EXCLUSIVE: What Q2's Launch Of Helix Means For Financial Services Brands Like NYDIG

Q2 Holdings Inc QTWO, a provider of digital transformation solutions for banks and lending institutions, announced its introduction of Helix, a Banking-as-a-Service (BaaS) offer.

At its core, Helix is a cloud-native core that enables banks, credit unions, fintechs and consumer brands to embed banking into their ecosystems.

One such brand using Helix is NYDIG, a Bitcoin BTC/USD company fusing tech with institutional-grade finance to usher in a new era of financial products. Through Helix, NYDIG built a corporate payment plan enabling employees to set aside, automatically, a portion of their paycheck as cryptocurrency.

To learn more about this monumental occasion, as well as the impact Helix is having on firms like NYDIG, Benzinga spoke with Ahon Sarkar, general manager at Helix, and Rahm McDaniel, NYDIG’s head of banking solutions.

Check out the conversation for more.

Benzinga: Hi gentleman, nice to meet you. Care for an introduction?

Sarkar: I’m a general manager focused on growing our Helix business and finding the right partners to build differentiated products with figuring out how to evolve our platform, and give clients a competitive edge in building unique banking solutions.

McDaniel: I’m the head of banking solutions at NYDIG and am responsible for the growth of our business with traditional banks, credit unions and fintechs.

When I say growth, what I mean is that we’re in the process of bringing digital assets, bitcoin in particular, to the customers of mainstream financial institutions, as an embedded account experience.

Tell me a little bit about this most recent launch, as well as what it means for both of your businesses?

Sarkar: Q2 is a publicly-traded company that’s been around for 17 years or so.

We’re one of the leading providers in digital banking and lending, and we serve 500 or so banks and credit unions, across the country, with digital banking solutions that sit on top of legacy cores.

Helix is Q2’s embedded finance division and is one of the first players in the BaaS space. Helix is a 128-plus person team platform doing about $20 billion in annual money movement — in and out — that has 12 million-plus users and growing relatively quickly.

With Helix, the goal is to provide innovative companies like Credit Karma, Betterment, Acorns, and M1 the building blocks of financial services so they can embed it inside of their application and use the unique context that they have about the individuals to personalize those products.

McDaniel: NYDIG is the technology and financial services firm dedicated to bitcoin and digital assets beyond that.

There are three things that differentiate us from what people typically think of when they think of cryptocurrency.

First, we are dedicated to compliance. Two, we’re a business-to-business company focused on working with insurance companies, pension funds, banks, credit unions, and fintechs. Third, we’re focused on working with high-quality partners in the tech space, such as Q2, who can do the integration lift so that our clients that we work with don’t have to.

The payroll use case that we worked on with Q2 is interesting as it allows people to allocate a part of their paycheck to bitcoin. The Helix team provided us with the BaaS engine that allowed that to happen with one of their partner banks.

Talk to us at Benzinga about the biggest challenges you’ve both encountered through this journey.

McDaniel: One of the levels of complexity is KYC, or Know Your Customer. The process of onboarding a person into a system.

In order for me to open an account, a bank has to KYC me. That’s nontrivial. If we didn’t have the Helix infrastructure in place, though, either we or the bank at the other end, would have to figure that [exercise] out and build it from scratch.

Helix has KYC embedded in its API.

Sarkar: There are also two vectors to consider.

One is what is the size of a company that you’re trying to solve problems for. The second vector is the complexity of the offering.

There is also the major challenge of having consumers stay with your product.

We solve for that.

McDaniel: In order to have broad-based adoption of digital assets, [you need] intermediaries that will help people navigate the financial system.

By working with Q2, we’re able to do that.

What are your thoughts on the utility of digital assets like bitcoin? The concept of fixed and declining supply growth, among other things. Do such applications, as the ones we’re talking about today, add utility to that?

McDaniel: We’re seeing three things.

One is the growing network and usage.

Then, you see an increase in the length of time people are holding assets and the percentage of the total supply that’s held for longer periods of time.

Finally, there are an increased number of addresses holding very large balances of bitcoin which signals institutional interest.

That points to mainstream [adoption].

Sarkar: I’m still trying to figure out the value. What’s perplexing for me, especially as cryptocurrency was coming up, was this conflict between what people said and thought it was.

When bitcoin first came out, it was a currency. Then you have people buying it (in anticipation of) value increases. Those two things contradict.

To Rahm’s point, bitcoin is a bit more of a store of value and I think we’re in an interesting geopolitical climate where you have significant inflation in some of the strongest currencies and you have conflict.

Different cryptocurrencies have found their niche and there’s a lot of evolution and use cases. To own and transfer cryptocurrency is a way to combat [these] … crises.

What are you most excited about going forward?

McDaniel: I’m most excited to work with the long list of banks in the process of rolling out digital asset services to their customers and, also, the growing adoption of paid in bitcoin programs that allow people to allocate a portion of their paycheck towards this.

Seeing this go mainstream — giving people the ability to do this inside mainstream financial systems — is just exciting to me.

Also, Q2’s mission of strengthening communities by strengthening the financial institutions that work with them is something that aligns with what we’re trying to do.

Sarkar: The thing that gets me out of bed is creating things that have never existed and solving real problems for people. I’m excited for us to see stuff that we haven’t seen before, and for us to slowly evolve adjacent industries like business banking, credit, and the like.