Future of Data in Payments & Fraud | Mark Walick

Hi, welcome to Payments & More, The Allies Show, I'm Nico, CEO of Allies. Each week I will have a chat with successful women and men from the Payments in US Week. We will speak about their business journeys and the lessons they learned. I will ask them to share their views, their opinion about the most relevant topics in Payments & More. My aim is to bring you up the bitten strike stories, views and perspective from a different angle to shed new light on what's hot in Payments space and in its future. We will go with a flow, let's see where our guest take us. This is Payment & More. Enjoy the ride! Today our guest is Marc Walik, Marc took care of eBay Enterprise, Apple, Google fraud management in his career. What else? I should say that's a volume of over 100 billion of dollars to manage every year, so I'm sure we learn a lot from Marc. Marc will share with us his views on the dominance of data when it comes to fraud prevention. We will hear about his opinion around AI, orchestration and all those buzzwords we are reading at the moment. On a more personal way, we will also know why Marc is attending the Bernin-Mal Fettival every year. So Marc, welcome to our show today. Thanks for having me. Thanks for waking up so early to be with us. We usually do this kind of interview with a drink. I don't know what's your favorite drink. What is a drink you're dreaming to have in your hand right now? It's the drink and the location, but I'd probably go with app or all spritz right now somewhere in Southern Italy. OK, something simple. So 20 years of experience, nice, because we are interviewing intelligent people in this show. So welcome to the club. Senior Director, Payment fraud at eBay Enterprise. You've been heading the fraud prevention at Apple and iTunes. And you're no in charge of end-to-end conversion optimization of Google Payment platform and Google Pay. If this company will not exist, which company will you be working for right now? Let's say Google and Apple don't exist. Where will be Marc? Ha, I think Marc would be at some startup that is working on bringing paying customers into a new and democratized way of paying. So I don't know. I think that I spent a lot of time thinking about this. How should the payments industry look like and how can I do something about that? That's been on my mind a lot lately. If we could do it all again, what would it look like? All right, great. So we'll speak about that. You know, at each of our show, we are giving an award to our guests. So this is your own award moment. It's very easy, because we've gotten as your world. But this is the only moment of the show where you cannot speak. And you just have to listen to us praising you. And I'm a bit fascinated because I know you for over 10 years. I know your ability to sit in the front row at eight o'clock in the morning of every conference in the industry in order to learn. But you also have this ability to stay in the bar, very late, to share opinion and knowledge with the most junior people of those conferences. So now my duty is to try to squeeze this punch you have in the brain. But really, congratulations for that. It's very rare to see an individual, especially working at Google, able to share so much. I'm wondering, are you still learning? The question is, am I still learning? Yes, the answer very much so is yes. I'm actually very inspired by what's going on right now with a bit of the digital revolution. And almost slightly worried, right, that, yeah, there's 20 years in there. And while the industry isn't going to fix itself in the next three years, or change, right, big, you know, steer a big ship around and make a change in that time. But I do, I do get a sense that the payment industry in even a decade's time is going to look drastically different. And we all need to understand and learn what's going on so that not only are we all relevant, but we're helping, right, to help steer that ship. So that's a great statement you're doing, let's try to dig a little bit. So when I hear about this kind of statement, some will say, let's start with this. There is more and more data available in the market. You've been working for very rich companies. I don't know if it's because it's easier, but no data, no fraud prevention will be the first conclusion. Is it more easy when you have a lot of data like at Google, Apple or eBay? There's no doubt about it having more data makes makes decision making easier. I would say that in the end, I think that it doesn't really matter in the eyes of the networks and the eyes of the issuers that we're talking about credit cards. We still seem to make mistakes. There are problems that that data can't solve, like friendly fraud, first party fraud, however you look at it, that ultimately impact businesses impact customers and impact everybody's bottom line. So while we, I have enjoyed significant amount of data advantage over lots of merchants around the world, I still, like in the case of PSD2, I still will have to do what everybody else does. I still have my fraud rates, I still have false declines, I still have everything that everybody else has. So I have a question because there is a bit of confusion here. Some people are saying, okay, let me outsource everything. I may, I may have only a fraud manager in house, and you know, you have some specialists to do that. Or I should bring a maximum in house in order to control because I'm the one knowing better my business. What's your position on that? I think that if you have the ability, so there's two things, especially from the eBay point of view, I certainly enjoyed having been the fraud solution provider, so to speak. We did it for all of our merchants, all of these merchants that we did business with were considerable in size for their industry, or at least from a, from a brand point of view. But at the end of the day, the transaction volume really isn't going to be so great, right? There are a few giant companies that have the ability to see enough transactions that running a risk engine that's in house makes sense and is effective. I really enjoyed the fact that over a hundred different clients worked with us, and I could watch fraudsters move through them, right? They were, like, especially in the sporting goods industry or the apparel industry, the customer, or the fraudsters rather, sorry, they would try every single one. And we ran risk for all of them, right? So it was, it was a good thing to see because we saw it in aggregate. The aggregate is really what you need, right, you need volume and you really need an end to end team. There's one thing that I've learned about building internal risk solutions that you have to have a commitment for not just the data sciences and the data collection, which is tremendous and very hard to do to pull data from all the different points within your company, but then tools and then adjustments, right? It's very, it's, it's very hard. So in my estimation that I would reserve in housing unless you really, really have a dedicated team budget and you have size in transaction volume. So to push a little bit more on that direction, you know, there is this recurring thought in the industry. In 2010, people were already speaking about, you know, when an insurance company will ensure fraud and we can focus on our business, is it a little bit what's happening with those chargeback warranty company, for example, that's the discussion of the moment, should I invest in fraud prevention, external solution, outsource, etc., I just hung over for a fee, all the responsibility to somebody else. And I know, I know you invented quite early at the event, chargeback warranty, right, because it seems something, it's not new at all, explain me a little bit about that. I was going to say, well, back in 1999, when our model was, you know, for payment processing, you paid us X percent, and you didn't worry about a thing, it was not my surprise, but I smiled a bit when somebody came by and said, hey, you know, what are you thinking about this? And it's like, yeah, yeah, I think that had an anniversary, a couple of decade anniversaries. I think it's a logical thing, right, I stand behind it, I managed it for over 11 years. I think that it makes a lot of sense. If the economics are there, it can make a lot of sense. I have seen companies that have said, hey, give us all of your fraud decline transactions. We will reevaluate them. And if we approve them, you have no chargeback liability. I think that was like maybe a decade and a half ago. I don't even know if that model still exists, but the price points were super high. And, you know, I said, I'm not looking for sales recovery, I'm looking for solid first run decisions and at a reasonable price. And just to give some examples of that, some of our largest clients back then, they negotiated with us a cost plus model, right? So it really depends on what you want. But I think that folks in general would most likely negotiate pretty heavily to have the business come through in this model. But yeah, totally. Sorry. And the last point on that is, is because, and this is what I'm focused on, have been for the last four or five years, the incentives need to be aligned on this as well. and you really have to, you know, your job then becomes making sure that that company is not declining to protect their margin on the business. So false declines is one of the biggest things in the industry right now. And it's in both internal because of inefficiency, also because of this model and external because of the cost of processing all this fraud. - So on one hand, you have this temptation for merchant to go with a chargeback warranty solution. On the other hand, you have dozens of new players in the fraud prevention area trying to sell their solution to merchants. They are different, the market is crowded. What's the latest technology that got you attention lately? I think merchants are confused. - Yeah, that's a really good question. I don't know that I can be an authority in vendor selection right now as far as that goes. And then as technology goes, the thing that obviously is around is, everybody can do ML and if not ML because apparently ML is machine learning, by the way, is almost an old technology from the buzzword point of view, artificial intelligence is the new thing. And I think that people really need to pay closer attention to what is meant by that with these vendors and what they're actually doing. And I don't know that, I think the problem is, is that I don't know if merchants, and particularly the folks that are making decisions on who to partner with, understand what that is. And I don't wanna sell anybody short, but I look at the millions of merchants, right? That we have just in the US alone, if they are all making selections, what do they actually do? I'm not quite sure that that's something that they need to necessarily understand in their everyday life. So back to your question. I really don't know how to best answer that. - So you have all just players. You have some players that are going the wrong way. We saw this month the case of NSAID, for example, but I'm not judging the technology here, but they're CEO who ran away. That's a sad news for the industry. What we observe as well is that the card schemes are acquiring every month a new fraud prevention technology. We've seen that being MasterCard, the Certified Visa. There is a race for acquiring these providers. I don't know if Ikata will be the next one. Do you think there is a strategy there? Oh, let's get them while they are available. I know you're close to the card schemes. - I would say that there's definitely a strategy. I've seen it play out very specifically, not with fraud per se, but with the chargebacks, component of the transaction ecosystem. And if you think about it, one of the things that I like to talk about is, is if you follow the dollar as it goes through the transactions, who's benefiting off the dollar? How much money is everybody making off of one dollar going through the system? The networks, the processors, the vendors, your solution providers that are adding a service, how much of that dollar are you actually getting because of the costs and then conversely, or inversely, how much money is everybody benefiting off of that dollar? And I think that as companies that are out there become larger and they eat a lot of margin away from networks and processors and alike, you see that naturally there's an acquisition opportunity to say, how can we get more of the dollar, simply stated? - So, do you think it's a chicken and egg because large part of the market think that the schemes should be accountable fully for the fraud in the system? At the end of the day, over the last 20 years, they did not manage, they seem to be a follower. Do you think they're returning into challengers of the rest of the market or just reactive? - Yeah, so to your first question, I don't think that the network should be responsible for fraud. I think that the networks should be responsible for policies that help both merchants, everybody in the ecosystem that stands to lose anything, to help them develop proper solutions. I worry about the inverse and that this is a, this can be a for-profit situation, right? I worry about networks or schemes benefiting from the problem that is fraud online, almost to a point where if you can't beat them, join them like the problem's too hard, we should just make money off of it. That's a very dangerous thought. But I really stand by the idea that the networks really should be working very hard to develop either policies or methodologies. We could talk about data-only transactions in concert with 3D secure. Let's do something bigger, better, or something along those lines that kind of brings things forward into the 2020s, the 2030s, whatever you wanna talk about, but something a bit more advanced. And I think that they have a position and a sense or an actual point of power, right, that would usher those things forward. I struggle a bit to be frank with one of the networks that has, on the outside, has done a really good job of developing lots of tools and solutions. And they're proposing things left and right. Hey, you know, put this in the message or use this API alongside of the authorization message and send this information, or let's repurpose the 3D secure rails and do something different. And we can drive down false declines and we can drive down fraud and we can shift liability and we do these things. And it's like this is exciting. Okay, so you're doing what I'm hoping and then they turning around and saying, and it's gonna cost you. And I'm gonna lower the fraud thresholds and say that if you can't dance under the stick, then I'm gonna start enforcing that you need to use my products for which I'm going to charge you. And I'm like, hmm, I don't know. Seems a little, seems a little disingenuous. That's what I'm worried about. I think that they are a governing body. I think that they have an opportunity to be at the center of innovation for the modern problems that are associated with cardinal present transactions. But I don't think that they should be necessarily profiting specifically from that. Does that make sense? - So here, I feel that you're buying to arrive to our next section that is a golden minute, your golden minute. Let's say you're the president of the fraud and payment industry, global presidents, big boss, and you're addressing your peers and your players. And this includes card schemes in front of an audience of 10,000 people. What will be in one minute your call to action for the industry? - Well, if you remember Apple's 1984 commercial, I think it might start out looking a bit like that. I will start with how I see my career. And I don't know how this will translate into your golden minute question. But I have, in the 20 years now, I've arrived at it like, hey, I really want to fix this problem of the card's business. I want to fix the false declines. I want to fix the pendulum swings between authorization and fraud. And I want to fix the data sharing. I want to fix all these things and I want to make the card business just normalized and not inflamed. And because we need to work on those things. And then once that's all fixed, I want to burn it to the ground. When PSD2 came out, the director like this notice came out and we all just freaked out about the credit card side of it. Can you believe we have to go backwards and do this draconian thing of challenging everybody like we did at least from the Americas? It's like, oh, we tried this thing in 2003 and 2004 was horrible. And how are you saying we've got to go do this for everybody, don't you realize? We have all this information. But I started to peek at the other side of it, the open banking side of it. And I went back and I started reading about the Y PSD2, right? Fraud is broken, font fees are there, the compromises are innumerable and never stopping. And I was like, and then I started looking at the open banking. And I'm looking left at the problem looking right at the open banking solution. I'm like, you know what? Why aren't we building something new? The credit card, the piece of plastic that everybody has was a proxy for your money. It's a proxy. Your money is sitting in a bank account and that card is dumb. Well, now it has a chip, maybe it's a little bit smarter. But the card itself doesn't do anything but get the money from A to B. That's absolutely refreshing to hear somebody in favor of PSD2. I'm super glad to have you on the show today. (laughs) The other part of PSD2, the other part, the other part. So, but now your device, your watch, a ring, your phone, whatever has, you know, is the new card in my mind. And it's, you know, so why do you need a card anymore? The rails, you know, we have become to rely upon these card rails. And while we've built all of these tools, the fraud solutions, on top of them, they are still, they run it, you know, plus one, T plus one, depends on the country. It could be T plus third and you don't see your money. All these processes take place between the processors and the issuers and the issuer processors and then all these people, when today you can just have a simple set of instructions, I want to send Nico 500 euros. And within a blink of an eye, the money's there. And, you know, build solutions around that. It's, at least in Europe, it's gonna be super cheap. The rest of the world is looking at Europe. You know, Latin America, Central Asia. everywhere. Even the US, right? It's like how can we change how we move money? How can we change? How can we build something with new Rails, new technology, and focus on the future of data? And as we describe, all of a sudden, maybe everybody can have data available to them to be able to use in a transaction message. >> That was a very long minute, but a very rich one, Marc, so thank you for that. So Marc, you manage 120 products, over 200 countries, 200 forms of payment, millions of daily purchase, hundreds of billion in annual money move, billions of customers at your recent position. And suddenly, Marc, during his career, is saying, I'm tied with fraud prevention. Let's dive into acceptance optimization. Did you start with a blank page of paper to do that? That's quite the challenge, right? >> Yeah, basically, it came down to one year I was doing planning. Just to be fair, I had even back in my eBay/GSI days, I had grown a bit tired of doing risk. And just to give you a little 50 cent tour of this little segment is, so I started working on payments proper. And then Apple called and said, hey, we would really love to talk with you about this risk opportunity. And I just finished with risk, I was taking a break, not from this acceptance point of view, but in general. And so when I fixed your fraud problem, can I go do something else? And it turns out, no, you get hired for a job, that's your job. Google comes along, and I'm working on the play Google Play Risk. And I realized in this planning point of view, I'm trying to go on resources and money and the like, so that I can continue my work. And I'm looking at it and I'm just not getting it. And I look around and I say, you know what? I started doing the math. And I'm like, I am working super hard to get a charge back rate reduced by 20 percent, 15 percent, whatever it may be. And in the grand scheme of where a company puts their money, you know, that's not necessarily where it's going to go. They want to go to go to growth. And so then I started looking at this and I said, you know, wait a minute, if I were to add 15 or 20 percent to the total authorization rate, it far outweighs the reduction of the charge back rate by the same ratio. And let me go see what's causing that problem. And from there, it was like, oh, it was a blank sheet to start writing down problems. And I ended up writing pages. Look at all the things that are happening for Google in particular. Look what's happening within the industry in particular. And I was like saying the same thing, follow the dollar and see what happens when a decline takes place. What do customers do next? Do they stay with the bank? Do they switch a bank? Do they stay with us? Do they go to a different merchant? Like what happens in the unhappy path? And then why? And then what are our systems do? And it turned out that within maybe a quarter, I had 23 projects that had a master program that I said, hey, instead of doing risk and trying to reduce the fraud, which is doing really good, right? We've got a good handle on it. And a lot of its family fraud, so really can't do very much there. Why don't we focus on these things and see if we can't outpace some of these losses and shrink it naturally while actually having a good story where we've grown our top line. And I guess the rest is history. Wow. So some things you must have done very good, because I read recently that Google Pay became the most downloaded app in August 2020, up to 77% in India. So congratulations for that. We are reaching the end of the show. So, you know, we have this famous section about the box game. You're going to participate. This is very simple for the first time listener. I have a box on my desk. Inside this box, there is something related to our industry. Listeners have to guess what's inside the box. If they guess correctly, they will win a week of holiday in Ibiza for two people from anywhere in the world. You have the opportunity to help them. So you have one question. You can ask me one question about what's inside the box to help the auditors. The entire industry is listening to you because there is a lot of buzz about what's inside my box. Oh, this is unfair. One question. Okay. My assumption is that lots of people get to ask the questions. And I have no idea of previous questions asked, but I am hopeful that you will share these for subsequent attendance. The only way to know the other question and answer is to listen to the other podcasts we have listed. Got it. All right. My one question is what are the dimensions of the box? That's a very clever question. So the box is 20 centimeter by 20 centimeter by 10 centimeters. Okay. Remember, you can give a try at the answer. Any auditor can give a try by posting the correct answer on LinkedIn. And this is where all the debate is taking place where you can have some tips. So go to our LinkedIn page or send us a private message through our website and win the opportunity to go and holiday to Ibiza for two. I'm getting to the end of the show now. I want it to be a little bit more personal with you. Fair thing. When did you fail in your career? And you say no. Really, I did it wrong. Very personal. Yeah. And how many times and how fabulously did each of those failures come up? Big your world. Yeah. I think that my time at Apple was probably one of the harder points of my life. It was my first foray into Silicon Valley life. I had a lot of pressure personally to succeed at that. I had relocated my family and relocated everything. I moved away from family. And obviously Apple is a very grand stage. I think that that the space was hard, the dynamics were hard. And I wouldn't call it a failure, but I would say that I learned a lot at Apple, which I think has helped me succeed at Google. So you know, we always disclose one of our guests best kept secrets. So I know that people who wants to meet you can either contact you on LinkedIn and you tend to answer and comment a lot of things on LinkedIn or to meet you at the Burning Man festival every September. What is addiction to Burning Man? You having a great time there or because there's no money involved? There's no way to pay, right? In Burning Man. Nobody pays. You give gratitude. So yeah, it is, it is a wonderful, I can't recommend it enough. In general, because it is everything. It's a city, right? There's everything for everybody. But I love the communal nature of gifting and offering what you have and receiving a need, I think, is just a refreshing type of economy. I can only imagine how long it would last if it were real. But it is nice to believe that in a 10-day stretch or more, that you can witness humanity, creativity, just love, I guess, in the simplest sense of just being able to be with each other. And to survive it all at 100 and whatever degrees with 80 mile an hour dust storms, I think it's just fantastic. Well, that's fabulous. Well, thank you very much for being with us today, Mark. People can find you on LinkedIn or at the Burning Man. Then last word of recommendation to the stakeholders listening to us. Three words, four words. Look at your data. Your data is going to tell you what's happening. I live and die by it. I think that it is your best way of maintaining objective decisions, whether it be in buying, partnering, approving, or what have you. Look at your data. Thank you, Mark. Yes, thank you very much for having me. Thanks for joining Payments and More, the Olesho. If you enjoyed the interview as much as we did, please share this podcast with your network. 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