Innovation is good, but flexibility and agility count, too — as does striking while it’s hot. Those are among the factors that drove the recent acquisition of Discovery Benefits, Inc. (DBI), an employee benefits administrator, by financial technology services company WEX.
In this week’s Monday Conversation from PYMNTS, Karen Webster spoke with WEX CEO Melissa Smith about the $425 million deal — expected to close in the first quarter of 2019 — and how it might fit with WEX’s other recent acquisition activity, along with other larger trends in the world of payments and commerce.
The general attraction of DBI was the company’s “overall growth picture,” Smith told Webster. According to new research by Devenir on the top 20 health savings account (HSA) providers, DBI was named the fastest growing. In 2018 alone, the company generated $100 million in revenue. In addition, DBI has more than 1 million consumers in 50 states, and with its account administration tech and services, it’s a key player in the consumer-facing healthcare system.
Furthermore, “we wanted to do more in the healthcare space,” Smith said. For more than a decade, the WEX health division has worked in partnership with DBI, which has used WEX’s healthcare tech platform to oversee a large slice of its consumer account administration. Smith added that WEX has generally achieved growth in its healthcare business in the high teens and low twenties, percentage wise.
Broader Healthcare Appeal
More broadly, Smith said for the Monday Conversation, the general healthcare market continues to grow, with “healthcare costs going up … and people are moving to more high-deductible plans. Those are the trends that are happening the background.” Such trends, she continued, make it even more important for companies operating in the healthcare space to scale — and that’s another benefit of the DBI acquisition.
“We like this space, and we want to make sure we continue to expand the offerings we have,” Smith said. Once the acquisition is complete, DBI, which is best known in the market for its benefits account technology (and its focus on businesses with more than 100 employees), will get WEX’s cloud-based platform. According to WEX, the deal will spark growth by enabling partners and customers to access a broader and more comprehensive library of products and services. The DBI acquisition will also serve to expand diverse market channels, including consulting firms and brokers.
DBI “has largely been going to market through brokers,” Smith told Webster, “and they have a really great reputation, and are highly focused on creating a really strong experience.” For WEX, DBI is “another avenue into that marketplace.”
The deal comes amid a busy period for WEX. Late last year, the company bought one of its partners, Noventis, which was using WEX to provide virtual cards that can enable payments on the Noventis electronic payments network.
Earlier in January, WEX announced a partnership with voice technology company AI.io to launch Halo Travel, a travel chatbot powered by Priceline Partner Network. WEX said Halo Travel will be the first app to allow people to book hotels and flights via voice commands. Halo Travel’s chatbot relies on artificial intelligence (AI) to learn the travel habits and patterns of users, enabling it to offer personalized travel assistance for users to book flights or hotels quickly.
Webster and Smith talked about what the future will hold, not only for WEX in 2019, but for the areas in which the company operates. Smith discussed the increasing “pace of change” — some from innovation, and some from the insertion of such factors as AI into payments and commerce. “The way we work and the way we live, there will be a tremendous amount of change,” she said.
Indeed, Webster spoke about how 2019 could turn out to be an important year, bridging the 2010s (not only a time of innovation, but of various innovations coming together) with the 2020s (when such innovations and the changes they are leading to will pick up speed).
For instance, and more specific to companies like WEX and their operations, the concept of payroll is changing. The traditional, seemingly eternal idea that a person must wait two weeks to gain access to wages and salary is being challenged by on-demand, quick or instant payroll disbursements that are enabled by new digital technology, and better disbursements software and processes (to say nothing of the pressures that come from gig workers, among other factors). The whole benefits back end, in fact, is moving closer together as technology improves, as various databases and platforms are linked, and as companies offering such services make acquisitions and scale.
According to Smith, it’s not just about innovation — agility and flexibility are vital for any company operating in payments and commerce. “You are creating as much standardization in the enterprise as you can,” she said, “and making sure there is enough flexibility so you can go fast.”