PassMark's technology employs user-selected watermarks to distinguish legitimate Web pages from phishing scams, plus back-end antifraud analytics that spot suspicious log-in attempts. RSA calls this multipronged effort "adaptive authentication," but it is more commonly known as "risk-based authentication."

"It's the concept of different types of authentication based on context," RSA's Young says. "Who are you? Where are you in the session? What's your typical account behavior?"

Among the factors that antifraud vendors consider are time of day, the IP address and kind of computer used, and geographic location. Although these measurements aren't foolproof, they're highly accurate in identifying most users, experts say.

"My wife always banks online at home," says Nico Popp, vice president of authentication services at VeriSign, which bought fraud detection company Snapcentric in February. "She's going to have a very stable cluster of behaviors: the same kind of browser, the same ISP, and she always banks on Saturday morning. It's a very clear pattern."

If Mrs. Popp tries to log in from Korea on a different machine with non-English-language settings, it should set off alarms, Popp says. On the other hand, Popp himself is more of a globetrotter; for his profile the geo-location information is less reliable. But he does always connect from the same laptop, so the device settings and session information is just as powerful, he says.

Proceed with confidence

The combination of fraud detection and risk-based authentication is powerful, Popp says, because it is invisible to users under normal circumstances but springs to life when the risk associated with user behavior increases, as in the case of money transfers or sudden account changes.

But risk-based authentication is no silver bullet for enterprises, notes Stu Vaeth, chief security officer of Diversinet, a supplier of token-based strong authentication solutions. Antifraud and risk-based authentication are great at weeding out phishing and man-in-the-middle attacks, he says, but they aren't as secure as traditional two-factor authentication.

RSA's Young concurs. "It's kind of like saying that alarm systems will make door locks go away," he says. "What this will do is allow millions of consumers or enterprise users who are not using credentials like SecurID to open up their protection options."

That kind of thinking represents a major shift in the authentication market. Whereas at one time merely granting permission was seen as the essence of authentication, today's solutions are moving instead toward an idea of "confidence," IBM's Blakley says.

"People think of authentication as something to do at the beginning of a session and never do again, but authentication is a confidence building thing you have to have confidence in the identity of your transaction partner, and that confidence can erode over time," Blakley says. For example, getting through the identity check at the front gate of NSA headquarters doesn't necessarily give a visitor access to every room in the building, he adds.

At security vendor Cydelity, the idea is to monitor users' behavior after they're logged on and flag what's risky, according to CEO Bob Ciccone. "Enterprises have typically deployed layered defenses, but there's not a layer where they're watching what users do once they're in," he says.

As do other companies in the antifraud space, Cydelity considers geo-location and atypical behavior, such as changing or disabling e-mail notification in conjunction with money transfer requests and attempts to access from suspicious locations.

Increasingly, customers are combining this kind of analytics-based risk detection with soft, two-factor alternatives to tokens and smart cards that are easier to deploy and support. For example, Diversinet's soft tokens offer strong authentication akin to traditional tokens but can be delivered over a wireless network and stored on a PDA or mobile phone. Bharosa, meanwhile, offers a choice of form factors for its Authenticator soft two-factor authentication application, while on the back end its Tracker application monitors the origin of log-ins to avoid fraud. Metrics used include the computer or mobile device used to log in, geo-location, and behavioral profiles, says Bharosa CEO Jon Fisher.

A wide-open future

According to guidance from the Federal Financial Institutions Examination Council (FFIEC) in 2005, "Single-factor authentication, as the only control mechanism, is inadequate for high-risk transactions" such as money transfers.

In June, the White House's Office of Management and Budget seconded that, directing federal agencies to comply with NIST security standards, including encryption of data on mobile devices and two-factor authentication for remote access to data.

These advisories have sent financial institutions and government agencies scrambling to shore up user authentication with additional factors. But that's not necessarily a good thing for enterprises. With vendors focused on consumer fraud protection for the government and financial verticals, enterprise-targeted products are being put on hold.

"The market opportunity is such on FFIEC that right now we're 99 percent on that," VeriSign's Popp says. "Between fraud, identity theft, and regulations, vendors are all-hands-on-deck." But when the flood of FFIEC-compliance money dwindles, he says, companies will begin looking to tap the even larger enterprise authentication market.

Like Popp, IBM's Blakley sees a role for risk-based analysis as part of the ordinary authentication process at organizations of all stripes. "Right now people mostly do risk analysis up front. It's plausible that in the future you're going to have more dynamic assessments of risk factors, so if a system becomes aware that something squirrelly is going on, you're asked to pass an additional authentication test to increase confidence in the strength of the authentication," he says.

Customers can already combine identity analytics with business rule checks to spot relationships within enterprise user populations. Adding more authentication data into that mix will lead to even more focused offerings, Blakley says.

But the future of strong authentication may lie outside the hands of any one vendor. The open source Initiative for Open AuTHentication (OATH) now boasts more than 66 members, including smart-card vendor Axalto, BMC, IBM, USB-token maker SanDisk, and VeriSign, among others. The idea is to create an ecosystem of authentication hardware and software that is based on open source components, encouraging creativity in a market that has long been dominated by a handful of large companies.

"One thing we've pushed with OATH is an open approach to fraud detection. Proprietary networks will never succeed, if each vendor says, 'This is my fraud data, and I'm not going to share it.' That just helps the bad guys," VeriSign's Popp says.