The following is a guest post by Frank Stornello of Verifi.

Online fraudsters benefit from the anonymity of a virtual medium. They can invent and reinvent who they are on any given day. And they do. They can change email addresses or IP addresses in just a few clicks. But it’s a little more expensive and time consuming to change the hardware that they’re using to make a purchase—the PC, laptop or smartphone.

That’s why “digital fingerprinting” or “device fingerprinting” has become a popular means for fraud prevention. Just as good old-fashioned fingerprinting has been used for over a century to identify criminals and thwart crime, digital fingerprinting can do the same by identifying the fraudsters’ tools, if not the fraudsters themselves.

Huella, by tian2992

Huella, by tian2992

What is a Digital Fingerprint?

Whenever a digital device is used to access a website, it leaks some information about the unique characteristics of that device. Distinctive features include the software installed, plug-ins and more. And most devices, just like human fingerprints, have inimitable identities. So the thinking goes, “if someone used this device to commit a crime in the past, he or she may use it again for the same purpose.”

What makes them particularly powerful is that unlike cookies, you can’t erase a digital fingerprint.

Below are some of examples of situations where digital fingerprinting can put your business back in the driver’s seat and the fraudsters looking elsewhere to perpetrate their crimes.

The Stolen Identity

A criminal who has gained access to a card number, the cardholder’s name and the card’s expiration date might be ready for an online spending extravaganza. This shopping spree might only be limited by the vigilance of the cardholder, issuer or merchant. But if you’re aware of digital devices — PCs, laptops and smartphones — that have been caught in past criminal acts, you lock them out by barring transactions that exhibit their digital fingerprints.

Anomalies and Velocities

If you are able to identify the device being used, you can also detect any anomalies in its use, such as if an individual is trying to connect through a proxy to conceal their location. Also, you can check velocity of use. Frequent use may indicate fraudulent activity as criminals tend to work quickly to maximize the gain they can realize from any holes in your defenses.

It’s not surprising that data from eMarketer Inc. show that device fingerprinting is one of the most popular means for fraud management. Half of merchants claim it’s the most effective tool they use. According to Forrester Research, a business can reduce fraud losses by 25-35% by using device fingerprinting.

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