When we want to be growing at a crooked number, that means we’re taking market share, right? And I think we’re well positioned to do that. We have more scale than anyone else. We’re actually investing in the product, because as a result of all of our investments, 2 examples being, we have and these are not future examples. They already happen. We are rolling out, we’re in the mixed of rolling out what have been through, our chip cards and, like, people say, chip card, what’s the big deal? Well, let’s, so far, no one else has done something where we have a staff card that is also a chip card that will actually also be available on mobile wallet. What does that mean? It means that you can have 2 or 3 of our products on the same card, and there doesn’t even have to be a card, right?
Now it’s also not easy, because it turns out that unlike regular chip cards, there’s not as much standardization as the Mastercard and Visa people think there is out there in the retail world, and so there’s some there’s some bumpiness there. But it’s a great product. Second example is through the use of AI. We’ve got to a place where you can take, as you saw at investor day, take a picture of a receipt from publics. You can have whatever on there. We can tell you what it is, and we can approve it right then. And that’s the biggest pain point with the largest of the CDB products, which is the FSA. So, I think it’s reasonable to believe that we can get to a place where we’re at single-digit growth in that product. And so that’s the plan. We’ll also look, Stephanie, we will continue to look carefully at, what do we need to own, what do we not need to own.
But it’s always going to be in the context, at least as far as I’m concerned. It’s going to be in the context of strengthening our core business. Everything we talked about at Investor Day in terms of new product, the health payment account product we talked about, which is a form of smoothing deductible costs for people who don’t who do, but also don’t have the benefits of HSAs. It’s always going to be in service of two things. One is our core product, which is our custodial accounts and the second is the mission of helping people, helping empower consumers and in doing so and saving really saving and improving lives when we listen to what people say. So that being the case, that’s how we, that’s kind of the framework through which we look at it, and think that’s a reasonable view of what you should be expecting from us over time.
I would very much have expected to and like to have gotten to that place quicker than we have. It’s easy for me to blame the pandemic, but we have some responsibility for that too, including myself.
Stephanie Davis : It kind of shows it’s more, it’s not that you’re not focusing on. It’s just that’s not an area of innovation as much, which is more kind of the focus for moving forward.
James Lucania: What I think is, it’s, if you look at for us. Let me say it this way. A piece of in order to achieve the 3-year target that we laid out, this is one of the things that in all likelihood we’re going to achieve. That is to say, to go back to I think it was Alan’s question. I could be wrong. If I am, I apologize. But regarding service revenue, one of the things we’re going to have to achieve to get there is we’re going to have to grow that service revenue. We can grow service revenue by innovating new products and innovating and by growing our CDB space. And we can innovate within the CDB space somewhere. And given that, again, I don’t think the hurdle is, like, super high, but I do think it’s probably fair that it’s also true that at the margin, these are not as profitable products. So, is it always going to be the first thing on a priority list? No. That’s it.
Stephanie Davis : Thanks sneaking one for Jim? Or is this, I mean, that was a long answer. I’m also happy to give it to you.
James Lucania: Go for it.
Stephanie Davis : Let me annoy you with this one. So you’ve given us a ton of clarity on our custodial revenue. So if I look at the incremental EBITDA dollars in your guidance compared to your incremental custodial profit, there’s a pretty big delta in that even compared to prior years, which doesn’t really square with this whole shifting of R&D dollars as opposed to like adding new headcount. So is there anything beyond conservatism to call out there about why there would be maybe a lower conversion rate?
Jon Kessler: So maybe a little more clarity because I didn’t give you guidance on custodial profit dollars.
Stephanie Davis : But you have given us clarity on the custodial AUM, how it trends. You’ve given us clarity on what’s graduating and you’ve also stock exchange.
James Lucania: I think the one factor that it’s important to consider in this whole discussion is the other element of let custodial, which is the CHF. In CHF world, custodial revenue from CHF is going to decline this year. Because if depending on what one believes, but for the forward, SOFR curves, so kind of plain old forward curve that CNBC talks about all day. We’re going to have lower short rates later in the year. And that hasn’t occurred yet, obviously, but that’s reflected in our guide and so forth. So that’s the one area in which that short cash area is the one area where you’ll see sensitivity. I think that’s, I’m guessing that that is the biggest source of the variance that you’re describing.
