Security Experts:

Fraud Prevention Trends for 2011

Device Fingerprinting and Mobile Transactions Were on the Rise in 2010; What's in Store for Fraud Prevention in 2011?

As companies continue to conduct more transactions online, they need tools to stop online fraud while protecting customer privacy without the use of cookies and cookie equivalents such as local stored objects.

Online Fraud PreventionHow do they do it? According to ThreatMetrix, a Los Gatos, California based provider of cloud-based fraud prevention solutions, fraud detection has shifted to utilizing device identification over cookie based identification – detecting returning visitors based on the attributes of the device -- be it a smartphone, personal or tablet computer -- without using any cookie information and has improved rules to use this information to detect spoofed devices and IP addresses as well as sniff out botnets.

ThreatMetrix shared some other trends and predictions in fraud prevention as we move into 2011:

1. Less Reliance on Cookies and Personally Identifiable Information (PII). Many fraud prevention solutions are being rendered ineffective as more consumers become concerned with online privacy. It's harder to detect repeat visitors -- and repeat fraudsters -- as they are either deleting or blocking cookies themselves, or having cookies deleted via their computer security software. As such, a move toward cookieless device identification and device fingerprinting is becoming critical in preventing fraudulent transactions today.

2. New Classes of Devices Become Commodities for Fraudsters. New devices, like smartphones and tablets, showcase different operating systems and browsers unlike the standard PC. These potentially compromised devices are ultimately becoming commodities. The user can hide their IP address and thus eliminate the possibility for an online retailer to detect the source of a transaction.

3. Use of Fraud Prevention Solutions Across the Entire Value Chain. Today's fraudsters are smarter and the necessity for fraud prevention will continue to persist in the e-commerce space as well as the entire value chain. Online brands will use fraud prevention software in detecting everything from automated bad reviews on their site, to account creation and account verification issues, in addition to monitoring transactions.

4. Rise of Online Services and Digital Goods Encouraging Fraud Automation. Online digital goods, like those obtained through Netflix, Groupon, Ticketmaster, and Facebook, have consequently propelled the need for real-time transactions -- which are often a hotbed for online fraud automation. The first generation of e-commerce, popularized by Amazon.com, was all about shipping physical goods. With the instant gratification associated with digital goods and services, however, fraudsters have the capability to automate fraudulent transactions.

According to Alisdair Faulkner, chief products officer, ThreatMetrix, the online fraud market today is where the spam and anti-spam market were 10 years ago.

"In the fraud prevention industry we saw a lot of changes in 2010, notably in the rapid growth of e-commerce greatly outpacing the use of fraud prevention technology to protect online transactions," said Faulkner. "This opens new doors for fraudsters, exposing different gaps in fraud prevention measures that can only be rectified through new and more relevant solutions." While mobile transactions represent still only around 1% of total transactions, for large retailers that see millions of transactions that could amount to hundreds of thousands of dollars.

"Every business that transacts on the Internet needs better automated fraud prevention that doesn't rely on cookies or personal identifiable information," said Faulkner. "2011 is the year that technologies like device fingerprinting and collective fraud intelligence in the cloud become mainstream tools for web security and fraud professionals. When fighting a collective problem you need a collective solution.”