard & same-day), domestic wires
- Debit Cards (physical & virtual) issuance, processing and settlement
- Know Your Customer (KYC) compliance
First Dollar Chief Product Officer Colin Anawaty says they chose Treasury Prime due to its modern banking platform and easy-to-use APIs, speed to market, and enterprise customer service.
“We were able to launch our initial product in four months with Treasury Prime, and any time there is a money-movement issue, which happens in banking, there's always same-day engagement by their team,” Anawaty says.
First Dollar started out partnering with one bank and, as they grew, was able to switch to another bank partner in the Treasury Prime network to ensure support for their continued product needs. The switch took around three months.
“It was critical to our business that we switch from an on-core relationship in which the bank shared ownership over the customer, to an omnibus (FBO) model in which we took on all aspects of risk and customer service in order to improve the quality and flexibility of our benefits administration platform,” Anawaty says.
“As a startup, it was also imperative that this migration happen fast so as not to disrupt our business and upcoming customer launches. Treasury Prime and Piermont Bank were excellent partners who worked closely to ensure continuity across our business.”
Results with Treasury Prime:
By taking on more responsibilities in an omnibus model, First Dollar was able to:
- Reduce account costs by almost 90%, which enabled First Dollar to be in a position to equitably service health plans and ensure all eligible members had an established health savings account to file claims against whether they fully funded the account or not
- Beat incumbent competitors due to improved economics combined with a better product experience
- Sign their first health plan customer, Bright Healthcare
Key strategies for success:
Working with Treasury Prime, First Dollar just rolled out virtual cards for its clients, with same-day activation. This allows First Dollar partners to quickly distribute funds to their members and save up to 95% over plastic cards.
If a health plan is switching vendors, virtual cards can help fill the gap as members wait for their new physical cards to arrive in the mail. This makes it easier for health plans to make adjustments and save costs as member needs change.
The First Dollar flexible software architecture also allows multiple benefit types to be stacked onto a single card, with the software automatically sorting each expense to the proper category.
“Ultimately, if we’re successful, the consumer that is buying healthcare should not have to think about what benefit type they’re using,” First Dollar Co-founder Jason Bornhorst said. “They just swipe a card, and First Dollar technology routes it to the most appropriate benefit in the backend.”
Treasury Prime has the largest bank network in the industry, giving you the most flexibility and affordability at scale. If you want to be the next unicorn, you need a direct bank relationship and the best Baas company. To discuss how we can help your company scale through embedded finance products, contact us.