So much of fraud prevention is accomplished with various forms of identity verification. Similarly, IP address verification helps identify authorized users and, conversely, unauthorized fraudsters.
Every single device connected to the internet possesses an IP address. This means that any person attached to that device is connected, too.
A user’s IP address is important in confirming the completeness and accuracy of his or her application, account, or transaction. A great deal of information can be connected to an IP address. Similarly, much can be inferred if the user possesses a new IP or if it is associated with past problematic activity.
How IP Addresses Work
Whenever your device connects to the internet, it does so through an internet service provider (ISP). Using rules defined by an organization called the Internet Assigned Numbers Authority, founded by the US federal government, that ISP assigns your device a unique address. This address is unique across the entire world, and facilitates your connection to other devices on the internet. It’s through devices like web hosts and cloud servers that you can access different parts of the net, like websites. Each website is hosted on a device that also has an IP address. The mutual recognition between these devices allows the internet to work.
Internal vs. External Addresses
Routers assign internal IP addresses rather than ISPs. If you’ve ever set up a home wifi network, then you’re probably familiar with the concept. The router’s job is to assign every device on its network with a unique IP address of its own. These addresses are called internal IP addresses because they exist only within the internal network. A device on a network like this only needs an address unique to the other devices on the same network, and anything exterior is irrelevant.
The IP address assigned to the router is the external address, which is unique to that network. When a web server also connected to the internet communicates with your device, it communicates through that public address. The router makes sure the right data gets to the right device at the right time.
The way this information is exchanged is through the mutual exchange of packets of data. For simple exchanges like browsing the web, the level of verification required matters for little more than matching the user’s IP address to their geographical location. This allows the site to cater its content to the person looking at it. A website that reads your location as the United States often defaults to the English language because a user from that location is likely to speak English as their primary language.
More complicated or sensitive data exchanges will require more than an IP address check – logging in to WordPress in order to edit a website, for example. The extra protection offered by a password is another layer of identity verification, but verifying a valid IP address is good for that initial confirmation.
How IP Address Verification Reduces Fraud
Good fraud prevention is only as comprehensive as the data it uses. While the varieties of data implementation are multiple and wide-ranging, the data itself provides a great deal of insight into where fraudsters are and what they use. Fraud prevention can be as simple as restricting all connection attempts from an IP address associated with fraudulent activity.
Another way that IP address verification can be implemented is through the use of consortium data. Collaboration among third-party entities is a common technique for the prevention of fraud. Having proper systems and agreements allows companies to openly and transparently share data, while also protecting their customers’ data.
While IP address verification offers a good pathway for fraud prevention, you likely need to implement more. Fraud.net offers an entire suite of fraud prevention tools, available today. Sign up for a free demo.