Businesses are racing to update their digital security services to help protect against fraud with soaring online transactions, and that is driving M&A. Equifax (NYSE: EFX) is buying fraud prevention firm Kount for $640 million. Mergers & Acquisitions spoke with Equifax CEO Mark Begor about the deal along with other sector trends.
How does this deal fit in with Equifax’s services?
The acquisition will expand the Equifax global footprint in digital identity and fraud prevention solutions, helping businesses to better engage with their customers online while combating fraud. The pandemic has driven customer interactions to digital channels in record numbers. With the acquisition of Kount, Equifax is expanding its differentiated data assets to help businesses fight online fraud with the industry’s leading risk-based authentication platform that leverages the Kount Identity Trust Global Network.
The combination of Kount and Equifax will help our customers across vertical markets to establish strong digital identity trust behind each interaction while enabling new forms of online engagement with current and prospective customers.
How will Kount improve Equifax’s fraud detection services?
The full suite of Kount products complement the cloud-based Equifax Luminate Platform. Luminate is our comprehensive fraud platform that orchestrates multiple solutions with machine learning to provide risk managers with insights to help manage fraud decisions across the consumer account lifecycle.
With this acquisition, Equifax is not only able to assess the risk of identity fraud in financial transactions, but also the risk of fraud at the point of digital transactions. In addition to the success that Kount has seen with retailers, the company has proven its technology with large enterprises across many industries, including financial institutions, e-commerce providers and retailers as well as service providers. Kount’s international reach will benefit from Equifax’s established relationships with some of the world’s largest financial institutions.
The combined Equifax and Kount global identity and fraud business will be well in excess of $200 million in revenue in 2021. With Kount revenue principally today in the U.S., about two-thirds of our combined revenue will be generated domestically. However, Equifax has strong identity and fraud businesses in both Canada and Australia, and growing capabilities in the UK, Spain and Latin America. Equifax’s global scale and cloud investments will enable integration and delivery of Kount’s capabilities across our International platform, further accelerating growth and strengthening the combined Kount and Equifax data assets.
What trends is Equifax seeing in the sector?
Now more than ever, it is essential for all online businesses to establish fraud prevention and digital trust while also delivering a quality customer experience. While digital transactions have been increasing over the years, 2020 – via Covid – saw record acceleration of E-commerce with consumer behavior permanently changing towards digital interactions. As a result, digital fraud is rapidly increasing and evolving, causing online commerce providers short term and long-term financial losses and reputation damage.
Our competitors and others in the FinTech space recognize the opportunity to provide customers with cutting-edge solutions that incorporate more data to fight fraud. Our acquisition is unique from others in that Kount solutions leverage the Identity Trust Global Network, which has more comprehensive and proprietary, differentiated data.
Will the company look for more acquisitions?
Equifax is always exploring opportunities to grow our business organically and inorganically that includes bolt-on acquisitions that add to our unique data assets. Our strong outperformance in 2020 allowed Equifax to reinvest in the Kount acquisition and growing cash generation will be used for additional bolt-on acquisitions. This is an important part of the company’s growth strategy and will explore additional acquisition opportunities in the coming year.
What is Equifax seeing in the industry in terms of M&A more broadly?
With consumers demanding more from their digital experiences with companies, we expect our industry will continue to look for capabilities that leverage the combination of digital and physical data that also delivers a frictionless digital experience across all consumer interactions. So, companies with differentiated data, with a built-in network effect, are becoming increasingly attractive targets.