‘We don’t care about being the first, we care about being the best’: Helix’s Ahon Sarkar

The following was produced by Tearsheet Studios in partnership with embedded finance platform Helix by Q2. Watch, listen, or read our conversation with Ahon Sarkar, GM of Helix, where we talk about following and much more:

• The evolution of the fintech space in the past eight years, and resulting need for now-wiser early entrants to resituate themselves in the market.
• The process behind the rebrand into Helix, and deep rooted aspiration to ‘make finance human.’
• The changing face of Banking as a Service, its unique challenge as a product through time, and what it means to stand out in an increasingly crowded landscape.
• The two types of companies that partner with Helix: the ones who just want to look like today’s favorite fintechs, and the ones who realize that with the right backend solutions and time, they will be different and memorable long-term. 
• Why (and how) platform-to-platform partnerships are the secret sauce to each platform owning and winning in their own niche.
• How far both banks and fintechs have come in understanding and optimally leveraging the potential in working side by side.
• What’s next for embedded finance: deeper focus, simplification, and better automation.

Watch the video

https://www.youtube.com/watch?v=zCTnPCoQsDY

Listen to the podcast

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.

Ahon Sarkar, Helix: I’m Ahon Sarkar, general manager for Helix – an embedded finance platform that powers companies like Credit Karma, Acorns, and Betterman in building unique banking products for everyday people.

Helix wasn’t always called Helix. Lately we’ve been seeing big brand, early to market players, who have achieved some maturity in the market, undergoing the process of rebranding. What was that process like for you, and what did you learn along the way?

As more people have popped up into the space, we’re seeing fintechs that have been around for four to six years exploring rebranding, because they have a better understanding of who they are, what they're trying to do, and who their customer is. They want to be memorable and different, so you might see them simplify their design aesthetic, go after a particular color that nobody else out in the market is using, or focus their go to market strategy on a particular customer segment or set of messaging.

Eight years ago, when a lot of these products were coming out for the first time, fintech didn't exist in the way it does now, and the demographics they were targeting weren't primed for those kinds of products. But in the last eight years, a lot of stuff has changed – you're seeing fintechs capture that new identity and build a brand on that in the market.

As more competitors enter the market, memorability and differentiation are going to be really critical for both direct to consumer and direct to business fintechs when it comes to beating out their competition.

In Helix’s case, it was a bit of that, and a bit different as well. We initially went to market with a joint venture arrangement, grew that business, brought it inside and catalyzed it within Q2, then realized that we had evolved the platform to a point where it was a little bit different than how it started.

Q2 is well known for digital banking and lending for banks and credit unions. But with Helix, we’re focusing on tech companies, brands, and fintechs – so we needed a brand that would become the go-to for embedded finance.

And so the question was: how do you build that go-to brand, where it's not just about the nuts and bolts? We're an infrastructure company, we sell the capability to go build things – but our mantra is to make finance human. 

That's why we're here, and why a lot of our clients are here. Acorns, Betterment, Gusto, and Credit Karma are all different, but in their own way they are all trying to make finance human for a different group of people. So when we were thinking about what is the right brand for an infrastructure company that wants to stay behind the scenes while catalyzing societal change, that's kind of where we netted out in talking to a lot of our clients. 

As some of these earlier companies start to rebrand, they leverage what's already in the brand to extend into new markets and products. But instead of talking about nuts, bolts, and features, Helix took an aspirational route. As a software company, how did you undertake that shift?

Honestly, it came by really organically. A lot of this growth happened during COVID, where we were hiring a bunch of people remotely and trying to figure out the common thread between everyone and what we’re trying to do.

When we get excited about what we're doing at work, it’s about a new product that no one's ever done before, or a customer who calls in saying, ‘I don't have to go to a payday lender, because I got my fee free cash advance’, or when we do a billion dollars in early ACH deposit because that means people got a billion dollars earlier to do whatever they needed to do.

And so we realized that it is not building a new way to process ACH that gets us out of bed – it is the societal impact and what it does for real people.

We go to work to change the face of how this financial system works. The unifying thread between our clients, who are tackling very different problems for different demographics, is the fact that the financial system has been cold and disassociated for most consumers for a long time. If we can be even a small part of making that human, then our work is worthwhile. And it pretty quickly grew from an internal rallying cry inside the organization to something much bigger. 

We now have north of 130 people split across the country. When you treat each person as a real human being, and you get to know them, their spouse, and their family, it's a meaningful relationship. And if you can get meaningful work and meaningful relationships, well, that's a pretty good place to be.

At Tearsheet, we’ve been observing how platforms like Helix are now enabling lots of different, unexpected sectors to start getting into finance. How do you see this from the perspective of your current clients and pipeline, and what are you seeing in terms of uptake of different industries?

For prospects, we're seeing a continuation of the trend that started with that piece that we did together on non-intuitive use cases of Banking as a Service, back in 2019. At that time it was crazy that a lending or insurance company would build banking. That's changed. Today, we see lots of different verticals launching. Particularly in the last 12 to 18 months, we've seen a big surge of interest outside of the financial realm. 

We've gotten into payments, savings, PFM, lending, payroll, and insurance. But now we're getting into the gig economy, marketplaces, brands, and telcos – and that's changing the types of products that people can build. There's a continuous expansion outside of finance into new verticals, but at the same time, there's a bit of a reckoning of sorts for existing companies. When we started these conversations, if you were one of the first players, you could simply launch a custom banking product and drive high valuation. When Helix first started, there weren't 15 to 20 platforms you could build on, so even getting to market was a big thing. That's a little different now. 

The very successful companies focus on the backend – the right tech stack, the right operational team, the right bank partner, and the right fraud mitigates – because that's what's going to make your program profitable. Because if you don't do that, and let's say you drive millions of customers, but each customer loses you $6, that's not a great proposition because then your business effectively just loses $6 million a year.

For the companies entering now, it's still early days, but with the added benefit of looking at and learning from the pioneers who launched these products. They’re not creating the scripts as they go – there actually is some learned experience out there. How do you see it from where you’re standing?

I would say prospects are split into two categories. There’s still one category of prospects that want to be the next Cash App, Chime, or [insert successful fintech company here]. And we point out to them that those companies have been around for six to eight years, have built a user base and differentiators and got to where they are today in phases – not overnight. And we ask them, ‘What  piece of that do you want to win?’ There's a lot that you can learn from and look at those types of companies, but you don't get there overnight – you get there by focusing on expanding bit by bit.

Then there's the second type of prospect that has learned from others successes and failures in the market on how to build and support the product. They want to compete against their peers and realize that if they start with something scaleable that deals with all the backend stuff to start, they can build an intrinsic advantage over time, and that's what’s guiding the way they go through the buying process.

It sounds like you've put your finger on the winning attributes of companies that will be successful in this market: building sustainable business, and differentiating with this. Can you tell us more about how you think about guiding your clients to success?

It depends on the prospect, because different kinds of companies are going to have different kinds of challenges. For a brand that has never launched financial services, the question is how to hedge their execution risk so they're not suddenly signing up for a whole bunch that they're not going to be able to tackle, and then how to use their existing brand ecosystem to create something that other people can't create. 

For fintechs pivoting from one part of fintech into another, it might be trying to find the overlap and fund flows that can create that 1+1=3 moment. For other companies that have never created before trying to build new hooks, it might be introducing them to regulators, or their compliance partner at the bank to help them work through the terms and conditions. We just launched five-day-early tax returns, which took some regulatory conversations, because we want to make sure that when someone launches a product, it's successful. 

What we found is that we’re not just giving advice once – it's a relationship, where we’re constantly looking at the ebbs and flows together and saying, ‘Have you tried this or the other?’

Sometimes people see that and they say, ‘Why are you spending all this time upfront for free before you've even cut a deal?’ And the answer is simple. For us, it's a quality not quantity deal; everything we can do to improve their probability of success in the long term pays off. 

Since you and I met and started speaking years ago, the market has gotten more crowded as we’ve seen more entrants and platforma out there. What do you think about this increase in options for companies building brands?

It's really exciting. The reality is that nobody is everything to everyone, so what we've seen over the last three or four years is platforms for every purpose; if you are two people in a garage and want to get a product to market, there's a platform for that. If you want to launch just a standalone virtual cart and nothing else, there’s a platform for that. If you want to launch a custom baking product at scale, there's Helix for that. Across the spectrum of sizes of clients and complexity of use cases, different platforms fill different pieces of that. 

Now, the natural consequence that comes from that is platform differentiation becomes important – all the words are the same. When we went to market in 2016, it was ‘What is Baking as a Service?’ Then at Tearsheet’s Embedded Conference 2019, when you guys did your embedded conference, it was ‘BaaS is everything’. And now, it’s ‘I can't tell the difference between these BaaS providers, can you help me understand?’

To go back to the Helix rebrand: it was a sub of the overall strategy. Our special sauce is taking your existing business, banking, and combining them to make something new. A helix takes the same DNA building blocks, but can make different creatures; we rolled with it because at the end of the day, what we're helping people do is take those building blocks – accounts, cards, payments, or data – plug that into their business, and build something new. 

The net net of it is more platforms means more options, means more products for consumers. You'll see these platforms sort of carve out their own niche and own their niche, and within that context, differentiation and recognizability are going to be critical. And the pros and cons of different platforms will vary based on the types of audiences they address. 

Tearsheet has been talking to a ton of platforms over the last four or five years – have you seen a similar evolution or something different?

We’ve definitely seen a proliferation of new options, which is great, but it's got to be a challenge. Unless you're going after the two guys in a garage, supporting a business that requires a backstory is really hard to come into a market like that. But I do see these opportunities that you describe about carving out like particular niches. 

Is there a platform to platform collaboration, where if a client wants something from one platform, but something else from another platform? And what do you think of such partnerships?

Helix is already there. Today, if you want to onboard a customer through Helix, we have a couple of onboarding partners that we leverage, Socure and IDology, and we'll use their platform to onboard. We don't think that we're going to build the best single thing of every single part of the services when there are companies exclusively focused on each piece, so the question is: Where are we efficient and have a competitive advantage? Where do we not? And where's the right angle for partnership?

If we're going to incorporate a partner, we try to figure out how to incorporate the Helix DNA into that product, so it is a meaningfully better experience. For example, Visa DPS is the largest debit processor in the United States, and we do our card processing by and large through Visa DPS. We have programs who may have multiple banks, and banks who have multiple programs on them, and we realized that there was a gap from fraud management perspective; the Visa tools are great if you're a bank launching something for your own programs, but if you're a fintech who only wants to see their fintechs program, there wasn't a way of doing that. So we asked, ‘How do we partner with Visa to get access to those tools for fintechs, without having to become PCI compliant?’ We spent eight months building it, and now when someone's using that processing through Helix, they can access those fraud tools. 

As you look into external functionality, like credit, the question for us is not just ‘How do I rescan another credit provider and sell it to you and make some margin?’ We built a best in class debit product, we know there are challenges with credit where credit scores don't encapsulate all the context, and we philosophically believe in designing financial products that leverage the unique context we have about people. So when we're building that credit offering, it's ‘How do I use the data that I have on the debit side to get you a better credit decision?’ Because if I can do that, then I can help my clients give their customers something that nobody else can offer. 

Because over time, consumers will be sick of getting the same thing in different places. And so platforms like us need to think about how to make things better, as an improvement for the financial system, because that's our responsibility as infrastructure players.

We've talked about the product builders and the platform level – let’s talk about the banks. One of the things that we've seen at Tearsheet is an increased conversation around banks thinking about their futures; they've seen some successful partner bank implementations in banks that have positioned themselves for the future. Helix works closely with a variety of banks – what are you seeing from your end? 

We're seeing banks more open to partnership with fintechs than we have ever seen in Q2’s operating history – more than doubled in the last two years. And I think that's because banks are realizing that fintechs don't have to just be competition; there are lots of options for partnership with fintechs, and you're seeing an increased appetite for partnership.

Banks are seeing fintechs as partners, distribution channels, and ways to solve for different functionality needs, meanwhile fintechs are also seeing banks as distribution and strategic partners – so that the ecosystem is getting more interlaced. 

When we started in BaaS, there was this misconception that the bank was just a utility – that you could send them a flat file at the end of the day, and banking would just happen. 

Those that launched products, got them to market, and partnered with banks realize that couldn't be further from the truth; the bank is the one leaning in and helping them on the compliance or regulatory items, helping them through ACH exceptions or card reconciliation, and sitting down with the auditor – the bank is a big part of your program. 

Today the fintech side is a lot more aware that the bank partner is an important part of that decision, and the bank realized two things. First, there’s a deeper need for collaboration. 

Five years ago, when banks were launching these products, the regulators, banks, and clients didn’t know what to think of BaaS. Today, regulators have a better understanding of what these programs are doing at that bank as a white label; the bank has a better understanding of what their needs are now that they have scaled – some banks of ours have scaled from less than a million users to north of five million users in the last few years, and that changes what you need.

As banks realize they are the B side to the A side, if you will, they have a need for more than just the flat files that they've been receiving, especially as regulators start to take a closer look at some of these larger banks. 

The second thing banks have realized is quality over quantity. At the end of the day, banks are risk managers: they take on risk, generate some kind of return, and they're typically pretty excellent at it. 

With SaaS, you can spin up 10,000 instances of your technology and it doesn't matter. But in BaaS, every product or program you spin up is a unique bucket of risk and reward opportunity. For a lot of these banks, there may be small programs with a ton of regulatory complexity that they thought were really interesting ideas five years ago, but are realizing aren’t worth the squeeze. So they have a deeper understanding that it's critical to not just to get a partner, but the right partner. All of this is couched in a general willingness to partner and understand that fintech is going to be a pretty important part of their strategy over the next three to five years. 

As Q2, we’re sitting on one side with the banks and credit unions with the digital platform, then on the other side with the fintechs and the Innovation Studio in between, it’s a really interesting dynamic because we can catalyze that convergence and help both sides have conversations that help them understand the other side a little bit better.

Last time we spoke you mentioned having a pretty vibrant pipeline. So what's next for Helix post rebrand, and what’s coming for the embedded market at large?

First thing you're going to see us add new functionality and make meaningful advancements, starting with  things like minor accounts, then business accounts, and then credit.

When it comes to timing and how the product actually works, it’s important to keep an eye on broader macro trends.

Credit is more readily available right now than it has been in the last two to three decades, and as long as you're giving credit to the right consumers, that can be totally fine. But in a world where there's a market downturn, and people are holding on to debt that they can't afford to repay, the people holding that bag are the companies that launched those products.

We think about how to innovate minor accounts and make them true DDA and not just prepaid. How do we innovate in credit and make it so your debit actually affects the types of credit product that you could get? 

Our philosophy, and it sounds kind of catchy to say (and not dissimilar from Apple): ‘We don't care about being the first, we care about being the best.’ Because if you're serving large clients who are building differentiation at scale, the thing they care about is that it always works, and that it allows them to build something unique.

The second thing looking ahead, which is for the market as a whole, is deeper focus, simplification, and automation.

From a focus perspective, instead of trying to be everything to everyone, you're starting to see companies say, ‘Hey, I'm gonna own this thing, I'm gonna be the best in this vertical, then I can expand from there’, which is refreshing because that’s where there's real value and differentiation. 

From a simplicity standpoint, your bank account has been the same for the last 60 years – why has nobody simplified what it takes to manage your money? People don't want to do more work, they hire products to do jobs for them, so the simpler you can make that job for them, the less analysis paralysis they'll have, and the more they'll actually engage with your product.

And then third, automation. Now that the capability to move money is modularized, you'll see more companies do things like what Envel is doing and automate parts of your financial life so that you don't have to think about it, because that's gonna bring you as a consumer a ton of value.

Lastly, in terms of what's coming: the recent massive acquisitions of cloud native cores. Helix is a cloud native core, and the first one purpose built for embedded finance. For the longest time, all of our competitors were by and large middleware on top of a legacy processor -- there weren't too many platforms who were cores themselves.

The interesting thing for cores that are pivoting from being a digital bank core for a bank to launch a digital offering into embedded finance is going to be going from one-to-one: where the bank is the one serving the programs and doing the customer service, into many-to-many: where each program has different thresholds and controls, and it all just kind of has to work together.

One, you'll see a growth in the value and the number of these cloud based cores because they solve some of the intrinsic challenges that people who built on middleware are facing as they start to scale into the millions or tens of millions of users. 

Some companies will try and build that core themselves as they try and bring that in house. For some it will be a natural fit, while others will realize it's a hell of a lot harder than you might think at first – we spent eight and a half years working on ours, and we're still chugging away.

Then within the realm of highly valued cloud native cores, you'll see that transition happen into embedded finance successfully for some and unsuccessfully for others, because it's not particularly trivial to go from single-to-single to multi-to-multi. But I think those that make that transition are going to be really successful, because they'll be able to leapfrog, as we have, over some of the traditional architecture and offer things that you can't unless you own that technology stack.