HealthEquity, Inc. (HQY): Business Model Canvas [Dec-2025 Updated]

You're looking to understand how HealthEquity, Inc. (HQY) actually makes money managing America's health savings, and after two decades analyzing these models, I can tell you it's a fascinating play on scale and interest rates. They aren't just an administrator; they are a financial custodian managing $34.4 billion in total HSA assets across 17.3 million accounts, with their largest revenue stream, Custodial Revenue, hitting $545.4 million in FY25 just from the cash they hold. The whole model hinges on their network partners for distribution and the spread they earn on member cash. It's a high-volume, low-touch operation that's surprisingly sensitive to the Fed's policy. Dive into the full canvas below to see exactly how their Key Activities and Revenue Streams line up.

HealthEquity, Inc. (HQY) - Canvas Business Model: Key Partnerships

You're looking at the foundation of HealthEquity, Inc.'s scale-the network of organizations that allow them to administer benefits for millions of people. These aren't just vendors; they are critical links in the chain that secures and grows member assets.

Network Partners

HealthEquity, Inc. relies heavily on its distribution network. This includes an integrated network of over 200 Network Partners. These partners are the conduits for bringing new members onto the platform, consisting of health plan partners, retirement plan partners, brokers, and benefit advisors. As of October 31, 2025, this broad channel strategy supported 17.3 million Total Accounts under administration. This scale is key, as the company noted that going to market with integrated plan partners helps enhance the value proposition.

The scope of these relationships as of late 2025 is substantial:

• Total Accounts administered: 17.3 million as of October 31, 2025.
• Total Health Savings Accounts (HSAs): 10.1 million as of October 31, 2025.
• Complementary Consumer-Directed Benefits (CDBs): 7.2 million as of October 31, 2025.
• Record New HSAs from sales in fiscal 2025: over one million.

Depository Partners and Insurance Company Partners

The cash component of the Health Savings Accounts needs a secure home. HealthEquity earns custodial revenue from interest on HSA cash held by its federally insured bank and credit union partners, which you refer to as Depository Partners. Similarly, Insurance Company Partners hold a portion of the custodial cash assets. Custodial revenue accounted for 45.5% of HealthEquity, Inc.'s total revenue in fiscal year 2025.

Here's how the total HSA Assets were split between cash and investments as of the end of the third quarter of fiscal 2026 (October 31, 2025):

To manage interest rate risk on the cash held, HealthEquity, Inc. further reduced repricing risk with a cumulative $2.25 billion 5-year Treasury bond hedge at 3.94% during the third quarter ended October 31, 2025.

Technology Partners

You noted the strategic AI integration, and this is a very current development. HealthEquity, Inc. announced in November 2025 that it is rolling out advanced agentic AI in partnership with Parloa. This is designed to deliver conversational, action-oriented member support across voice, mobile app chat, and web, starting with a limited release in November 2025 and expanding throughout 2026. This initiative builds on existing AI tools, such as Expedited Claims AI, which saves members an average of 70% of the time typically spent on claims entry. The integrated AI experience, which also includes HSAnswers and HealthEquity Assist™, is designed to improve service and reduce friction.

Investment Custodian

The invested portion of HSA assets is managed by an Investment Custodian partner. As shown in the table above, the invested balances totaled $17.5 billion as of October 31, 2025. This segment is showing strong growth; HSA investments grew 44% year-over-year to reach $14.7 billion by the end of fiscal year 2025 (January 31, 2025). This growth in invested assets is a key driver, as investment accounts typically generate superior fees compared to cash deposits.

Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - Canvas Business Model: Key Activities

HealthEquity, Inc.'s key activities center on the massive-scale administration of tax-advantaged accounts and the management of the associated financial assets. You're looking at the core engine that processes millions of transactions daily while safeguarding and growing client wealth.

Platform Administration and Account Servicing

The primary activity is the administration of the combined Health Savings Account (HSA) and Consumer-Directed Benefits (CDB) platforms. As of October 31, 2025, HealthEquity, Inc. administered a total of 17.3 million Total Accounts. This scale requires continuous platform operation and client support.

This activity is supported by revenue streams derived from these accounts, with custodial revenue reaching $159.1 million and service revenue at $120.3 million for the third quarter ended October 31, 2025.

Asset Management and Investment Oversight

Managing and investing the assets held within these accounts is a critical function. Total HSA Assets reached $34.4 billion as of October 31, 2025, representing a 15% increase year-over-year.

• HSA Cash Balances: $16.9 billion
• HSA Investment Balances: $17.5 billion

The split shows a slight majority of assets held in investments, which is key to custodial revenue generation.

Strategic Portfolio Acquisitions

A key activity involves integrating acquired portfolios to immediately scale the platform. The acquisition of the BenefitWallet HSA portfolio is a concrete example of this strategy in action. This transaction, which closed in tranches during the first half of fiscal 2025, added significant scale:

• HSA Members Added: Over 616,000
• HSA Assets Added: Approximately $2.7 billion
• HSA Investment Percentage of Added Assets: 34%

The original agreement contemplated a transfer of approximately 665,000 customer accounts and approximately $2.8 billion of HSA Assets for a purchase price of approximately $425 million plus up to $20 million in transfer-related expenses.

Technology Development and Maintenance

HealthEquity, Inc. must continuously develop and maintain its proprietary cloud-based technology platforms to support this volume and enhance member experience. A recent operational enhancement involved the integration of AI capabilities.

• AI Platform Use: Integration of the Parloa platform to enhance member engagement.

Regulatory Compliance and Risk Management

Administering tax-advantaged accounts mandates rigorous compliance and proactive risk mitigation, especially concerning interest rate fluctuations on cash balances. HealthEquity, Inc. actively manages this exposure.

As of October 31, 2025, the company reported a specific measure taken to reduce HSA cash repricing risk:

• Cumulative Hedge: A cumulative $2.25 billion 5-year Treasury bond hedge was in place.
• Hedge Rate: The hedge was established at 3.94%.

The company also reported cash and cash equivalents of $295.9 million as of January 31, 2025.

HealthEquity, Inc. (HQY) - Canvas Business Model: Key Resources

You're looking at the core assets that let HealthEquity, Inc. operate and scale in the complex world of consumer-directed healthcare finance. These aren't just line items; they are the engine room.

The most significant tangible resource is the sheer volume of assets entrusted to HealthEquity, Inc. As of the close of the third quarter on October 31, 2025, the Total HSA Assets under custody hit $34.4 billion. This massive pool of capital underpins the custodial revenue stream. This total is split between cash held for immediate use and assets allocated for growth, reflecting member confidence in both liquidity and investment options.

Here is a breakdown of the key financial metrics as of October 31, 2025:

The proprietary technology platform and API infrastructure are central to managing this scale securely. HealthEquity, Inc. offers multiple cloud-based platforms, accessible via desktop or mobile, designed to handle integrated, secure, and compliant systems. This technology stack supports everything from custodial administration and card processing to benefits enrollment and sophisticated analytics. It is built for secure, two-way data sharing with what the company calls Ecosystem Partners. As of late 2025, innovation is clearly focused on artificial intelligence, with technical requirements showing a need for proficiency in Python, SQL, and experience with Azure and OpenAI frameworks, specifically to develop retrieval-augmented GenAI tools and AI Agents for security and fraud investigation. The platform also enforces the Zero Trust security framework to strengthen network defenses.

The network of partners is critical for the custodial function. HealthEquity, Inc. operates as an IRS approved non-bank custodian, which means it must contract with external entities to safeguard cash. This resource includes FDIC-insured custodial depository bank partners and an insurance company partner that hold the cash assets. Custodial revenue is directly tied to the success of these placement agreements. As of early 2025, the company cited an integrated network of over 200 Network Partners, which includes health and retirement plan partners, brokers, and benefit advisors.

Intellectual property and expertise in healthcare finance compliance form a protective moat. Operating in this space means adhering to stringent regulations like HIPAA and the Affordable Care Act. This expertise is embedded in the platform's design. To maintain this, HealthEquity, Inc. mandates that all employees complete mandatory compliance, privacy, and security training upon hire and annually thereafter. This deep, institutional knowledge is a key barrier to entry for competitors.

Human capital, often referred to internally as 'Team Purple,' is the final layer of essential resources. This includes the specialized client sales and relationship teams driving growth and service. The company supports this talent with specific benefits aimed at retention and development:

• Tuition reimbursement of up to $5,000 for eligible team members.
• A 401(k) retirement plan with an employer matching contribution of up to 3.5%.
• An annual allocation of up to $240 for gym and fitness reimbursements, called 'Movement Money.'

Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - Canvas Business Model: Value Propositions

You're looking at the core reasons why employers and consumers choose HealthEquity, Inc. (HQY) for their healthcare savings. It's about making tax-advantaged money work harder and be easier to access.

Tax-advantaged savings and spending via HSAs and CDBs

HealthEquity, Inc. administers a massive pool of consumer-directed healthcare funds. As of October 31, 2025, the company served 10.1 million Health Savings Accounts (HSAs), representing a 6% year-over-year increase. Total HSA Assets under administration reached $34.4 billion as of that date, a 15% jump from the prior year. This total includes $16.9 billion in HSA cash and $17.5 billion in HSA investments. Beyond HSAs, the platform manages 7.2 million complementary Consumer-Directed Benefits (CDBs), bringing the total number of accounts to 17.3 million as of October 31, 2025.

Integrated platform for saving, spending, and investing healthcare funds

The value is amplified by how the revenue streams reflect the integrated functionality. For the third quarter ended October 31, 2025, the revenue breakdown shows the asset-heavy nature of the platform:

The investment component is growing faster than the cash component; HSA investments increased 29% year over year in Q3 FY2026. Management also flagged a continued expected yield of ~3.5% on HSA cash for fiscal year 2026.

Consumer empowerment through personalized benefit information

Empowerment comes from scale and technological efficiency. HealthEquity, Inc. captured 21% of the U.S. HSA market share by assets as of the end of 2024. The platform supports this scale with technology upgrades, having finished the V5 cloud migration, which delivered 92% faster response times and 5x stability.

High-touch service model with human and agentic AI support

The service model is evolving to manage high volume while controlling costs. HealthEquity, Inc. expanded its use of artificial intelligence by incorporating the Parloa platform. This integration is cited as improving member engagement, reducing service costs, and increasing member retention. Furthermore, the company is targeting fraud costs to normalize, aiming for approximately 1 basis point (bp) of HSA assets per annum in the second half of fiscal year 2026.

Portability of HSA accounts, a defintely key differentiator

The inherent portability of the HSA is a structural advantage, further bolstered by market tailwinds. Recent regulatory expansions have boosted the HSA addressable market, marking the largest growth in two decades. This environment supports the company's market-leading position, which grew from 4% market share in 2010 to 21% in 2024.

• Total Accounts as of October 31, 2025: 17.3 million.
• HSAs with investments as of October 31, 2025: 802,000.
• Non-GAAP Net Income Per Diluted Share for Q3 FY2026: $1.01.
• Adjusted EBITDA Margin for Q3 FY2026: 44%.

Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - Canvas Business Model: Customer Relationships

You're managing relationships across a massive ecosystem of healthcare savers, so HealthEquity, Inc. (HQY) leans heavily on digital scalability to manage the sheer volume. The foundation of this is automated self-service, meaning members primarily interact with their accounts through digital channels. As of October 31, 2025, HealthEquity, Inc. (HQY) served 10.1 million Health Savings Accounts (HSAs) and a total of 17.3 million Total Accounts, which includes Consumer Direct Benefits (CDBs). This scale demands that routine tasks are handled without human intervention.

The push for efficiency and personalization is clearly routed through AI integration. HealthEquity, Inc. (HQY) expanded its use of agentic AI, powered by the Parloa platform, to manage conversational support across voice and digital channels, aiming to replace friction from traditional phone menus. This technology is designed to lower servicing costs while deepening engagement. For instance, the Expedited Claims AI feature has helped members save roughly 70% of the time typically required for receipt processing, with more than half of claims processed in under two minutes. Also, the HSAnswers tool has supported hundreds of thousands of personalized conversations on complex topics like Medicare coordination.

For your largest clients-the large employer groups and benefits partners-the model shifts from pure automation to a high-touch approach. While the search results don't give a specific number of dedicated relationship managers, the need for dedicated support is implied by the complexity of managing relationships with the entities that bring in millions of accounts. These relationships are critical for continued growth, especially given the recent regulatory expansion that marked the largest increase in the HSA addressable market in two decades.

Client retention is a core focus because switching costs are naturally high for these accounts. HealthEquity, Inc. (HQY) believes its retention rates are high due to the platform's integration with the broader healthcare system and the inherent effort required by the account holder to switch. As of January 31, 2025, the company had 9.9 million HSAs, showing a 14% increase year-over-year, which suggests successful retention of the base while adding new users.

Here are the key statistical snapshots of the customer base as of the third quarter of fiscal 2026:

The AI-powered support layer is central to managing the service experience at scale. You can see the specific capabilities deployed to enhance member interaction:

• Agentic AI deployed via Parloa platform for natural, conversational interactions across voice and digital channels.
• HSAnswers tool supporting hundreds of thousands of personalized conversations on topics like Medicare coordination.
• Expedited Claims AI automating receipt processing, reducing entry time by roughly 70%.
• 64% of healthcare consumers are open to using AI tools for healthcare needs, supporting this strategy.

Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - Canvas Business Model: Channels

You're looking at how HealthEquity, Inc. gets its services-primarily Health Savings Accounts (HSAs) and Consumer-Directed Benefits (CDBs)-into the hands of consumers as of late 2025. The distribution strategy relies on a mix of established institutional relationships and newer direct digital outreach.

Network Partners: Primary, efficient distribution channel for new accounts

The core of HealthEquity, Inc.'s distribution remains its deep integration with other entities. This channel leverages established trust and existing employee benefit structures. HealthEquity, Inc. works in partnership with employers, benefits advisors, and health and retirement plan providers. The company's integrated network includes over 200 Network Partners that span health and retirement plan partners, brokers, and benefit advisors. This network is key to driving new logo growth and overall account acquisition.

Direct-to-Consumer: Retail channel and new direct HSA enrollment platform

A significant near-term focus is on direct enrollment, especially given regulatory shifts. HealthEquity, Inc. launched a new direct HSA enrollment platform, a streamlined digital experience allowing individuals to open and fund HSAs directly via the company's mobile and web platforms. This targets a new segment created by recent ACA regulatory changes that make Bronze plans HSA-qualified starting in 2026, potentially making over 7 million Americans newly eligible for HSAs. Management estimates this opportunity could translate to 2-3 million households.

The success of the sales engine, which includes this direct retail effort, is evident in recent account additions. HealthEquity, Inc. opened approximately 175,000 new HSAs from sales during the third quarter ending October 31, 2025. For the full fiscal year ended January 31, 2025, the company reported adding a record one million new HSAs from sales.

Digital Platforms: Mobile app and cloud-based member portal

Technology underpins engagement across all channels. Enhancements to the mobile app, improved analytics, and a smoother onboarding experience are cited as drivers for better member engagement. The company is actively reinvesting in the app experience and data/API infrastructure. The HealthEquity Marketplace platform is now integrated into the HealthEquity App and web portal, offering members access to solutions like GLP-1 weight management programs, with early adoption from subscribing members being encouraging.

The overall scale of the digital ecosystem reflects channel effectiveness:

Employer Sales: Direct sales teams targeting enterprise clients

Direct sales teams continue to secure new enterprise clients. This activity is supported by continued adoption of HSA-qualified plans across employers and strong new-client activity. HealthEquity, Inc. is focused on working with employers and partners on plan design to support HSA adoption, including securing new employer clients who are offering HSAs for the first time. The total number of HSAs as of October 31, 2025, stood at 10.1 million, representing a 6% increase year over year. This growth is a direct result of the combined efforts across all channels, including the employer-focused sales teams.

Key account growth metrics driven by these channels include:

• Total Accounts grew to 17.3 million as of October 31, 2025.
• Net CDB (Consumer Direct Benefits) accounts grew by over 200,000 year-over-year as of Q3 FY2026.
• The average HSA balances grew 8% year-over-year, contributing to the 15% increase in total HSA assets.
• Custodial revenue grew 13% to $159.1 million in the third quarter ending October 31, 2025.

HealthEquity, Inc. (HQY) - Canvas Business Model: Customer Segments

You're looking at the core groups HealthEquity, Inc. (HQY) serves to drive its business. These aren't just users; they are the foundation for their asset growth and revenue streams. Honestly, the numbers here tell you exactly where the value is captured.

The customer base is segmented across individuals managing their health savings, the employers providing the plans, and the partners who help distribute the offerings. As of the third quarter ended October 31, 2025, the scale is quite clear.

HSA Members are the primary individual users. HealthEquity, Inc. served as a non-bank custodian for 10.1 million Health Savings Accounts (HSAs) as of October 31, 2025. That represents a year-over-year increase of 6%. Not only are they saving, but they are also investing; 802,000 of those HSAs held investments as of that date, which was up 10% year over year.

The total population under management is captured by looking at all accounts:

• Total Accounts administered by HealthEquity, Inc. reached 17.3 million as of October 31, 2025.
• Total HSA Assets under custody grew to $34.4 billion by October 31, 2025.
• HSA cash holdings were $16.9 billion, while HSA investments totaled $17.5 billion at that time.

The CDB Users represent the other major individual segment. These are individuals utilizing consumer-directed benefits (CDBs) like Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs). As of October 31, 2025, HealthEquity, Inc. administered 7.2 million of these complementary CDBs.

The relationship with Employer Clients is crucial, as they are the ones offering the high-deductible health plans (HDHPs) that drive HSA adoption. While a direct count of employer clients isn't always published in the same metric as accounts, the scale is evidenced by the total accounts administered in partnership with employers.

The distribution channel relies heavily on Network Partners. HealthEquity, Inc. works with an integrated network that includes health and retirement plan partners, brokers, and benefit advisors. For fiscal year 2025, this network was described as comprising over 200 Network Partners.

Here's a quick view mapping the key account metrics for these segments as of the end of Q3 Fiscal 2026:

Client-held funds, which are deposits held for administering CDBs and generate custodial revenue, stood at $0.8 billion as of October 31, 2025. Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - Canvas Business Model: Cost Structure

When you look at HealthEquity, Inc.'s cost structure, you see the necessary investments to run a massive, regulated platform. It's not just about processing transactions; it's about securing data and constantly improving the member experience. For the fiscal year ended January 31, 2025, total stock-based compensation expense across the company hit $96,425 thousand, which is a key component of their non-cash operating costs.

Technology and Development Costs: Investment in AI, data, and app enhancement

You have to spend to stay ahead in this space, especially with the push toward AI and better mobile tools. HealthEquity, Inc. is clearly putting money into its proprietary platforms, which they call Team Purple. Looking at the stock-based compensation portion of Technology and Development costs, it was $25,002 thousand for the full fiscal year ending January 31, 2025. For the first half of the following fiscal year, ending July 31, 2025, that specific cost component was $11,652 thousand.

Service and Operations Costs: Running member support centers and transaction processing

Service and Operations costs are tied directly to supporting the millions of accounts they manage. Remember, service revenue for the third quarter ending October 31, 2025, was $120.3 million. The company noted a steep 11% sequential quarter-over-quarter reduction in service costs during that same period, signaling strong operating leverage as they scale. The stock-based compensation embedded in Cost of Revenue for the six months ended July 31, 2025, was $6,501 thousand.

Amortization Expense: Significant non-cash cost from past acquisitions

This is where those big acquisitions, like BenefitWallet, show up as a non-cash charge. Amortization of acquired intangible assets is a major line item. For the six months ended July 31, 2025, this specific charge totaled $54,003 thousand. For just the three months ended July 31, 2025, that figure was $27,001 thousand.

Sales and Marketing: Costs associated with partner and direct channel growth

Winning new business means paying for the sales engine, whether through employer partnerships or direct-to-consumer efforts. The stock-based compensation allocated to Sales and Marketing for the fiscal year ended January 31, 2025, was $15,623 thousand. In the six months leading up to July 31, 2025, this stock-based component was $6,399 thousand.

Compliance and Legal Costs: High regulatory burden in healthcare finance

Regulated finance means you have to spend on compliance, security, and legal overhead, which typically falls under General and Administrative (G&A). While direct legal spend isn't itemized here, security costs give us a concrete example of risk management spending. For the third quarter ending October 31, 2025, fraud costs were only approximately $0.3 million, which management noted was well below their run rate target of 1 basis point of total HSA assets per year. The stock-based compensation for General and Administrative expenses for the six months ended July 31, 2025, was $8,852 thousand.

Here's a quick look at how some of these key stock-based compensation costs compare:

You can see the shift in focus, with Technology and Development costs being a significant, consistent outlay. Also, keep in mind the amortization of acquired intangible assets is a separate, large non-cash hit that doesn't reflect current operational spending but rather past strategic moves.

• Amortization of Acquired Intangible Assets (6 Months Ended July 31, 2025): $54,003 thousand.
• Total Stock-Based Compensation Expense (6 Months Ended July 31, 2025): $33,404 thousand.
• Interest Expense Paid in Cash (6 Months Ended July 31, 2025): $28,362 thousand.

Finance: draft 13-week cash view by Friday.

HealthEquity, Inc. (HQY) - Canvas Business Model: Revenue Streams

You're looking at how HealthEquity, Inc. actually brings in the money to run its operations, which is pretty straightforward given its role as a major custodian for tax-advantaged health accounts. Honestly, the revenue streams are heavily tied to the interest rate environment and the sheer volume of assets under administration.

The core of HealthEquity, Inc.'s revenue generation for the fiscal year ended January 31, 2025, totaled $1.20 billion. This total is built from three primary, distinct sources, with one clearly dominating the mix.

Here's a look at the breakdown of those key revenue streams for fiscal year 2025:

To give you a sense of how this is tracking more recently, in the third quarter of fiscal 2026, which ended October 31, 2025, the revenue mix looked different due to market conditions, but the streams remained the same:

• Custodial Revenue for Q3 FY26 was $159.1 million.
• Service Revenue for Q3 FY26 was $120.3 million.
• Interchange Revenue for Q3 FY26 was $42.8 million.

The interest earned on the cash portion of the accounts is the largest component, but the fees on invested assets are also a significant, though often bundled, part of the picture. You see, HealthEquity, Inc. earns fees on the assets members choose to invest, which directly ties to market performance and asset growth.

Regarding the assets that generate these investment-related fees, as of the third quarter of fiscal 2026 (October 31, 2025), the total HSA Assets under administration were $34.4 billion. Of that total, the amount held in investments was $17.5 billion.

The revenue streams can be summarized by their primary drivers:

• Custodial Revenue is driven by yields on HSA cash balances and the total amount of uninvested cash.
• Service Revenue is driven by the total number of accounts administered.
• Interchange Revenue is driven by member spending activity using payment cards.
• Investment Fees are directly tied to the total value of $17.5 billion in invested HSA assets as of Q3 FY26.

Finance: draft 13-week cash view by Friday.