National Savings and Investment (NSI) is planning to issue telephone and online customers with two-factor authentication devices to increase security.

The government-backed provider of financial services is investigating issuing token devices to 500,000 customers.

Joe Dall, head of information and ebusiness systems at NSI, says the organisation wants to be able to offer customers new secure services through its web site and call centre.

‘Customers have increasingly expected us to offer a wider range of customer interactions through our direct channels, and that is really what this facility will support,’ said Dall.

NSI has 26 million customers and believes 500,000 will sign up to use the two-factor authentication tokens. Priority will go to those with financial assets that require frequent transactions.

‘Two-factor authentication is what we have in mind but we’re not pinning it down to any particular customer token or digi-pass-type solution yet,’ said Dall.

The additional security will allow customers to use the web site or telephone service to check their balances, change address details, make and request repayments, instead of via the post office or by writing.

Dall says the technology will also cut costs associated with back office processing, and the biggest challenge is finding a solution with a good balance between product versus cost.

‘It has to be easy to use, acceptable to our customer base, more secure than what we have now and be cost-effective,’ said Dall, ‘There is no point in rolling out something that is going to cost £5 or £10 per customer – that is a very expensive proposition.’

NSI hopes to begin work on the project this year.

Forrester Research analyst Benjamin Ensor says that most financial institutions are looking at some form of two-factor authentication, although consumers may not yet be aware of the shift.

UK payments industry association Apacs has developed a common authentication standard, but Ensor says there is no sign of industry-wide adoption.

‘The big fly in the ointment is that British consumers have multiple accounts and nobody wants to be carrying around four or five tokens,’ he said.

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