Clay Wilkes

Galileo Processing taking the direct approach to fraud prevention

Being direct is good advice in many parts of life. It is also good when combating payment fraud, Galileo Processing CEO Clay Wilkes said.

Mr. Wilkes is a featured speaker at the Canadian Prepaid Providers Organization’s CPPO Prepaid Symposium being held on May 8 at the Beanfield Centre in Toronto. The CPPO Prepaid Symposium is a key networking and education event for Canada’s $3.6 billion open-loop prepaid industry.

Cut losses to 1%

In an industry where five basis point losses are the norm and 10-point losses occur, Galileo’s Dynamic Fraud Engine can cut that loss down to as low as one per cent, Mr. Wilkes said. They achieve this by creating very specific and directed responses to fraud.

“It’s a rules-based system with pinpoint responsiveness to a very specific fraud,” Mr. Wilkes explained.

Most cardholder fraud originates at a merchant because it is difficult to tightly control that environment, he added. The data is pulled off, aggregated and sold to different parties. Fraudsters buy a database, manufacture a stack of cards and go to stores to buy gift cards or electronics, hoping that by the time the processor reaches the name on the card that they are long gone.

Either the merchant or the processor will eventually get stuck with that loss, so both parties are interested in reducing those losses as much as possible, Mr. Wilkes said.

Success matrix

That success can be visually plotted on what is called a confusion matrix, Mr. Wilkes said. The four-quadrant diagram of transactions begins with good transactions in the upper left section before moving clockwise through false negatives, actual negatives and false positives.

Clay Wilkes

Beyond having 100 per cent good transactions packed in the upper left section, the best-case scenario is to have nothing but good transactions and fraudulent ones caught before losses are incurred.

The Dynamic Fraud Engine gets pretty close, Mr. Wilkes said. Thanks to a significant investment in artificial intelligence it successfully identifies actual fraud attempts 90 per cent of the time. Taken over 3.5 million cardholder transactions the Dynamic Fraud Engine identifies 4,800 actual fraud attempts and 400 false positives.

Galileo Processing is well positioned to serve the growing cryptocurrencies market, Mr. Wilkes said. APIs can build the bridge between cryptocurrencies and payment capacity.

‘Genie’s out of the bottle’

“There’s the ability to connect cryptocurrencies to payment networks and have it all flow through a bank,” Mr. Wilkes said. “The blockchain, and cryptocurrencies on top of that, the genie’s out of the bottle. We’ll never go back to a world without it.”

Before cryptocurrencies gain wider use, they have to solve some pressing issues, Mr. Wilkes said. Most cryptocurrencies are purely speculative and neither a good currency nor a good investment.

“There’s a demand-side problem,” he added. “There’s no supply. People aren’t selling them and they can’t use them anywhere.”

While that gets sorted out, Galileo will help foster innovation through its open APIs, which have brought strong success so far, Mr. Wilkes said.

“We allow innovators to figure out what the future is. Whether it’s a large tech company or two guys in a garage it’s hard to say who the winner will be.

“Galileo wants to provide the capabilities that power that.”

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