Stay informed with free updates
Just enter the Technical section myFT Digest — delivered straight to your inbox.
We are now accustomed to a short pause after pressing the enter key on the keyboard or clicking the mouse to make a financial transaction. In the background, the algorithm reaches a snap judgment and the money is transferred or there are more checks to follow.
The ritual was quick and smooth, providing nothing went wrong. An automated process by a bank or insurance company that verifies our identities, or checks that we're not lying about something on an application, comes in handy. The screen lights up 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 declined each year. Evidence of this is in the FTSE 100 index, where Relx started this week as the fifth most important company in the UK, ahead of BP. Data really is the new oil.
Relx is a generic name formerly owned by Reed Elsevier accepted almost a decade ago. But ix on Relx isn't just some marketing company gimmick. It describes LexisNexis, an online database business that has grown immeasurably in scale and scope. Starting with putting Ohio's regulations online in 1967, it has become the financial guardian of many mobile phones.
I the story of Relx's digital transformation from its Anglo-Dutch roots in business magazines and scientific publications is typical. The FTSE 100 soared under Erik Engstrom, a humble Swede who became chief executive. since 2009. Most of its operations are now online rather than printed, and its subscriptions regularly generate revenue from trusted investors.
But while it is known for science under the name of Elsevier and official knowledge under LexisNexis, its main division does something else entirely. LexisNexis Risk Solutions, as it is blandly called, contributes about 35 percent of the revenue and is much larger than the legal activities. There is a lot of money in answering the question, “Are you who you say you are?”
This is mostly done quickly and quietly, as devices are scanned and user information and financial statements are passed through databases to check for breaches. Sometimes, it's public. “When we lose contact, we work with LexisNexis Risk Solutions to help us find you again,” Royal London, a UK insurer, tells those customers who received the unexpected letter.
Relx risk division is not the only provider of identity verification and analytics: from Experian and Verisk Analytics in the US to Group GB in the UK, the list of global competitors is long. But it grew to its current size through acquisitions that were too small to attract attention, adding more grist to a data mining facility managed by 3,000 software engineers and artificial intelligence experts.
US car insurance is one of its biggest markets. Insurers run applications for new policies through their software to match personal information with government records, court data for fraud, driving violations and more. Most of the information is public, but this is combined with proprietary data and analysis to reduce insurance losses by tracking personal histories, wars and all.
Relx expanded to the bank in 2018 by buying ThreatMetrix, a Silicon Valley firm that combines internet and digital tools, to check for signs that a computer or phone is being used for fraud. The phone may be in a suspicious location or at an unusual height. The user may be hitting the keys harder or faster than the owner usually does. All of this can be viewed remotely.
The risk division currently holds 290mn US unique identities, 13bn names and addresses, 8bn car records, 9bn device records, and 3bn digital identities. That's a lot of data, never mind the 16bn keyboard, mouse, sensor and touch transactions made each year. About 80 percent of its revenues come from the US, where privacy laws are more relaxed than in Europe.
Another reason why the identity business continues to grow, and is so profitable for Relx and its investors, is that it works transparently. An insurer or bank may not be able to calculate whether these checks reduce fraud enough to justify payments by turning the technology on and off. There is enough crime to pay.
Engstrom deserves part of the credit for increasing the x-size in Relx, but not all of it. Its first advances in data identification came under its predecessor Sir Crispin Davis. The result is a business that grows more valuable than it realizes. Follow the money and leads to your phone.