March 6, 2009
PayBefore interviews Clay Wilkes and Todd Brockman
Interview with Clay Wilkes and Todd Brockman, Galileo Processing
Execs Discuss Growth, Portfolio Management and Why it Will Change Prepaid
By Paybefore Staff
Galileo Processing, based in Salt Lake City, is one of the industry’s most experienced prepaid-focused processors, with a reputation as an innovator for the prepaid and hybrid card products it develops and supports.
A year ago, Todd Brockman surprised the industry, leaving his position as global head of prepaid for Visa Inc. and joining Galileo Processing as president. He assumed the role from Clay Wilkes, who founded Galileo and remains the privately held company’s CEO.
At the time, Wilkes told Paybefore that Brockman’s presence “ratcheted up” Galileo’s visibility in the industry and expressed his hope that Brockman’s knowledge and industry contacts would contribute to Galileo’s ambitious growth plans.
Paybefore sat down with Galileo’s top executives, asking them about the past 12 months, how things have turned out with Brockman in a leadership role and what’s on the horizon for their company and the industry.
Paybefore: Let’s start by asking the questions that no one can escape these days: How’s business? Any letdown because of the economy?
CW:We’ve just come off of an amazing end of year. During the fourth quarter 2008, we handled 38 major implementations for existing clients and new clients such as Amscot Financial and Barclaycard US. It was far and away our most successful quarter ever. And, the pipeline looks very promising with additional leading program managers and financial institutions. We have many reasons to be optimistic.
Paybefore: Thirty-eight is a lot of new programs—how do you manage that kind of expansion? Can’t such significant growth change you as an organization?
CW: We’re focused No. 1 on supporting our existing clients, delivering expertise, stability, scalability and new tools to those who have entrusted their programs to us.
Effectively managing growth is a cornerstone of Galileo’s business strategy. If an organization grows like we did last year and as we expect to this year, you’ve got to consistently make process improvements with the goal of streamlining. We examine our key activities to ensure they’re flexibly scalable. Then, we feed those learnings back into our system to make us stronger and even more scalable. We take growth management very seriously.
Paybefore: Speaking of growth, but from an industry perspective, where do you see prepaid growth coming from in the next year to 18 months?
TB: By far, the two biggest growth segments will be government disbursements and general purpose reloadable (GPR). The government area will grow because of the need for state governments, and even the federal government, to save money and, at the same time, provide more convenience to recipients. There will be significant dollars spent there.
In light of what’s happening in the economy, GPR is a fascinating proposition. Access to credit has been reduced significantly, and we’re not talking only about people who can’t qualify for credit cards. We’re also talking about the person whose credit line has been reduced. He used to live in that space between his balance and his credit line, but now that space is gone. In effect, his credit card is useless.
Yet, both of these types of people need to have access to a payment card with rich features and functionally and incredible benefits; not having access to this type of card would impact their lives—and not in a good way. I’m very bullish on GPR cards as a solution for these individuals.
And, I think that large financial institutions focused on building deposits, increasing profits and providing a better consumer experience will be making greater investments in consumer GPR cards.
Paybefore: But haven’t banks been frustratingly ambivalent in investing in consumer-focused prepaid? With all of the pressure on controlling expenses and backing only sure winners, why invest now?
TB: Some banks have been reluctant to invest significantly in consumer-focused reloadable prepaid products because they’re uncertain about the business model—in other words, the profitability. What will change the way banks perceive GPR profitability is a trend we’re seeing now and actually pushing forward—that is, portfolio management.
Those in the GPR space generally do a fine job of acquiring customers—that’s still important but not the biggest issue. What’s often overlooked is keeping customers, changing the behavior of individuals after they’ve signed up for a GPR card through a long-term strategy that creates stickiness—keeping them engaged for one more month or two more months, or moving from three transactions a month to five transactions a month. Just think how that kind of behavior could affect the revenue of a large portfolio.
Paybefore: What is Galileo doing in the area of portfolio management?
CW: Our overall goal is to improve the data our clients get. Traditional processor data are static: You get reports, for example, that tell you how many new cardholders you have or how much fraud you’ve experienced. Those data are defined by the processor to help the issuer, but it becomes a passive business.
Galileo is moving out of the transactional reporting environment into an area where clients have analysis capability, independent of us. We call this Galileo Analytics, and it’s based on super-rich, real-time data to enable our clients to make business decisions relying on a fact base and to manage their marketing campaigns.
Galileo Analytics is available today and campaign management capabilities will be available in early Q3.
Paybefore: How does this work—relying on a fact base and tools to manage campaigns?
CW: These new game-changing tools with Galileo Analytics enable managers now to review important portfolio data through intelligent dashboards. They can then ask questions on aspects of the portfolio and run campaigns with Galileo Campaign Manager. For example, a manager can run a marketing campaign targeted to cardholders based on a broad set of criteria such as gender, cardholder usage, funding behavior, geography, fraud, collections, etc. With Galileo’s fully integrated platform, the Campaign Manager oversees communication through a variety of channels such as IVR, SMS, Web, email, customer service and the API. This can deliver a personalized message to an individual account holder—changing issuing from a passive business to a contextual, dynamic and active business. We believe this becomes processing for the future.
Galileo Analytics will put the data that managers need in graphical form at their fingertips. That capability is 100 percent absent in today’s business environment.
Paybefore: So, how does access to these data encourage financial institutions to invest in consumer-facing prepaid products, like GPR, and drive profitability?
TB: It encourages investment because financial institutions and program managers will—for the first time—have a fact base to run campaigns with significant confidence regarding their return on investment. If you can model return, you can invest a lot more—leading to even more investment in acquisition and portfolio management.
And, think of the power from a marketing perspective—the ability to market down to the individual customer, getting results and pushing the results back into the system to generate additional business intelligence to run a smarter campaign the next time. Think of what that can do to support profitability!
Paybefore: What else does Galileo have under development?
CW: It’s not actually under development, it’s just gone live—and that’s transactional credit, which we believe will further differentiate Galileo from competitors. The first card to use this credit feature is called the Entrada Card, issued by New Millennium Bank in New Jersey. It’s a two-purse hybrid card that combines the benefits of a credit card and a banking account—managed on the same feature-rich platform.
There’s a cash balance and a credit balance on the card. The cash balance is funded by direct deposit or by retail loads at MoneyGram and Western Union. The cardholder accesses the cash balance funds to get cash at ATMs or pay bills—any financial activity typically associated with a checking account. The credit balance feature is activated automatically when the cardholder makes a direct deposit of at least $500. The maximum credit line is initially $50, but the cardholder can increase the available credit balance by making an instant payment from the cash balance to the credit balance. This makes it possible for the cardholder to make larger purchases on credit and develop a credit history. Entrada credit card activity is reported to the major credit bureaus.
The benefits are obvious to the cardholder who needs this kind of feature- and functionality-rich card. But there are also benefits to issuers who are under pressure to manage risk, because this product reduces credit risk. It also generates deposits and earns credit card interchange.
We’ve had this product in the works for some time now, but—it’s funny—it seems tailor-made for today’s economic conditions. We think it’s going to get a lot of pick up because it solves a big dilemma for financial institutions in how to serve a segment of customers who need a payment card.
Paybefore: Speaking of pickup, how aggressive is Galileo in seeking out new business?
TB: In terms of potential new business, our top concern is making sure that Galileo is the right fit for any new client. We’re most excited about partnering with organizations that are committed for the long term, are invested in the space, recognize the strategic opportunities and are willing to plan for success. Those are the types of companies that will gain the most from our expertise, our architecture and the tools we offer. We want to be the best partner possible to these organizations.
Paybefore: Clay, Todd’s been with Galileo for about a year now. How are things different compared to before he joined?
CW: Todd is a tremendous leader. At Visa, he set the course for the industry and the industry lined up behind him. Having him here at Galileo, as an industry leader and veteran, has made an enormous difference and validated who we are, what we’re doing and the caliber of work we’ve been engaged in. It’s been an incredibly good year.