Report: Identity Theft Still Threatens Online Banking

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Customers see the threat of identity theft as a key obstacle to online banking's growth, according to a new report.


The report, "Online Banking Customers: Attitude and Activities," was released Oct. 19.


"Online banking must still contend with anxieties that most other forms of Internet commerce left in the dust years ago," said eMarketer senior analyst David Hallerman, the report's author. "Even though nearly three times as many U.S. online households cite financial transactions as a most important reason for using the Internet than those who mention purchasing products, the penetration rate among Internet users for online banking is less than 56 percent as compared to more than 63 percent for online buyers."


The United States has 40 million online banking households, eMarketer said, a figure estimated to reach 52 million by the end of 2010. Nevertheless, online banking customers want stronger online security guarantees and more rigorous online authentication.


"The causes of consumer anxiety are clear," Hallerman said. "Fears about identity theft, fanned by data loss, account attacks and phishing, continue to plague the online banking sector. These problems are worrisome across all aspects of Internet commerce, but consumers are far more conservative about their finances than they are about purchasing books, computers or three-week vacations to New Zealand."


Hallerman suggested that the best thing banks can do to encourage more online banking use is to offer a comprehensive security guarantee. That pledge exists in the form of the Federal Reserve Board's Regulation E, which requires all banks to reimburse customers if funds are pilfered. But first customers must fill out lengthy forms and confirm online user names and passwords. A better solution would be an all-inclusive guarantee that promptly reimburses the stolen funds from victims' accounts.


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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