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We are now familiar with this short pause after pressing the enter key on the keyboard or clicking the mouse to perform a financial transaction. Somewhere in the background, the algorithm reaches a quick judgment about risk and either the money is transferred or there are more checks to follow.
The ritual has become faster and smoother, provided there is nothing wrong. The automated process for a bank or insurance company to verify our identities, or check that we're not lying about something on an application, is less intrusive. The screen flashes and the workflow flows.
Identity verification and fraud detection drive e-commerce, and have become a big business in their own right: billions of transactions are approved or declined every year. The proof of this lies in the FTSE 100, where Relx started this week as the fifth most valuable company in the UK, just behind BP. Data really is the new oil.
Relx is the strange name given by the former Reed Elsevier adopted Nearly a decade ago. But the x in Relx isn't just verbal nonsense for a corporate brand. He's referring to LexisNexis, the online data company that has grown inexorably in size and scope. After it started Ohio's Internet laws in 1967, it became the financial custodian of many cell phones.
the story Relx's digital transformation from its Anglo-Dutch roots in business journals and scholarly publishing is familiar. It rose on the FTSE 100 under the leadership of Erik Engstrom, the low-profile Swede who was CEO. Since 2009. Most of its business is now online rather than in print, and its recurring subscriptions generate money for loyal investors.
But although it's known as Elsevier Scientific and Legal Information under LexisNexis, its larger division does something else entirely. LexisNexis Risk Solutions, as it is affectionately called, contributes about 35 percent of revenue and is much larger than the legal operations. There is a lot of money in answering the question: “Are you who you say you are?”
This is often done quickly and silently, as devices are scanned and user identities and financial statements are passed through databases to check for violations. Sometimes he appears in public. “When we lose contact, we work with LexisNexis Risk Solutions to help us find you again,” British insurer Royal London tells customers who have 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 has grown to its current size through acquisitions that were mostly too small to attract attention, adding more heft to a data mill run by 3,000 software engineers and AI specialists.
Auto insurance in the United States is one of its largest markets. Insurers run applications for new insurance policies through their programs to match personal identities with state records, bankruptcy court data, driving violations, etc. Much of the information is publicly available, but it is combined with proprietary data and analytics to reduce insurance company 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 and checks for signs that a computer or phone has been used in fraud. The phone may be in a suspicious place or at an unusual height. The user may press the keys harder or faster than their owner normally would. All this can be observed from a distance.
Risk now has 290 million unique US identities, 13 billion names and addresses, 8 billion vehicle records, 9 billion device records, and 3 billion digital identities. That's a lot of data, not to mention the 16 billion keyboard, mouse, sensor and touch transactions you process annually. About 80 percent of its revenue comes from the United States, where privacy laws are looser than in Europe.
One of the reasons the identity business continues to expand, and has become so profitable for Relx and its investors, is that it clearly works. An insurance company or bank can calculate whether these checks reduce fraud enough to justify fees by turning the technology on and off. There is enough crime to pay for it.
Engstrom deserves some of the credit for Relx's x-volume increase, but not all of it. Early developments in identity data came under his visionary predecessor, Sir Crispin Davis. The result is a business that increases in value the less attention is given to it. Follow the money and leads to your phone.
