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Good morning, everyone, and thank you so much for tuning into the Experian FY '21 Q3 Trading Update Call. My name is Greg, the operator for you today. [Operator Instructions] And now, I'd like to hand the call over to Brian Cassin. Sir, please go ahead.
Thank you very much. Good morning, everybody, and welcome to our Q3 trading update call. I hope that you and your families remain safe and well. I'm joined today by Lloyd Pitchford, and Lloyd will take you through the trading performance after my opening remarks.Q3 was a good quarter. It turned out better than we had expected. Total group revenue was 10%, up at constant currency and organic revenue was up 7%, and that's a performance we'd be satisfied with in any time let alone during a pandemic. This was again driven by North America and Latin America, which considering the backdrop is a great achievement by our teams there. But all regions had a slightly better outturn than we had expected when we spoke to you last in November, and it's especially nice to see the U.K. on a much improved trajectory even if we do face some renewed COVID restrictions. Consumer Services deserves special mention having delivered growth of 22%, with all regions contributing positively. We pressed ahead with innovation and investments. And with our free membership base now exceeding 100 million, we have a solid foundation from which to build. Before I touch on some of the Q3 highlights, I want to pay special tribute to my Experian colleagues across the world. Their commitment to doing the right thing for our clients, consumers and the communities we serve has kept our business strong and prosperous. This has been an extraordinary year like none other we have known, and we're going to emerge from it in very good shape, and that would not be possible but for their incredible hard work and commitment. Turning back to Q3 and North America, which delivered another strong quarter, there were several drivers. Mortgage volumes have stayed stronger for longer. But that's not the whole story. Ascend is going to have another great year. We saw some recovery in Clarity services, and I'm pleased with the progress we've made across both fraud solutions and health. Lending clients are closely watching credit quality and particularly how and when government stimulus is likely to land. This will determine when they are likely to resume customer acquisitions for cards and loans. For the time being, core credit volumes are still trending below where they were this time last year. This won't last forever. And when a more general economic recovery materializes, we should be well positioned. It was also an important quarter for our targeting business. In November, we completed the acquisition of Tapad, a leader in resolution of digital online identities. Big trend coming out of COVID has increased online activity and with it the desire to match better online -- to better match online identities. And digital identity is a key component of every Experian business. And with this investment, we have further strengthened our position in identity verification, identity graphs and have added to our already strong capabilities in fraud management. Consumer Services delivered very strong results again this quarter across all fronts. Our free customer base now stands at 38 million in the U.S. We have good momentum. We've extended our market position. Our advertising is performing well, and our credit marketplace is now the scale that has to be taken into attention by anybody in the lending market. The diversity of our model across the credit, identity and insurance has more than protected us from the worst effects of the downturn, meaning we've grown when others have not. We've invested in our brand, our relationships with the lenders. We have a compelling product road map. And when the credit market recovers, we will be very strongly positioned to take advantage. We had a good quarter in Latin America. In Brazil, we are moving to a new generation of risk -- of credit and risk analytics on the back of positive data, and we are shaping and leading this process. Even though the economy is weak, fast-moving new digital banks are adding customers and expanding the addressable market for Experian. In addition, we had significant success extending relationships with some of our largest financial services clients during the quarter, and we started to see the early adoption of positive data in scoring models. In this quarter, our own B2B initiatives were a significant contributory factor to our performance, which helped to offset ongoing weakness in credit volumes. Consumer Services continued its very strong growth trajectory. The free membership base, which now stands at 56 million, is crystalizing opportunities from new innovative propositions, like Score Turbo. So as we add to the growth, we are also broadening and diversifying the revenue base, strengthening the appeal of our brand and building consumer engagement. U.K. was down overall for the quarter, but we're making good progress with the business transformation, and the rate of decline has moderated. Parts of the business have returned to growth, and we have put a lot of effort this year into reorganization, improving service levels and ensuring our operating structure is appropriately scaled. As a result, client satisfaction scores are improving, our run rate in the market is good and we're confident we're on the right track as we turn our attention to the program to modernize our technology estate. We're also seeing encouraging signs of new business pipeline, which has held up pretty well. The lending market is more buoyant than it was, and lenders are launching new products, but it's hard to predict precisely how this trend will play out while more stringent lockdown measures persist. Consumer Services returned to modest growth in the quarter and take-up of Experian Boost has been encouraging. We're off to a good start, and it's helping to stimulate activity for credit comparison services and drive lead generation, and we have secured 230,000 Boost members in the U.K. and our free membership base has now grown to 8.9 million. Moving to EMEA/Asia Pacific, while EMEA/Asia Pacific has stayed weak, there has been some very gradual recovery in bureau volumes, particularly in EMEA, where some countries are back at pre-COVID levels despite the lockdowns, and that does provide us with encouragement going forward. We still see extended sales cycles for software, but the good news is that we are closing some good deals, which will help lay a solid foundation as we move into FY '22. We also took the opportunity to extend our position in Spain in December with a small acquisition of a business credit bureau, and this will add to our existing position in CI and DA in Spain and is consistent with our plan to get scale in certain selected markets. I should also note that the acquisition in Germany continues to perform really well. And with that overview, I'll then hand it over -- I'll now hand it over to Lloyd for the financials.
Thanks, Brian, and good morning, everyone. As you've seen, Q3 came in better than anticipated, with organic revenue growth of 7%; and including the contribution from acquisitions, total revenue growth at constant exchange rates was 10%. Exchange rates were a 3% revenue headwind in the quarter, mainly due to weakness in the Brazilian real. So total revenue at actual exchange rates grew by 7%. We delivered strong organic growth in North America and Brazil with sequential quarter-on-quarter improvements in our other regions. Segmentally, Consumer Services had a great quarter, up 22% and B2B grew 2%. In B2C, we ended the quarter with 103 million free members, up 7 million in the quarter and up over 20 million year-to-date. In B2B, whilst many markets' unsecured credit volumes remain down, we continue to see a recovering trend, and generally markets are less impacted by this wave of lockdowns than we saw in the first one back in March and April last year. Turning to the performance by region. And beginning with North America, where organic revenue was up 9%, with B2B up 6% and Consumer Services up 18%. Data was up 7%, with the core bureau delivering double-digit growth. Within here, mortgage refinancing volumes remained strong and grew in line with Q2 at over 60% in the quarter. Ascend continues to deliver good revenue growth during the quarter, with additional modules now starting to contribute well. We also saw a stronger performance in Clarity Services, driven by improved volumes as the market for shorter-term loans continues to recover. In our core bureau, we continue to see weakness in credit reference volumes for unsecured debt in cards and loans as credit supply remains below the pre-COVID-19 levels. Targeting remained down on the prior year, but the performance improved sequentially as we benefited from the stronger advertising during the holiday season, and we also saw the first contribution from Tapad acquired during the quarter. Decisioning grew 2%, with health delivering organic revenue growth of 5% as growth in collections and identity offset continued lower patient volumes, and we completed a high number of customer installations during the quarter. Decision analytics was down modestly for the quarter, with strong growth in identity and fraud, offset by softness in decisioning software. We've continued to see a transition from on-premise decisioning software solutions to more hosted decisioning software, which has lower upfront revenue, but will mean a smoother revenue progression in the future. Double-digit growth in Consumer Services reflected strength in all our core products. Our paid-for memberships continue to benefit from higher acquisition volumes into credit education services. Lead generation also performed well, with growing contribution from the new automotive insurance vertical, which more than offset the constrained supply in the consumer lending market. We continue to grow our audience, with the number of free consumer members growing to 38 million and the number of Boost connections reaching 5.7 million. Moving on to Latin America, where organic revenue was up 13%, reflecting double-digit growth in both Brazil and Spanish Latin America. After the impact of FX headwinds, total revenue declined by 11%. B2B was up 2% organically, while Consumer Services delivered 178% growth. Data grew 1% with growing contributions from positive data, Ascend and our automotive vertical. This more than offset lower consumer bureau volumes from financial services and retail verticals, which are still recovering from the lows of April and May. Decisioning grew 5% with higher revenue in analytics and decisioning software. Consumer Services delivered organic revenue growth of 178% as our debt resolution service, Limpa Nome; and our credit matching service, eCred, continued to perform well. We now have a free membership base of 56 million consumers in Brazil. Turning to the U.K., which saw a 2% decline in organic revenue, up 1% at actual rates. Consumer Services was back to growth, and B2B declined modestly by 2%, both representing a great sequential improvement from the lows of the first half of the year. Data declined 1% with growth in the core bureau from new business and a sequential improvement in volume trends as credit supply started to open up. This was offset by softness in targeting. Decisioning declined 5%, with challenges in decisioning software offsetting growth in identity and fraud. And Consumer Services returned to growth of 1%, reflecting a higher number of new consumers taking a credit education subscription. Whilst lead generation declined modestly, the performance was much stronger versus previous quarters, powered by the launch of Experian Boost in the U.K. Moving on to EMEA and Asia Pacific, where organic revenue declined by 11%, with data and decisioning down 8% and 15%, respectively. We're seeing improvements in EMEA bureau volumes; however, these still remain lower than the prior year driven by COVID-related restrictions, particularly in Spain and Italy. Asia Pacific bureau revenue continues to be heavily impacted by the crisis, most notably within our India business. And decisioning across the 2 regions remains weak as clients continue to delay decision-making for software acquisitions. Turning now to our near-term expectations. As with previous guidance, we continue to experience a high level of uncertainty as we look ahead to Q4 as restrictions continue to be extensive across the regions that we operate in. Our current view is that organic revenue growth for Q4 will be in the range of 3% to 5%. Heading into the Q4, we face tough prior year comparators as we lap the start of the significant mortgage boom and strength across a number of our other businesses. As a reminder, last year, there was a 3% step-up in the growth rate from Q3 to Q4. So the midpoint of our Q4 guidance range this year reflects the sequential step-up in growth last year. And as we're now in the final quarter of the year, I'll provide an outlook on profit. For the full year, we expect total benchmark EBIT delivery of between $1,360 million and $1,380 million. That's $1,360 million to $1,380 million at actual exchange rates. And with that, let me hand you back to Brian.
Thanks, Lloyd. So to summarize, Q3 was a very good quarter. We delivered high single-digit organic revenue growth and double-digit growth overall. And we're going to have a year of solid growth in FY '21, which, when you consider the backdrop, really illustrates the strength and resilience of the Experian business. Of course, we can't be certain exactly how new virus strains and new lockdown measures will affect the very short-term, but we do know we'll be incredibly well positioned for the post-vaccine world, and we have been very focused on making the right investments and backing our innovations to take full advantage of the recovery when it comes. And with that, we're going to open the line for your questions.
[Operator Instructions] The first one is coming from line of Sylvia Barker from JPMorgan.
Two questions from me. First, on margins. Clearly, the revenue is better, very good organic in Q3. So just trying to bridge, I guess, the gap on the SG&A. Obviously, mortgages continue to be good margin. But can you maybe just help us understand how much of the consumer impact is mix versus investments? And maybe you're gaining share at the moment, some of your peers are struggling. So have you accelerated the investments a little bit off the back of that? And how should we think about full year '22? And then second question, just on the core unsecured credit business. You mentioned that that's still down. Could you give us a bit more detail around the trends within that business? And in your experience, how does that recovery in the core business normally work as we come out on the other side of a downturn?
Sure. Lloyd, do you want to deal with the margin question?
Yes.
And I got number 2, I think.
Yes, sure. So if you look at our -- the mix of our growth, Sylvia, as you say, it's been weighted to the consumer business, which has a slightly lower margin than our B2B business. If you just look at these growth rates, on a full year, that would be something between a 20 and 30 basis points drag on margin overall for the group. The rest of the guidance and EBIT really takes into account additional investment we're making into customer acquisition. You can see the momentum we have in the direct-to-consumer business, adding over 20 million free members this year. And the power that that's giving us as a distribution engine for new products. So we've expanded the investment behind customer acquisition across the markets, given really the reinvestment of the revenue outperformance in Q3. On unsecured credit, I think as we -- as I mentioned at the half year, as we look across our businesses, clearly, some businesses like mortgage are going well, consumers are doing very well and some of our new products like Ascend are going well. But unsecured credit for cards and loans is still down and it's still down probably low double-digit in most markets. As we look out, clearly, we've never recovered from a pandemic before, but as we look out into next year, those markets will have very easy comps in the first half of the year. So clearly, the depth of the downturn were Q1 and Q2. As we look out to the second half of next year, clearly, we'll need to see an improvement in the economy, the operating environment, consumer confidence coming out of the pandemic to see that continue to power the recovery beyond the first half. Those are probably the main comments.
And then maybe just to add on the unsecured lending. I mean I don't think it's a surprise that all through the last year, we've seen banks really in all of the countries take a very cautious approach, not just to provisioning but also to extending further credit. And I think that just reflects the uncertainty in the economies in which we operate. What I would say is, I think as we've moved through the crisis, credit quality hasn't actually deteriorated as they anticipated. Around about March of this year, you'll start to see some of the results and the banks come out with some write-back of provisions already. So I think we do believe that once we get a bit of visibility on how we come out of this, you're going to see some very strong rebounds in some of these sectors.
The next question is coming from the line of Paul Sullivan from Barclays.
Just following on from that. In light of the sort of additional investment that you're talking about on the consumer side, what are your thoughts on monetization and the ramp-up in lead gen that we should expect and growth in lead gen from here? And then as B2B recovers, do you think we'll see that in margin too? Or is the mantra of continual reinvestment going to be a feature as we go into fiscal '22? And then just more broadly, as we start thinking about the next fiscal year, what are your priorities? And how should we start to think about the shape of growth into the next fiscal year?
Okay. Well, I'll make a start, Lloyd, and you can come in maybe on some of the margin points. I think the lead generation, right, you can see the business before we went into COVID was growing in a very, very fast rate. Obviously, there's been quite a dislocation in the lead gen market this year, particularly pronounced when we went into the pandemic at the outset. Notwithstanding that, our actual business has continued to grow, particularly in North America. So I think that gives you an idea of strength of position that we built up there. And you need to match this up really to the increase in the scale of membership base that we have, because I think we've moved our strategic position in lead generation really significantly this year. That's a function of continued investment, not just in the product proposition but in marketing and closing the gap to the clear market leader in the U.S. So compared to 12 months ago, we are a much, much bigger strategic -- we have a much better strategic position and a much bigger force in lead generation. So I think when that market comes back, and it will come back, I think it will come back fairly strongly and we're going to benefit, I think, very significantly from that. So that would be point number one, Lloyd, do you want to add?
Yes I think -- Paul, I think the way to think about the investment that we're making is the direct-to-consumer business is one that we can judge pretty finely and over pretty short periods as to whether we're adding value. And there's a difference between investing in something that is loss-making and investing in something that's adding value but may be lower than the group's average margin. So to give you a point on that, the lead gen business, for example in North America, grew 30% in this quarter. So growing well, and that's the one that we can judge pretty well. The Brazilian business, we think, will move into profit on the direct-to-consumer side next year. So as that started to scale, we expect to see that contribute positively towards profit. So -- and as you know, overall, the direct-to-consumer business generates really good margins at over 20%. So I think in this period when we're seeing a number of our direct-to-consumer competitors pull back from customer acquisition, we see it as a great opportunity to gain share. We've got a very active product pipeline, and we can use these relationships as a very effective distribution engine for those products as we roll out.
And Paul, just going back on the B2B, I think as we look into next year, obviously, we see recovery. We're very confident we're going to see recovery in our B2B portfolio and probably across the piece. But not much has changed in terms of how we approach managing the business. We will be still managing to grow our business as fast as we can, and that will be our focus. And we can talk to you more about that in May when we get to what the actual outlook is. I think there's one other point, I think, that we should probably highlight, which is at the same time that we've been making the investments that we have in the consumer business, we're also in the middle of some fairly extensive technology investments across all of our portfolios. And all of that investment is also going through our P&L. So we've used the opportunity over the last year to really double down on that. We've made a lot of progress, and we're well on our way to essentially modernizing the entirety of the estate. So that's something people have to bear in mind as we look forward to the next couple of years.
The next question is coming the line of Brett Huff from Stephens Inc.
When I'm looking at the delta in the growth rates, the plus 5% to plus 7% sequentially from 2Q to 3Q, we kind of broke it down, I just -- tell me if I'm roughly right. But it looks like the U.K. and Ireland, EMEA/APAC, although smaller pieces of the business, the dramatic -- or the dramatic improvement or much less bad growth really drove a majority of that uptick. Is that the right way to think about that delta kind of quarter-over-quarter, Lloyd?
Yes. I think -- yes, obviously, Latin America increased from 10% to 13%, and you saw a step-up in consumer in North America. And so those, plus the things you mentioned. I think versus our expectation, so we originally set the range of 3% to 5% for Q3. And we said to come in at the top end of that range, we'd have to see mortgage stay strong, and it did. And we'd have to see consumers stay strong, and actually consumer improved. We saw the step-up against some quite tough comps in Latin America. And we saw the U.K. particularly perform better than we'd expected. The road to recovery in the U.K. has been faster. And the contribution of the consumer business in the U.K. was better than we expected, underpinned by the performance of the Boost launch.
That's helpful. And then just a second question from me. Focusing on the U.K. again. I know you guys are in the middle of a restructuring there. I think you found the team that you like and put them in place, I don't know, 6 or 8 months ago. And it sounds like there's still a lot of heavy lifting there, maybe both from the organizational but also from the technology point of view. I guess just maybe a little more detail there on -- is the weakness we're seeing driven maybe by those 2 things or is it by Brexit or is it by the pandemic? I know there's a lot of thread to pull here. But is there -- kind of when do we see the light at the end of that tunnel and maybe see growth get better again?
Yes. Well, I guess if you look at the point that you just raised, which is the sequential improvement in the U.K. business from quarter-to-quarter, we're actually quite pleased with that because market conditions are very tough. The U.K. doesn't have a big mortgage refi market to sort of give it a lot of countercyclical revenues. So we've managed through that with some pretty big declines in acquisition-orientated revenue. In terms of the heavy lifting in the U.K., you're right, the new management team has been in there for almost a year. We started to make changes actually before we brought the new management team in. So we put through a fairly significant reorganization of the business internally to better align it to its market opportunities. That was very extensive activity that took place. A lot of the investments and actions we've done last year has really been to stabilize some of the technology issues which were causing the service problems, we've now seen a really dramatic improvement in that. And also reflected in our NPS scores, which have moved ahead extremely well. So I think as we look on, I think we've made a massive amount of progress in the last 12 months. And as I referenced in my -- in the script, we're actually seeing a really good amount of new business being generated. So a lot of positive signals there. And I think we're probably tracking a little bit ahead of where we expect to see in the U.K. I had no doubt that if we hadn't gone into cover, the U.K. business would already be back in growth. So I think that bodes well for -- going into next year. The other thing we've done is we've realigned the cost base there, so we should start to see some positive movement as we get a bit of growth back from the market. So I think we achieved a lot. And we do still have some heavy replatforming to do. I think we've talked about that before. But the plans are in place. We're on our way in scheduling that. And we're already in flight in that with -- in the U.S. and Brazil. So our confidence in both the executability of that and the time scales in which we can do it are improving all the time.
The way I think about it -- it's Lloyd, Brett. The way I think about it from here, the majority of the revenue recovery comes from the recovery in the market from the pandemic. The big focus from the transformation activities will be about cost. So we've said that the cost of maintaining the old legacy estate is too high. That's one of the reasons we've embarked on the transformation. Over the next 2 to 3 years, you'll see a strong improvement in margin in the U.K. back to something like the 30% margin that we had previously as we transitioned through that transformation change. So revenue will be driven really by the economy and the post-pandemic recovery, cost and margin will be driven by the transformation actions we've got underway.
And the next question is coming from the line of Simona Sarli from Bank of America.
I have a couple of follow-up questions. First of all, on the U.K. So is it reasonable to assume that U.K. for B2B should be back to positive growth in the next quarter? And could you please comment also on the evolution of credit supply and demand in this region in the past few months and how does it compare to the first lockdown? And in terms of recovery in the U.K., I appreciate that it might be difficult to quantify, but roughly, how much of the improvement in this region was driven by the reorganization versus better lending volumes? And then in terms of subscription services, how sustainable do you think in the next few quarters is the growth in this business, considering potentially the higher churn versus other product lines in B2B? And lastly, if you can please remind us on the opportunity on payroll data in the U.S. as well as potentially in other countries, and if there is any further update on that.
Sure, Simona. There are a lot of questions in there, so we'll attack them as best as we can. I think just over to your comment on the U.K., obviously, we've gone back into lockdown in the U.K. in a pretty severe way. If you'd ask me before we'd gone back into lockdown whether we're going to get back into really good growth in Q4 in the U.K., I would have said absolutely yes, it's still -- Lloyd will give you a bit of a better picture. We still think that we will be in growth in Q4, notwithstanding that in the U.K. B2B business. So I think that's good. Credit supply and demand has improved from the first lockdown for sure, because it essentially stopped really back in March, April. But as Lloyd said, we're still tracking significantly below volume levels that we saw in the previous year. A lot of the improvement in the B2B business actually came from new business wins. So as I said, the pipeline has actually improved. So we're winning more business. That's helping us. We're having some great success in some of the business lines. A couple of them in growth as well, which is good. And then on the consumer side, Lloyd, do you want to add to that?
Yes. So I think if you look at the U.K. consumer and what's happened to consumer debt, a good place to look is the Bank of England survey. You'll see that because incomes have been protected by government support schemes, the total level of consumer debt has reduced since we went into the pandemic. And obviously, the Christmas and holiday experience from consumers has been very different. So what would normally be a period of new consumer lending in the first quarter of the calendar year is a little bit different, I think, this year given how the average consumer comes into the period. Notwithstanding that, we saw a good sequential improvement in the lead gen business. So Q1, Q2, that was down 40%, 50% in the U.K. It was down modestly 2%, 3% in Q3. So we expect that to be continue with the Boost launch into -- to help the consumer business continue to grow. And just back on the B2B business. I think the way I would think about most of the movement in revenue just now is associated with the environmental factors rather than big, big swings on -- in relation to the restructuring that we've done. Most of the restructuring really is targeted at that longer-term cost recovery that I mentioned.
And then, Simona, on your question on verification services, I think is what you're referring to, and you said payroll data. I think we said previously that this is a market that we're looking at. We expect to be launching some products this financial year. Still on track to do that. So it's a little really early to talk about that in any great detail. I think what we will do is give you a bit of a fuller update when we talk to you in May.
And is there an opportunity also to launch this kind of service also in other countries like the U.K., Canada or India?
Yes, I think there is. Yes. Obviously, the biggest opportunity right now is in the U.S. But I think over time, other markets will evolve in the same way. Similar trends seem to play out. The U.S. is the most developed market because of the availability of data there and the ability to aggregate it. That's not true in many of the other markets. So it's a bit of a longer burn to actually get sufficient data to build comprehensive products. But we've always -- we've started that as well, particularly in the U.K. and Brazil. So I think this will be something that will be a very interesting segment for us over the next few years. And as I said, when we get to May, we'll give you more of an update on the progress that we've made so far.
And the next question is coming from the line of Rajesh Kumar from HSBC.
Two, if I may. The first one is just can you please confirm if there are any one-off or restructuring charges below the line of that EBIT guide number? Or are all of that expense -- are all those expenses included above the line? And the second one is on the U.S. situation. Clearly, there's a new leadership at CFPB. During the campaign, Biden indicated his ambitions for an alternate bureau. Nobody obviously understands how that might work. But how is your strategic thinking evolving in that space? Does Boost, Clarity, et cetera, give you the ability to actually deliver on what a Biden bureau itself might have tried to achieve? Or is it a completely different line of thought?
So I'll just start on the EBIT question. Maybe I'll hand over to Brian on the U.S. Obviously, this is just a trading update, so just revenue, Rajesh. But there's no change to the restructuring that we announced at the half year. So first half, we recorded about $22 million and guided to $50 million for the full year. No change to that.
Okay. And that's below the line, right?
Yes, restructuring charge.
Okay.
Yes, on the Biden question, I think we've been asked this question before. I think we do expect CFPB oversight to continue. It's not new for us. We've had CFPB oversight under a democratic regime at the outset, also under a very active leader of CFPB at that time, Rich Cordray. And even throughout that period, while we saw a lot of kind of action, it was mostly directed at improving the accuracy of credit reporting, improving fairness outcomes. So we expect more of the same. We expect that to be a big focus. I think on the legislation around the public bureau, I think there's a long way to go before that becomes a reality. First of all, legislation has to be introduced. Secondly, it actually has to get widespread support. So I think there's some big hurdles for that. And as we've said before, it's actually quite difficult to think what a public credit bureau could do better than the private industry is doing. We've got 3 very large, very competent credit bureaus. And it's a competitive marketplace and a lot of innovation. So I think our confidence under any scenario is strong, and we'll just wait and see how that evolves.
And the next question is coming from the line of Anvesh Agrawal from Morgan Stanley.
I got 3 questions, the first 2 related to the North American consumer business. Lloyd, you mentioned that you have gained some members there from the -- and as the competition has sort of stopped investing. Just want to check like what's the stickiness of that consumer base? Is there a case that when sort of competition again sort of start to reinvest from FY '22 onwards, there is a bit more competition out there? And then on the North American credit education business that is growing nicely. But is that purely a decision phenomena? Or you've seen sort of an underlying improvement in that business as well? And then finally, your peer has made a decent acquisition in the fraud and ID space recently. Any comments on that, how that business sort of matches with what you have? And how do you see the competitive landscape changing from that?
Okay. Anvesh, I'll pick up the consumer pieces. So 2 different pieces, obviously, to our business. You've got the free membership base, which the -- once you've acquired them into a free membership relationship, the key is really to keep them engaged. So it isn't that they churn, it's that you have to maintain engagement. And that's where we have a real advantage on our competitors, that we have a breadth and diversity of products and offerings. So rather than just being a score or a lead gen product, we can offer identity protection, education and now an auto insurance offering, and you'll continue to see us broaden those relationships. So increasingly, if you think about our ambition for our consumer business, that free membership base is our distribution engine for all of these new products that we're bringing along. On the credit education side, you're right in that the -- we saw a big inflow of subscription members as we came into this year, really on the back of a mix of the pandemic and the mortgage boom. If you look at that membership base, it's clearly a little uncertain as to how their tenure will extend. If you look at the membership base, we'll continue to see good growth year-on-year. And that membership base as we go through the first half of next year underpinned by the acquisitions we've had this year. And of course, our goal is to enrich the membership product so that we can continue to see the subscription membership base continue to grow from there. Brian, do you want to take the fraud and ID?
Yes. And I just think on the fraud and ID space, it's something that we've been investing in for quite some time. I think a lot of the capabilities that Kount as a business has we already have. Some of it going back even to the 41st Parameter acquisition back in 2013. So there's a lot of overlap between what they did and what we do. We have a very strong fraud business. And we're excited about the prospects. We've got a very comprehensive portfolio of products. So I think we feel good about our position. They're an existing player in the market. Them teaming up with Equifax changes something a little bit, but not massively. So I think it's an exciting space, and we're well positioned.
And the last question is coming from the line of George Gregory from Exane BNP Paribas.
I had 3 questions, please. Firstly, following up, Brian, on your comments regarding technology transformation. In broad terms, should we think of the phasing of cost as being neutral or incrementally a headwind as we move into the next few years of your transformation, which I think you described as getting you through the entirety of the estate?Secondly, following up on the earlier question around the political setup in the U.S. Should we expect any discernible cost burden from regulation as we move into the next few years? Or should that be relatively immaterial on a group basis? And finally, Lloyd, CapEx spend was a bit lower in the first half. To what extent has that caught up in the second half, please?
Do you want to deal with the technology costs?
Yes, so I think we've called out, I think, previously, George, in contrast to our competitors, the natural P&L cost of a transition to the new technology is coming through our base P&L. If you look at Equifax in this year ahead, I think they guided to $145 million of cost outside of their P&L. And TransUnion, from memory, is something like $175 million over 3 years. So that's cost that -- our equivalent of that is in the P&L, and we're managing over the last couple of years and probably the next 3 or 4 years. Overall, we felt that's manageable within our overall financial framework. But it's important to call it out that we're investing in that and dealing with it. And the reinvestment of some of the operating leverage that we have in our core business is going into both our innovation investment, but also that technology transformation. And on CapEx, I think we'll finish this year somewhere around 9%, our overall CapEx, a little bit lower than it probably round up to 9% rather than down to 9% that we may have seen and expected previously. But certainly, we're back investing again at our normal CapEx rate, I would say, in the second half.
And just on the point on U.S. regulation. I think the main point to make is I think we expect the main focus to be in areas which are actually very aligned to the strategic direction we're taking the business in, which is looking for alternative data sources, putting more control into consumers' hands, improving outcomes, improving response times. And these are all areas that we are, have been and will be investing in our business going forward. So I think that, overall, that we expect that to be the thrust. It's very difficult to be precise at this stage. Obviously, new administration hasn't yet taken over, and we haven't really seen sort of how the CFPB will look under its new leadership. But I think, as I said, the strategic direction of where we've been taking the business is very much in tune with what we hear from the regulatory thrust that's likely to be pursued.
Thanks so much. And that was the last question.
Okay. Well, thank you, everybody, for joining today and thanks for all your questions. I hope you all stay safe, and we look forward to speaking to you again in May for our full year results. Thank you.
Thank you so much. So with that, the conference call has been concluded. You can now disconnect. Thank you so much for joining and stay safe. Goodbye.