Payments

Why Galileo CEO Clay Wilkes sees big opportunity outside of the U.S.

Utah-based company powers major fintechs such as Chime and Varo

Earlier this year, Utah-based payments infrastructure provider Galileo was acquired by SoFi for $1.2 billion in a cash and stock deal.

It was one of those stories that is always fun to cover – a company based out of Silicon Valley that did not raise outside capital for its first 19 years of existence getting acquired for such a large sum. Let’s not forget the company was also profitable.

Galileo’s digital payments platform enables checking- and savings account-like functionality via its open APIs, providing companies with a way to create consumer and B2B financial services. The company’s offerings are accessible via mobile, desktop and a physical debit card. 

In other words, Galileo provides the underlying infrastructure, and serves as the operating system, for fintech companies such as Chime, Robinhood, TransferWise, Varo, Revolut, Monzo and of course, SoFi. Via its APIs, companies can launch debit cards, credit cards, savings products, money transfer and a number of financial products more quickly. In general, Galileo’s APIs are used widely throughout the neobank, payments, gig economy, investing and SaaS market segments. 

Galileo crossed the $100 million ARR (annual recurring revenue) in March, which represented a more than doubling year over year. As of September 2019, Galileo managed over $26 billion in annual payments volume, a 130 percent increase over September 2018. The company raised $77 million in a Series A led by Accel with participation from Qualtrics Co-Founder & CEO Ryan Smith. By March 2020, Galileo had processed over $53 billion in annualized payments.

With so much historical growth, I was curious to hear about what’s ahead for Galileo, which operates as an independent subsidiary of Social Finance Inc. (SoFi). So I hopped on a Zoom call with CEO and co-founder Clay Wilkes to find out. 

Global expansion

Wilkes told me that looking ahead, he sees “probably more opportunity” for Galileo’s services in Latin America and Asia-Pacific than in the United States. 

Galileo has been active in Mexico for about two years but only recently went “live” in the country earlier this year, meaning that it has clients “up and running” in the country.

“Payment network brands and switches are together in the U.S.,” Wilkes explained. But in Mexico, that’s not the case.

“Mexico operates a local switch with a distinct brand,” Wilkes said. “Also there are about 50 banks in the country with about five dominating, whereas in the U.S., there over 8,000 banks.”

And so for example, Mastercard did not historically have network or switching infrastructure in place in the country. As such, it only had brand deals in place with big banks in Mexico.

Last year, Galileo got approved by the country’s central bank to route in-country transactions, making Galileo the first certified provider on the Mastercard switch. By April of this year, Galileo had announced its Mastercard certification in Mexico as well as its partnership with Mexican startup Klar, which describes itself as the “Chime of Mexico.” 

At that time, Galileo said it was the “first API software innovator to secure Mastercard certification and to launch as part of Mastercard’s Fintech Accelerate program in Mexico.”

For Galileo, Mexico “leads the way for the rest of the region,” so solidifying its presence there first was important, Wilkes said.

“Not only is Mexico one of the most influential and innovative fintech markets in Latin America, it is also one of the fintech hubs with the highest growth potential worldwide,” said Tory Jackson, Galileo’s in-country manager for Mexico, in April.

Next, the company is going through certifications in Colombia and Brazil, and has identified four additional countries in Latin America that it will also begin working towards certifications.

Paving the way

LatAm is not the only region Galileo is eyeing, having acquired a company in Hong Kong. Certification is underway in Singapore and Galileo is working on it in Hong Kong and Japan, according to Wilkes.

It’s a long process, he said.

“You have to do a lot before you can begin certification. For example, you need to have a sponsor relationship in that country, as well as have a good understanding of what’s going on there before an intent to launch,” Wilkes said. “You must also reveal what your strategy is to be successful in that country.”

By sponsor relationship, he means being partnered with third-party providers. And in some cases, a company has to have an established local presence. And that doesn’t even include compliance and local laws.

Currently, in Mexico, 90 percent of all payments are cash. And in Brazil, layaway systems are still prevalent.

“Much of the population is unbanked or has a fear of big banks because of corruption,” he said. “So there are huge opportunities to democratize payments. It’s very easy to onboard clients.” 

It’s important to note that all this work Galileo is doing is paving the way for the fintechs it services to begin operating in these regions. 

“We make it easier for fintechs to enter those regions as we move into these various geographies,” he said.

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