Alliance & Leicester will become the first UK high street bank to give all its customers two-factor authentication technology in a bid to clamp down on identity theft and online fraud.

The bank announced the move to the City this week and said starting this month, it will begin to provide all its online banking customers with the new security process.

Two-factor authentication is a security process in which the user provides two means of identification. One of these methods is typically something that has been memorised by the user, such as password or special code; the other is a physical device that generates random numbers or code.

Even if hackers manage to capture the first pass code, attempts at theft are likely to be foiled because the customer then needs to generate a new code to authorise online transactions.

The Alliance and Leicester authentication technology will also be used to prove to internet banking customers that they are accessing the bank's genuine web site, rather than a spoof one set up by cyber criminals to fool users into entering their details.

The bank would not reveal any further details about the initiative but said it would be "a simple and robust way for [customers] to be even more confident that their data [online] is safe from criminals."

Other banks are also testing similar devices. Barclays has been running a test with 5,000 customers and staff on a chip card reader and Lloyds TSB is nearing the end of a six-month test of a keyring type device with 30,000 of its UK internet banking customers.

Lloyds TSB said the results from its trial are extremely promising with a 78 per cent adoption rate among the 30,00 people given the devices. The bank said 95 per cent of people on the trial said they found it easy to use and there had been 100 per cent success rate in reduction of fraud among users of the device.

However, although Alliance and Leicester will be the first bank to offer it to all online banking customers, the ultimate aim for the banks is to create devices that people can use with different banks, accounts and online shopping sites.

Lloyds said although its current trial was already deemed a success, its main aim was to test consumer response to the technology. It may therefore not roll out the device it has been testing as it will be working to meet banking industry group Apacs' security standard for a single technology that can be used by all banks.