Facing up to the Security Challenge in Retail Banking (Market Focus)

Security is a fundamental requirement for all banks as customers expect their investments, personal information and credit details to be secure. Fraud continues to be an issue for retail banks across the world. The majority is currently related to cards and payments, however, identity theft and account breaches are on the rise. As a result, banks are fighting an ongoing battle on all fronts.

Report Highlights


Losses due to online banking fraud are currently small compared to card-based losses, however, it is likely that this will grow over time. Banks need to consider how they will encourage customers that to use the online channel, guaranteeing its security, without encouraging customers to be complacent about their personal security efforts. The increased level of automation is a double edged sword, both opening up banks to an increased level of potential security threats, while simultaneously providing them with the tools to be able to detect erroneous and/or fraudulent transactions. More than ever, banks are vulnerable to breaches due to insider actions, whether intentionally or not. Bank systems and data are now not only available to their physically onsite employees, but also external contractors, offshore locations, remote contact centers, outsourcers and IT vendors to name a few.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
METHODOLOGY 1
ANALYSIS 2
Bank security and fraud are becoming an increasingly high profile issue 2
Anything other than perfect security is a failure... 2
...But banks are facing a barrage of security threats from all sides 3
Negative publicity is a major concern for retail banks... 3
...However, there is no smoke without fire 4
The perception of security differs by channel, but customer reactions are complex 5
The increased level of automation is opening banks up to attacks from across the globe 5
Automation and the internet enables access to bank systems from across the world... 5
... However, automation also enables more effective fraud detection analytics 6
Banks want customers to use direct banking channels 6
However, non-IT based threats remain just as critical 6
Security breaches can happen without any help from fraudsters 6
Gathering sufficient data to commit third party fraud/identity theft does not require IT literacy 7
Customers can unwittingly compromise themselves, being tricked into disclosing security details 7
Internal employees can prove a security hazard, whether intentionally or not 8
Regulations are driving towards formal security standards 8
Regulations are having a direct impact on security initiatives 9
Wider banking regulations will also impact security 10
APPENDIX 11
Further reading 11
Ask the analyst 11

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Figure 1: Phishing activity by sector 2
Figure 2: UK fraud losses 5
Figure 3: What compliance and regulatory issues are driving increased IT expenditure in 2007? 9

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