Alliance & Leicester (A&L) has seen a 22 per cent increase in online banking and reduced its costs by £1m a month since introducing two-factor authentication technology in March.
The bank is using a system that requires the user to select a unique picture and password to authenticate themselves. It is just one of a series of security measures being used and investigated by UK banks.
While banking industry body Apacs is developing an industry standard card reader, other banks have been experimenting with other two-factor authentication solutions.
Lloyds TSB, for example, is testing its keyring Passmark system with 23,500 customers, while Barclays is to issue a card reader to customers based on the Apacs model (Computing, 3 August).
Benjamin Ensor, senior analyst at Forrester Research, says security is playing an increasing role in competitive advantage.
‘Banks are getting to the stage where they look at security as a possible differentiation,’ said Ensor. ‘It’s not something that any of them really want to make a big deal of. I think you will see one or two break ranks from the Apacs standard.
HSBC has yet to instigate any kind of two-factor scheme, and last month Brendan Pickering, group head of fraud technology at HSBC, accused rival banks at a Gartner security conference of taking an arms race approach to authentication.
Pickering says security measures such as two-factor authentication will generate considerable revenues for the vendors, but are unlikely to resolve fraud and security problems for more than a limited time period.
‘In the UK many of the big banks have announced authentication schemes,’ he said. ‘It may seem we have not done much, but this is because we have not had the problems some of the other banks have had.
‘We have done authentication trials, but in the personal space we do not see much need to launch a scheme,’ he said.
Banking-related online fraud cost the UK £23.2m last year. HSBC intends to address security issues through a ‘portfolio of controls applied at a number of different points in the service’.
Andy Muddimer, head of internet banking at A&L, says there are a number of methods for combating fraud, but two-factor authentication is the only marketable element – see box. He believes improving customer confidence is essential, regardless of the technology applied.
‘We have seen an increase in people using the system month on month, and that’s because they have confidence in it. Making sure you address customer’s perceptions about security is crucial,’ he said.
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