UK banks plan to establish a standard for physically authenticating online transactions early next month, allowing them to create greater consumer confidence in internet security.

The growing threat of identity fraud is forcing banks to find stronger means of securing their customers' accounts, such as providing a physical device that can generate unique codes to secure online transactions.

Banking industry group the Association for Payment Clearing Services (Apacs) says once a technical standard is set, banks are likely to start rolling out devices to select customers in the next nine to 12 months.

Tom Salmond, a consultant for Apacs' ecommerce group, says MasterCard and Visa's recent decision to collaborate with the banks will help establish the common technical specification.

'By the start of May, we should have an agreement about which authentication standard we're going to use,' he said.

HSBC, which has 18.9 million online banking customers in 39 countries, revealed last week it is investigating the viability of rolling out an extra layer of security to physically authenticate online banking customers.

'The increasing sophistication of fraudsters needs increasing sophistication from the bank,' said Alan Jebson, group chief operating officer at HSBC Holdings. 'This is a game of high stakes that we can't afford to lose.'

The Royal Bank of Scotland is believed to be in the process of conducting a trial with plans to deliver an authentication device within the next 18 months.

Barclaycard last month completed a six-month trial of a device that allows customers to use their bank cards and PINs to generate a unique code authenticating their online transactions (Computing, 17 March).

The company is now investigating how this can be rolled out across the market, which would require widespread collaboration across the industry.

'We need to engage with retailers and banks to find out how to take this forward,' said a spokeswoman for Barclaycard.

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