A Cross Check of Fraudsters

ThreatMetrix began as an R&D project to help the Australian government prevent intrusions onto its Websites. Co-founder and CTO David Jones realized most intrusions came from behind proxy servers or from PCs infected by botnets.

"Fraudsters use proxies to give their PC a false IP address," says Ryno Blignaut, CFO at ThreatMetrix client Xoom, an online remittances provider. "For every stolen card they use online, they'll have a different IP address."

Relocating to the U.S. in 2008, Jones developed the ThreatMetrix Fraud Prevention system, which verifies the real identity of a device used for a transaction. Once the identity is verified, it is checked against ThreatMetrix's global list of 12 million compromised devices. ThreatMetrix adds 100,000 compromised devices a day to this list.

"We do a deep packet inspection to check the real characteristics, IP address and geographical location of the device, as opposed to those it claims to have," says CEO Reed Taussig. "We examine up to 150 characteristics, including the device's OS and browser; its screen font; and the time zone displayed on its time stamp. Then we score the device's risk factors and decide in real time if the transaction is genuine."

"Banks are interested in technologies like ThreatMetrix that help them stem fraud losses by immediately identifying a potential fraud attempt, rather than by watching transactions until a fraudulent pattern emerges," Forrester Research analyst Ellen Carney says. "Another advantage is that ThreatMetrix instantly recognizes returning customers."

There are currently 30 deployments of ThreatMetrix's system, which is available on a SaaS basis or as a mixture of SaaS and on-premise. ThreatMetrix competes with similar products from Iovation, Inc. and 41st Parameter, Inc. "41st Parameter is software, while ThreatMetrix is a service," says Avivah Litan, vp and distinguished analyst at Gartner Research.

Clients include retailers such as; payment gateways; and alternative payments providers. "ThreatMetrix is starting to get interest from banks, Taussig says. "A big bank could deploy ThreatMetrix for tens of thousands of dollars."

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