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We are now accustomed to the brief pause after pressing Enter on a keyboard or clicking a mouse to perform a financial transaction. Somewhere in the background, an algorithm instantly makes a risk decision and requires further checks to see if the funds will be transferred.
If nothing went wrong, the ceremony would be faster and smoother. Automated processes for banks and insurance companies to verify our identity and make sure we haven’t lied on our applications are less onerous. The screen flickers and the workflow progresses.
Identity verification and fraud detection are key elements of e-commerce and are big business in their own right, with billions of transactions approved or rejected each year. The evidence is in the FTSE 100 index, where Relux started this week as the UK’s fifth most valuable company, just ahead of BP. Data is truly the new oil.
Relx is a strange name adopted by former lead Elsevier nearly a decade ago. But the x in Relx isn’t just some verbal nonsense from a corporate branding company. This represents LexisNexis, an online data business that is growing relentlessly in size and scope. It started in 1967 by publishing Ohio statutes online and has become the financial guardian of many cell phones.
Relx’s digital transformation story from its British and Dutch roots in business magazines and scientific publishing is well known. The company became a FTSE 100 stock under the direction of Erik Engström, a low-profile Swede who has been chief executive since 2009. Most of the company’s activities now occur online rather than in print, and subscriptions provide large amounts of cash to loyal investors.
But while the company is known as Elsevier for science and LexisNexis for legal information, its largest division does something entirely different. Despite its bland name, LexisNexis Risk Solutions accounts for about 35 percent of its revenue and is much larger than its legal business. It costs a lot of money to answer the question, “Are you who you say you are?”
This is done quickly and in most cases silently as the device is checked and the user’s identity and financial declarations are passed through a database to check for compromise. In some cases, they may appear in public. British insurance company Royal London told customers who received an unexpected letter: “If we can’t reach you, we’ll work with LexisNexis Risk Solutions to help find you again.” I’m telling you.
Relx’s Risk Department is not the only provider of identity verification and analytics. The list of global competitors is long, from Experian and Verisk Analytics in the US to GB Group in the UK. But through acquisitions, most of which were too small to attract attention, the company has grown to its current size and added oomph to a data mill managed by 3,000 software engineers and artificial intelligence experts. I did.
Auto insurance in the US is one of the largest markets. Insurers are processing new insurance applications through software that matches personal information to state records, bankruptcy court data, driving violations and more. Although much of the information is public, it is integrated with proprietary data and analytics to reduce losses for insurance companies by tracking personal history, warts, etc.
Relx expanded its banking operations in 2018 by acquiring ThreatMetrix, a Silicon Valley company that links online identities to digital devices and checks for signs that computers and phones are being used for fraud. Your phone may be in a suspicious location or at an unusual altitude. The user may be hitting the keys harder or faster than the owner would normally. All of this can be observed remotely.
Risk departments currently hold 290 million U.S. unique IDs, 13 billion names and addresses, 8 billion vehicle records, 9 billion device records, and 3 billion digital IDs. That’s a lot of data, apart from processing 16 billion keyboard, mouse, sensor, and touch transactions a year. About 80% of the company’s revenue comes from the United States, where privacy laws are more lenient than in Europe.
One reason the identity business has continued to grow and become so profitable for Relx and its investors is because it has proven to work. By turning technology on and off, insurance companies and banks can calculate whether these checks reduce fraud enough to justify the fees. There are enough crimes to atone for.
Engstrom deserves some of the credit for increasing the size of Relx’s x, but not all of it. Early advances in identity data came under his visionary predecessor, Sir Crispin Davies. As a result, your business becomes more valuable the less attention you pay. Following the money will lead you to a mobile phone.
john.gapper@ft.com
