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We are now familiar with that brief pause after pressing the enter key on the keyboard or clicking the mouse for a financial transaction. Somewhere in the background, an algorithm makes an immediate risk assessment and the money is either transferred or additional checks follow.
The ritual became faster and easier, provided it was nothing bad. The automated process of a bank or insurance company verifying our identity or checking that we are not lying about something in the application is less annoying. The screen flashes and the workflow continues.
Identity verification and fraud detection grease the wheels of e-commerce and have become big business in their own right: billions of transactions are approved or declined each year. The proof of this lies in the FTSE 100 index, where Relx started this week as the fifth most valuable company in the UK, just above BP. Data really is the new oil.
Relx is the strange name of the former Reed Elsevier adopted almost ten years ago. But xu Relxu is not just the verbal nonsense of a corporate branding company. It stands for LexisNexis, an Internet data company that has grown inexorably in scale and scope. Starting with the Ohio State Statutes put online in 1967, she became the financial guardian of many cell phones.
The story Relx’s digital transformation from its Anglo-Dutch roots in business magazines and scholarly publishing is well-known. It climbed into the FTSE 100 under Erik Engstrom, a low-profile Swede who served as chief executive since 2009. Most 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 for science under the name Elsevier and legal information under LexisNexis, its largest division does something completely different. LexisNexis Risk Solutions, as it is fondly 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 mostly done quickly and quietly, while devices are checked and user identities and financial statements run through databases to check for breaches. It occasionally surfaces in public. “When we lose contact, we work with LexisNexis Risk Solutions to help us find you again,” Royal London, the UK insurer, told customers who received the 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 mostly too small to attract attention, adding even more to a data mill run by 3,000 software engineers and artificial intelligence experts.
American auto insurance is one of the largest markets. Insurers run applications for new policies through their software to match personal identities with government records, bankruptcy court records, driving violations and so on. Much of the information is public, but it is integrated with proprietary data and analytics to reduce insurers’ losses by tracking personal data, warts and all.
Relx expanded into banking in 2018 with the acquisition of 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. The phone may be in a suspicious location or at an unusual altitude. The user may be pressing the keys harder or faster than their owner normally does. All this can be observed from a distance.
The Risk Division now owns 290 million US unique 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, let alone the 16 billion keyboard, mouse, sensor and touch transactions it processes annually. About 80 percent of its revenue comes from the US, 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’s proven to work. An insurer 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 increasing the size of xu Relx, but not all of it. His early advances in identity data came under his far-sighted predecessor Sir Crispin Davis. The result is work that becomes more valuable the less it is noticed. Follow the money and it will lead you to your phone.
