Embedded Finance Briefing: Q2 repackages its BaaS for non-banks as Helix
- Q2's Helix is geared at enabling fintechs, consumer brands, and tech companies to offer modern and personalized banking services.
- US consumers are welcoming embedded finance, with 43% of their wealth now circulating in non-traditional banking platforms.
Q2, a provider of digital banking solutions, announced an extension of its existing BaaS product for non-banks, rebranding the platform as Helix. With this, the firm reaffirms its focus on the embedded finance space, a market poised to be valued at over $138 billion by 2026.
It’s 2022, and many apps, from online marketplaces to ride-hailing platforms, want to offer some banking functions in a bid to become the next ‘super app’. Q2 views itself as capable of powering such programs and introduced Helix geared at enabling fintechs, consumer brands, and tech companies to offer banking services.
Q2 says firms can use Helix to embed ‘the building blocks of banking’ into their platforms. The term entails key banking capabilities such as cards and payments, accounts, monetization, and administrative tools. Helix’s existing customer base spans over 11 million users across the US, with transaction volume over $20 billion per year. The provider’s current clients include the likes of Acorns, Gusto, and Credit Karma.
“Successful technology companies historically have gained traction in the market by building their products around each specific user’s needs and context. We have taken that same design philosophy and applied it to banking,” said Jonathan Price, an evp at Q2.
Helix advertises itself as a service dedicated to making finance more human-centric. Behind the claim lies its capability to intake a lot of user data to customize experiences for individual users. The firm’s vision for personalized experiences is threefold: first, to create a world where financial solutions are as unique as customers; second, to enable companies to put together such products, moving away from cookie-cutter offerings; and third, to make such offers available to every consumer.
The software offers personalization with multiple uses. One, brands can use Helix to offer their customers personalized loan limits. The platform stores a user’s activity data to build a context around their usage — for example, how diligently and how much they pay off their credit every month — allowing companies to use that information to assign the user a customized credit limit. Secondly, it provides firms with granular control. This means they can control spending and create a customized card experience for each user. Thirdly, Helix also powers a customized reward program.
According to the firm, granting partner companies individual-level controls across many facets of the financial ecosystem, coupled with granular risk management and better bank collaboration, can help them drive adoption, engagement, retention, and ultimately, profitability.
“One of the reasons that many traditional FIs offer one-size-fits-all solutions is that they’re still using 30-year-old legacy technology that wasn’t built to differentiate customers. Consider that in 1980 it cost about $40,000 to store 1 gigabyte of data; today the cost is about 3 cents,” Ahon Sarkar, the general manager at Helix wrote for TechCrunch.
Sarkar believes that Helix can help increase banking accessibility for the traditionally under-served populations. He argues that such platforms incentivize service providers to create an assortment of products that serve a different variety of customers more personally and effectively, regardless of their financial health or background. Platforms like Helix run on a cloud-based architecture and can process a larger amount of data at a fraction of the cost of traditional cores. In addition, the company says Helix has the capability to be scaled up to a multi-million user base.
Chart of the day
US consumers welcome embedded finance
Embedded opportunities are booming, as almost half of all consumers report comfort with making payments and managing their money via trusted non-financial firms, like streaming services and internet providers. While 77% of consumers said they prefer traditional FIs as a primary or secondary provider, they reported that just over half (57%) of their funds are kept in a traditional bank account. The other 43% are circulating among various providers.
Digital-only banks are growing, as the difference between traditional and digital banking actions fades. Users are increasingly using digital-only banks, prepaid accounts, and stand-alone digital accounts to perform functions traditionally powered by brick-and-mortar banks, such as paying bills, depositing wages, or saving. Saving is in fact among the key uses for standalone digital accounts (50%) and prepaid accounts (40%) among consumers using those accounts as primary. When talking about online shopping, all digital types of accounts are used more frequently than traditional services.
In addition, 61% of consumers say they are somewhat or highly likely to switch their primary provider to a digital-only provider in the next year. Millennials lead this trend, with 77% reporting so, while gen Z followed quickly at 72%. Lower fees, points/rewards, and security of account and funds emerged as the key motivators to switch in the future.
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