A pen which can identify who is using it by the way it is held has been heralded as a major step forward in combating fraud. The LCI Smartpen, which contains tiny pressure pads, a spirit level and a computer processor, paves the way for making secure financial transactions without proof of identification.

The Smartpen this week won the prestigious Ecu200,000 (£150,000) European Information Technology Prize in Brussels, partly sponsored by the European Commission, which will increase interest in the product in areas such as banking, online businesses and the healthcare industry.

Mr Sam Asseer, chairman of Dutch company LCI, says: "The Smartpen will have a big impact on the way that electronic commerce is conducted, particularly over the Internet. By authenticating the author of a transaction, the act becomes undeniable."

When a person uses the Smartpen, which writes like a normal pen, a computer inside it records both the pressure applied to the pen and the degree of the pen's tilt.

This information is then encrypted and passed, via a battery-powered transmitter at the top of the pen, to a nearby computer.

These details, together with the signature itself, can then be checked against records held in a central database.

Forensic experts believe the Smartpen could be a vital tool in combating fraud because the main way of detecting inauthentic signatures is not the appearance of the signature, but the way the pen is held.

Mr Tom Davis, a consultant in handwriting analysis at the University of Birmingham, said: "A forgery is usually deficient in the speed and fluency of the writing."

The Smartpen could prove most useful in the online world. LCI hope it will outweigh people's caution about buying things over the Internet. People are generally not comfortable giving out their credit card details because they fear the security risks are high.

"To be able to give an electronic signature would give people confidence, and if they know the banks trust the pen they're far more likely to take it on board," says Mr Tim Wilson, editor of Internet Business magazine.

LCI is waiting for big companies to adopt the technology before it makes the Smartpen available for home users.