Microsoft has signed up with security firm Digital Resolve to provide anti-fraud technology directly into Internet Explorer 7, as well as Windows Live Toolbar.

Digital Resolve will contribute a constantly updated whitelist of genuine financial and e-commerce sites to the Microsoft applications, warning users when they stray onto a site that doesn't appear on the list. The approach is more stringent than the blacklist approach taken by some existing anti-fraud software, because it leaves no room for social engineering, according to Digital Resolve.

"We were impressed with the quality of Digital Resolve’s data feeds,” said Alan Packer, product unit manager of Microsoft's anti-phishing team, in a statement. "This agreement underscores Microsoft’s goal of employing a broad range of data sources from both third parties and end-users to help protect customers from the threat of phishing."

Digital Resolve generates the feeds via its Trusted Server product, which uses data-mining techniques to compile and monitor a list of financial and e-commerce sites. The information will be provided to Microsoft's Phishing Filter, which is currently available in the Windows Live Toolbar, released last month.

Phishing Filter is likely to make a significant impact on the general public with the final release of Internet Explorer 7, which Microsoft has said will be delivered automatically to Windows users as a high-priority update. The browser, which overwhelmingly dominates the market, will have Phishing Filter switched on by default, Microsoft said. Explorer 7 and Phishing Filter will also be built into Windows Vista, scheduled for launch early next year.

Phishing has become a major problem, as users have come to routinely use the Internet for all sorts of financial transactions. Digital Resolve claims its approach relieves consumers of having to carry out extra authentication measures, such as the image-based two-factor authentication being introduced by some financial sites.

The technology also specifically protects users against man-in-the-middle attacks, in which the attacker intercepts information passed between the user and an authentic site, and DNS cache poisoning attacks, which invisibly redirect the user from legitimate URLs to fraudulent sites.