Jul 7, 2021

Meet Hydrogen, the latest sibling-led API fintech

5 min
Meet Hydrogen, the latest sibling-led API fintech
Hydrogen is the brainchild of twin brothers Matt and Mike Kane. The New York natives' API-driven solution is one of the latest sibling-founded fintechs

From the Irish brothers, John and Patrick Collison, behind Stripe (now worth a tidy US$95bn) to the UK’s insurtech Marshmallow, which was launched by Alexander and Oliver Kent Braham, sibling-led fintech enterprises are making their mark.

Joining the fray are Mike and Matt Kane, twin brothers who grew up in NE Philly and went on to create their first start-up together, called Hedgeable, which then morphed into Hydrogen.

We caught up with the Kane brothers to find out how Hydrogen was conceived, and what the sibling relationship brings to the boardroom.

Tell us about Hydrogen and how the concept was developed?

Hydrogen plans to be the Squarespace of Fintech. We believe there is a multi-billion-dollar revenue opportunity to make launching fintech products as easy as creating a website. We have spent years building the first truly no-code fintech platform.

We developed the concept after struggling to launch our own debit card product at our last tech startup. We couldn’t meet the ridiculous minimums and didn’t want to spend six months developing a new product line. We thought, why can’t this process be available to companies that want to issue 1 card and get to market in a few days?

There are a few twin/sibling co-founders of super-successful fintechs. What is it about this combination that seems to work well?

Twin co-founders work well because you get two for the price of one! We tend to run the companies more like family-run businesses, similar to what you will find in an SME.

We are passionate, mission-driven, and intent on building long-lasting dynasties that will employ our children and grandchildren.

I think this mindset is successful because everyone on the management team is bought in and you are never looking over your shoulder worried about someone’s motivation or drive.  

Do you argue a lot about the business’s strategy? Be honest now

‘Argue’ isn’t the right term with siblings. ‘Spirited conversations’ is more like it. Tactics are discussed more than strategy, as we have always had a clearly defined business strategy and goals.

It’s easier to develop a strategy in a B2B startup than in a B2C, because of the heavy investment needed in infrastructure, security, and legal.

We find shifting strategy to be more prevalent in consumer startups, because it’s much easier to pivot, given the lower costs.

Who brings what to the table in your partnership dynamic?

We agreed early on to have clearly defined roles and responsibilities. Nobody wants to work in a company where they don’t know who they report to and they get mixed signals.

Matt is in charge of product, and Mike is in charge of the business. Mike knows not to get involved in the product and doesn’t even attend any of the meetings. The worst thing for a startup is when there are two heads of product.

If you hadn’t entered the world of fintech, what would you be doing now?

Matt: Mike would be the host of a TV game show or celebrity chef.

Mike: Matt would be a stand-up comedian or running a BBQ joint.

Would you still be working together?

Mike: Yes. I would be Matt’s head chef in the restaurant business!

Matt: This would be a role reversal, with Mike being the Head of Product and me as the CEO!

What inspires you in fintech today?

We really like some of the innovative business models that have sprung up in recent years. For example, the brokerage industry has been forever transformed by the freemium business model introduced by startups.

Fintechs in all verticals have started to put tremendous pressure on entrenched financial services firms. This has led to much lower prices for consumers, which should be the goal of introducing any new startup competition.

About Hydrogen

  • In 2018, following interest from a number of B2B clients, the brothers pivoted their business away from the consumer marketplace and launched Hydrogen, a technology solutions company that provides a range of fintech solutions in the form of easily integrated APIs.
  • With Mike as the business brain and Matt running the technology, the brothers have developed what they believe to be the first truly code-free white labeling solution for scaling fintechs.
  • The New York-based fintech describes its services as ‘embedded finance simplified’. Hydrogen’s no-code platform allows businesses to configure and install financial products, all of which are offered via Hydrogen’s subscription service app.

Sibling-led fintechs making headlines

  1. Zeta

The Dubai-based fintech Zeta recently achieved unicorn status and is the brainchild of the Turakhia brothers, who jointly founded and own the fintech’s parent company, Directi Group. Divyank, the younger of the two brothers, is based in the US, where he runs an online advertising business, Media.net. Bhavin runs Ringo, Flock, Zeta, Radix and Codechef in India.

  1. Carbon

Formerly branded as Paylater, the Nigeria-based Carbon was launched by brothers, Ngozi and Chijioke Dozie, who grew up in Nigeria and attended boarding school in the UK. Chijioke studied Economics at the University of Reading, whilst Ngozie studied Physics at Imperial College London. Today, Carbon lends to thousands of consumers and SMEs, with loans ranging between US$3 and $2600 for consumers, and up to $50k for SMEs.

  1. Odyssey Acquisition

Siblings Yoël and Michael Zaoui are the high-profile bankers set to launch a blank-cheque company, alongside plans to list a US355mn Special-purpose acquisition company (SPAC) in Holland. The brothers, who previously held senior roles at Goldman Sachs and Morgan Stanley, will lead Odyssey Acquisition which is set to list on Amsterdam's Euronext exchange and will specialise in healthcare and technology companies.

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Jul 18, 2021

Reimagining operational risk management for business value

Tom Ballard, Program Manager, ...
6 min
Tom Ballard sets out a thorough new vision for operation risk management in finance, using advanced AI and analytics technology to drive business value

The events of 2020 and 2021 have fundamentally changed how we do business, upending every industry, including investment banking. Once bustling trading floors went silent as the switch to work from home led traders to disperse locations – and gave rise to new operational risk challenges. 

Today’s dynamic regulatory landscape coupled with ongoing technological innovations have made legacy approaches to operational risk management ill-suited to tackle current challenges and complexity. And while many financial institutions have turned to digital automation and transformation projects to adapt traditional ‘revenue generating’ functions to meet their challenges and help drive growth, they must now do the same with their Operational Risk Management (ORM) functions - or risk being left out in the cold. 

The Basel Committee defines operational risk as the “risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.” Unfortunately, many financial institutions still view ORM as a regulatory and compliance necessity rather than a business function that delivers real value. That means executives and risk management departments must now change their risk approach to ensure they are dynamic and flexible, can guide their organizations through complex situations, and can readily meet the evolving expectations of regulators and their clients. 

Operational Risk Management is still a young field compared to other risk sectors in the financial markets, but it has always been viewed under a broad umbrella that encompasses risks and uncertainties difficult to quantify and manage in traditional manners. ORM has also been the convergence point where corporate governance issues overlap with revenue-generating business activities, causing potential confusion between departments. 

Investment banks have too often placed undue emphasis on creating governance frameworks designed to ensure they meet Basel Committee on Banking Supervision (BCBS) standards instead of recognizing that a sophisticated ORM function can bring quantifiable value. Their desire to merely meet BCBS standards and avoid historic risks has in effect led to an outdated, analogue approach in an increasingly digital world. Savvy investment banks have grasped the value potential of ORM and begun to drive a shift in awareness about the importance of a comprehensive risk identification, measurement, and mitigation program. 

Embracing a data-driven approach

Market players now recognize that adopting a digital strategy will allow them to deploy diverse and agile risk management mechanisms. It will also empower them to develop a strong and dynamic understanding of risks while adding real value to the business. This value goes beyond meeting regulatory and compliance mandates introduced as part of the Standardized Measurement Approach developed under Basel 3. A robust approach to risk allows the ORM functions to provide actionable intelligence to support business decision-making and assume a more commercial role that supports the various business units’ day-to-day activities. And that requires an intelligent, data-driven approach with a mandate to match, one that is championed at all levels of the organization.

This type of aggressive approach and embrace of digital transformation can also strengthen how ORM functions handle ambiguous and/or improbable events, especially as traditional methods of risk analysis prove unable to manage the ever-increasing volume of data. In 2010, the total amount of data created, captured, copied and consumed equaled about two zettabytes, compared to 2018 when volumes reached about 33 zettabytes. This 26% compounded annual growth rate means that if the rate of growth steadily continues by 2024, we can expect 149 zettabytes of data created per annum. 

Available data levels will make it difficult for analogue ORM functions to successfully meet the executive expectations, however organizations that adopt a data-driven approach will find increased data volumes provide them the insights to gain a competitive advantage and ability to proactively manage their risk. 

Leveraging AI and advanced analytics for high impact

Cognitive computing technologies like artificial intelligence (AI), data mining and natural language processing (NLP) can supplement a data-driven approach and help financial institutions confidently automate decisions, optimize processes and provide a deeper insight into available data. These cognitive computing technologies can help reduce or eliminate time-intensive and repetitive tasks, often related to data collection, handling and analysis which are better suited to automation. That in turn can free up critical employees to deploy their experience, knowledge of policies, and powers of assessment to support ORM functions and achieve their goals and focus on high-impact, high-value deliverables. 

Cognitive computing can teach computers to recognise and identify risk, which is especially useful to handle and evaluate unstructured data – the kind of data that doesn’t fit neatly into structured rows and columns on a spreadsheet. Natural language processing (NLP) can analyze text to derive insights and sentiments from unstructured data, which a 2015 study by the International Data Group estimates accounts for 90% of all data generated daily. When combined with the estimated future data volumes, cognitive computing functionality presents an immense opportunity for ORM functions to add additional business value in ways previously impossible. A detection model built on cognitive analytics can manage risk on a near real-time basis and can also unlock organizations’ historic datasets that have been compiled for internal, regulatory, or compliance purposes. These datasets often contain free text descriptions that contain a potential wealth of untapped, institution-specific information and could provide valuable insight into historic operational risk losses, providing data to augment employee’s qualitative experiences.    

Teaching an old dog new tricks

There are certainly challenges to launching digital transformation projects, implementing new data-driven approaches, and introducing cognitive computing technologies, including employee uncertainty and ethical considerations. That means financial institutions must preemptively address and prepare for potential challenges before they adopt a technology-enabled approach to Operational Risk Management. They must also secure employee buy-in to ensure stakeholders use these new technologies to their full potential and to assuage any concerns that technology diminishes employees’ important role in the organization.  

It’s critical that investment banks now shift their Operational Risk Management functions and focus on becoming more adaptive and agile in an increasingly volatile, complex, and uncertain world. Over 66% of banking executives report that adopting new technologies like AI and NLP will be a key driver in IBs development through to 2025. Yet for many investment banks, their ORM functions do not leverage the powerful new tools available to them – including increased computing power, digitization, advanced analytics, and data visualization techniques – much less harness the power of cognitive computing technologies. Until ORM functions leverage these tools, executive leadership cannot allocate resources and solidify ORM’s role in business strategy, performance, and decision-making processes. 

Old habits die hard, but it’s time for ORM functions to keep pace with these new technologies, methodologies, and approaches to position themselves and their organizations for success in today’s ever-changing world. If they do not adapt, there is a real risk they may stifle the wider organization, impede new opportunities and inhibit paths to valuable business growth.

This article was contributed by Tom Ballard, Program Manager, Broadway Technology

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