The following is a transcript of the podcast episode
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Welcome to the payment journal podcast. I’m your host Ryan Mac and on today’s episode. We’re going to be talking about payment processing and to help me with that conversation, I have the CEO and Founder of Galileo Processing Clay Wilkes. Clay, Welcome to the podcast.
Clay Wilkes CEO and Founder of Galileo Processing
Thank you. Nice to be here.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
To get things started, can you give us a little bit of a background about Galileo processing?
Clay Wilkes CEO and Founder of Galileo Processing
Certainly. Galileo is based in Salt Lake City. We were founded in 2000, and we have grown to become one of North America’s largest payments companies and processors, and program management are services that we provide. We have roughly 20 years of experience. We support debit, credit, prepaid, commercial, and virtual card products, and we have more than 87 million accounts that have been instituted on our platform. We have a very strong culture that is centered on humanitarian work and philanthropy as well as a number of other attributes such as the environment. I would love to have folks come and learn more about who Galileo is. We primarily differentiate ourselves based on the innovation – technological innovation – that we provide. We’ve been an innovator. We’re known as an innovator in the industry, and our platform and underlying capabilities are really significantly different than many other providers of processing services. That’s key, and it’s really what has allowed us to be very, very successful in a very diverse payments ecosystem.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Excellent. Now there’s a lot of buzz around APIs (application programming interfaces) nowadays and for good reason. And recently Galileo Processing opened up its APIs. So can you walk me through why this is significant?
Clay Wilkes CEO and Founder of Galileo Processing
Yes, the APIs are absolutely critical in today’s environment, the open network type environment that we live in. Technology is key and integrating that technology with other providers is a big part of that. While Galileo has had an API for 15-plus years, providing an open API where really anybody can come to an environment – we’ve created an environment that we refer to as our sandbox – people can come whether they have a formal relationship with Galileo or not, they can come and authenticate and begin, just dive right in and begin developing and coding. And on that site we have our APIs fully published. It’s a nice environment because you can see not only the request but also the responses that come back. All of that is delivered in a content managed way, but the nice thing is that there’s code fragments there that are generated and personalized to your authentication so that you can really just copy and paste and begin, as a programmer, being very productive within a few minutes of coming to the site. So that’s been very powerful. There’s another perhaps more important reason that we’ve provided an open API. An API is really just a thin veneer over the functionality that exists below that layer, and we believe that Galileo services are really the best in the industry and an API which delivers these services back to our partner are important. Those services have been, again, key to our success.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Now, fraud is really another hot topic. It continuously goes on, especially within the payments industry. I’m interested to get your specific take on how fraud is affecting issuers and fintechs today, and also what you see is next within the fraud detection space?
Clay Wilkes CEO and Founder of Galileo Processing
Fraud is absolutely key to having a successful portfolio or program. It’s going to ultimately drive the profitability, and it’s one of the reasons why we have focused so heavily on fraud. Today, fraud losses for card issuers exceed $22 billion. EMV and other tactics are helping, but it hasn’t completely eliminated the problem. And so we’ve put significant effort into this. The first thing that we’ve done is that we rolled out something that we refer to as our dynamic fraud engine. This is a dynamic, real-time, rules-based capability that we can interject rules that defend against fraudulent scenarios directly into the offstream. This has been an extremely effective tool at fighting fraud. In some cases it’s lowering the cost of fraud for issuers by as much as 80 percent, which is a very, very dramatic number. Having a 20 percent card loss, fraud loss, on a card portfolio is very significant. And then the other thing that we have done is that we’ve launched, we believe, the most successful fraud AI capability in the entire industry. One of the things that this AI is capable of doing, we’re looking at over 550 features or attributes on every given transaction in less than a tenth of a second. These features or attributes that have the ability to drive the AI’s behavior in such a way that we can really defend against the first or really the zero transaction in a fraudulent scenario. So where the dynamic fraud is really defending against a pattern, the AI is actually able to learn, detect, and defend against the first fraudulent event. Let me frame just how successful this is: The fraud AI, most AIs, are measured with what is called a confusion matrix and two key things, two key numbers or metrics, come out of that. One is the relationship of true fraudulent transactions to false positives or actual cardholder transactions that are good. Those negatively impact the consumer experience. So where the leader in AI might have a precision – the first metric that comes off of that, of 0.25, our AI is currently operating at 0.98. Stated a different way, if you had 4,000 transactions that were recognized by the AI and you’re operating a precision of 0.25, you would have 16,000 alerts that are generated where some operator needs to intervene and contact the cardholder and say: “Look Clay, is this really you in California conducting this transaction?”, whereas with a 0.98 you would have less than a few hundred transactions you would have to call and make that notice on. The other thing that is key here is that these two capabilities can interoperate. In other words, our dynamic fraud engine has the ability to receive input from our fraud AI and the two of them together are extraordinarily effective at defending against fraudulent cardholder transactions.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Excellent. Thank you very much for that. To follow up, I guess what you’re saying here, and I think what most data scientists are saying, especially when it comes to AI and machine learning, the better models reside with those that can provide it more and more data. Correct?
Clay Wilkes CEO and Founder of Galileo Processing
That is absolutely correct. And it’s a very good point. We believe that our strength in AI actually stems from our many, many years of investment in advanced analytics. Actually knowing the data as well as we do, we have had an extensive business intelligence or analytics capability that we have provided for nearly our entire existence, so almost 20 years. That familiarity with the data is really what’s driven our ability to be extremely effective in the area of AI.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Shifting gears a bit here, there’s a lot of hype around cryptocurrencies. I can’t tell you how many emails I receive on a given day about an ICO. What I’m really interested in looking at is, what do you see for the future of payments and cryptocurrencies, and also what do you think of the convergence of payments and cryptocurrencies?
Clay Wilkes CEO and Founder of Galileo Processing
That’s a great question. Clearly, blockchain and cryptocurrencies are here to stay. I’m not a great prognosticator. So I’m not certain exactly how soon or how far cryptocurrencies will go, but they’re very important. And they’ve certainly been widely embraced. As such, Galileo has spent a lot of time with cryptocurrencies for one. For example, we released a set of APIs, our cryptocurrency API, that allows the convergence of existing payments with cryptocurrencies. One of the drawbacks to cryptocurrencies is that they are not natively or widely accepted at merchant locations today. What you have is people investing, or better, speculating on cryptocurrencies, and that’s creating lots and lots of demand for the underlying currency, whereas the acceptance of that currency (if indeed it is to perform as a currency) by a merchant is not as widely available. So what you have is, if that were the case, essentially that currency being received by the merchant, that merchant would have to convert it back into another form of currency. And so it would provide the supply, and then the demand of course would normalize or equalize. That is in nearly all cryptocurrencies, at least today, currently unavailable. So the problem that our cryptocurrency API is addressing is that the way that merchants accept payment today is via the payments network, and what we’re doing is providing a gateway between those services. So if I’m a cryptocurrency investor, and I’ve got Bitcoin or Ethereum or potentially other ICO, what I could do is I could tie, as a program manager, I could tie a payments capability, a debit card, to that cryptocurrency, and that payment card could then be accepted at essentially any merchant where that payment network – Visa, Mastercard, Discover – is accepted. And so that’s what our cryptocurrency API is intended to do, is allow program managers to provide a gateway service between the cryptocurrency and the payments network. That solves, in part at least, the problem that I was alluding to earlier, where in effect what’s going to happen is that as I go out and use my payment card (my Visa let’s say) at a merchant location, in effect what I’m doing is selling a portion of my cryptocurrency. Again, you’re going to help find a normal balance between demand and supply. We believe that it’s an overall positive for the ecosystem of cryptocurrencies. So that’s the problem that we’re trying to solve there. The cryptocurrency API is the first of its kind to enable users in fintechs to be able to offer this type of capability where you’re transferring funds and making purchases in real time at the point of sale. We believe that that’s very important for the environment of cryptocurrencies as well. All transactions are conducted in the fiat currency and converted back to the cryptocurrency and settled by Galileo when a program manager is utilizing our cryptocurrency API.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Before we wrap things up here, as we look at 2018 and beyond, what’s next for Galileo Processing?
Clay Wilkes CEO and Founder of Galileo Processing
It’s exciting. We’re doing a number of very innovative and exciting things. One of the things that we’ve just barely launched is our Galileo Security Solution. What that is a set of APIs that allows investment-based firms to create a bridge between banking and payments on the one hand, and investing and securities on the other hand. In essence, what I can do as an investor is that I can actually be both liquid and invested. So I can have a security that I’m invested in generating much, much higher returns than what is available at my bank and I can be liquid at the same time. That’s a unique problem that Galileo is solving. We believe it holds great promise for the asset managers, wealth managers, advisors, and other investment-based firms that are wanting to create banking-like products. In essence what we’re doing is we’re allowing savers who today at banks might be getting close to zero as a return on their deposits or savings to actually go into safe, or reasonably safe, investment products and convert them in a very simplistic way into investors where they have access to much higher yields. So that’s one of the things that we are doing is providing this investment-based API.
Ryan McEndarfer Editor-in-chief at PaymentsJournal.com
Well Clay, thank you very much for taking the time today for speaking to us about payment processing.
Clay Wilkes CEO and Founder of Galileo Processing
Thank you for having me, Ryan.
