Alliance & Leicester has issued security technology to all its one million online banking customers, in a move intended to cut identity theft and internet fraud.

It is the first UK bank to respond on such a large scale to the threat of cyber criminals, by providing two-factor authentication technology free-of-charge to its entire online customer base.

While Lloyds TSB and HSBC have been testing different types of two-factor authentication for a number of months, neither have immediate plans for a full rollout.

‘We are committed to combating online fraud and this is an additional level of protection to online banking customers,’ said Andy Muddimer, head of internet banking at Alliance & Leicester (A&L).

The bank will adopt technology from IT firm PassMark Security, which is already being used by 15 million Bank of America customers in the US.

The PassMark system sits alongside traditional password security and checks personal log-in details are being entered from the customer’s computer, rather than from another machine.

Also, when account holders log on, the system will show them an image and phrase they had previously chosen, allowing the bank to prove that customers are accessing the bank’s genuine web site, rather than a spoof one created by phishers.

A&L will supplement the technology with a card-reading device to authenticate online transactions physically, once a standard is agreed by members of banking industry group Apacs (Computing, 5 January), which could be as early as next year.

Martha Bennett, research director at Forrester Research, says that phishing scams only cost UK banks £23.2m last year, but a far greater threat to the industry comes from concerned online customers switching back to more costly high-street and telephone banking services.

She also warns that the introduction of multiple security devices by UK banks could cause short-term confusion until banks approve the Apacs standard.

‘If you have several accounts, and they are all doing different things, there will be some initial confusion, but long-term most of the banks are onboard with the Apacs standard,’ said Bennett.

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