Equifax: The Work Number Data Coverage

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And you mean that for the employers, not the payroll providers, right? Because the payroll provider is also a factor. But a large employer, like a Fortune 500 company, would be receiving this money as compensation for providing The Work Number, correct? Okay. And would that be the case for most very large enterprises and not for middle-market companies or SMBs? I'm trying to understand what kind of company benefits from this. Is that part of the value proposition?

It's definitely more advantageous for larger companies. It depends on what you consider big these days. In my opinion, very big is hundreds of thousands of employees, big is anything over 25,000, middle would be 10,000 to 25,000, and small falls below that range. I would say any company with 50,000 employees or more has probably discussed some sort of revenue sharing or loyalty payment. They call it various things, but it's very common in this industry. Many competitors to The Work Number openly offer revenue sharing.

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Another point to discuss is the contracts, which usually have exclusivity. This means the company cannot share their records with someone else. How do you view the strength of that exclusivity from the company's side? Are companies unlikely to switch, meaning they'll just keep renewing? Is there no incentive for them to switch? How do you view that aspect of the business moat? For instance, in five years, could a company like Walmart decide to switch if Experian offers twice what they're currently paying? I'm curious about your thoughts on the differences between large companies that might charge more and smaller companies that might not care as much about the money and just want to avoid hassle, preferring to rely on their HR workforce.

However, for a payroll provider, exclusivity is much more important. Equifax has built a strong competitive advantage, or "moat," to keep other players out. Almost every payroll provider, except one to my knowledge, has built-in exclusivity. This means no other payroll provider can use or share the data with another service provider. This exclusivity helps them succeed and keeps others out. As long as these contracts auto-renew, this will remain in place. They include this in their contracts, offering payroll providers a certain amount, defined as a percentage or per transaction, and if it's exclusive, they multiply it by a certain amount.

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