itstargetnews
Stay informed with free updates
Just sign up to Technology sector myFT Digest — delivered directly to your inbox.
We are all too familiar with that short pause after pressing the keyboard enter key or clicking the mouse to make a financial transaction. Somewhere in the background, an algorithm reaches a quick risk judgment and the money gets transferred or there are more checks to follow.
The ritual becomes faster and smoother, as long as there is no mistake. The automated process of a bank or insurance company verifying our identities, or checking that we’re not lying about something on an application, is less intrusive. A screen flashes and the workflow continues.
Identity verification and fraud detection grease the wheels of ecommerce and have become big business in their own right: billions of transactions are approved or rejected every year. Proof of this is in the FTSE 100 index, where Relx started this week as the UK’s fifth most valuable company, ahead of BP. Data is really the new oil.
Relx is the strange name of the former Reed Elsevier adopted almost a decade ago. But the x in Relx is not just a corporate branding firm’s verbal nonsense. This explains LexisNexis, the online data business that has grown inexorably in scale and scope. Started by putting Ohio laws online in 1967, it has become the financial guardian of many mobile phones.
the story of Relx’s digital transformation from its Anglo-Dutch roots in business magazines and scientific publishing is familiar. It climbed the FTSE 100 under Erik Engstrom, the low-profile Swede who became chief executive since 2009. Much of its activity is now online rather than in print, and its recurring subscriptions bring in money for loyal investors.
But while it is known in science under the Elsevier name and legal information under LexisNexis, its largest division does something else entirely. LexisNexis Risk Solutions, as it is loosely called, contributes about 35 percent of the revenues and is much larger than the legal operations. There’s a lot of money in answering the question, “Are you who you say you are?”
This is usually done quickly and quietly, as devices are checked and users’ identities and financial declarations go through databases to check for violations. Sometimes, it is visible to the public. “If we lose contact, we work with LexisNexis Risk Solutions to help us find you again,” Royal London, the UK insurer, told customers who received an unexpected letter.
Relx’s risk division is not the only provider of identity verification and analytics: from Experian and Verisk Analytics in the US to GB Group in the UK, the list of global contenders is long. But it grew to its current size through acquisitions that were often too small to attract attention, adding more grist to a data mill run by 3,000 software engineers and artificial intelligence specialists. intelligence.
US auto insurance is one of the largest markets. Insurers run applications for new policies through its software to match personal identities with state records, bankruptcy court data, driving violations and more. Much of the information is public, but it is mixed with proprietary data and analytics to reduce insurers’ losses by tracking personal histories, warts and all.
Relx expanded into banking in 2018 by purchasing ThreatMetrix, a Silicon Valley company that links online identities to digital devices, checking for signs that a computer or phone is being used for fraud. A phone may be in a suspicious location or at an unusual height. The user may hit the keys harder or faster or faster than the owner normally does. All this can be observed from a distance.
The risk division now has 290mn US unique identities, 13bn names and addresses, 8bn vehicle records, 9bn device records, and 3bn digital identities. That’s a lot of data, never mind the 16bn keyboard, mouse, sensor and touch transactions it processes every year. About 80 percent of its revenues come from the US, where privacy laws are looser than in Europe.
One reason the identity business continues to expand, and has been so profitable for Relx and its investors, is that it appears to be effective. An insurer or bank can then calculate whether these checks will reduce fraud enough to justify the fees by switching the technology on and off. There is enough crime to pay for it.
Engstrom deserves part of the credit for increasing the size of the x in Relx, but not all. Its first development in identity data was under his predecessor Sir Crispin Davis. The result is a business that grows more valuable the less it is noticed. Follow the money and it will lead to your phone.
