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Consumer Confidence And Security Measures In Online Transactions
John Stith
Staff Writer
2005-09-01
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Cybersecurity remains a top issue in the business world today. As more and more businesses move online, particularly in the retail world, it becomes imperative for consumers to be secure in their transactions. The foundation will be security with online financial transactions with financial institutions and the authentication process is crucial.
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But a balance must be maintained. Consumers can be quite fickle based on something so simple as merely adding another level of difficulty to their online financial transactions. Whereas banks mustn't worry about this issue as much as others, that balance between ease of use and customer service friendliness and a genuine strengthening and improvement of transaction security must be achieved, both for consumer confidence to protect crucial data.
Javelin Strategy and Research just released the first in a two-part study concerning consumer preferences and online authentication and security for financial institutions. Some of the findings contained some obvious information but there were a few points of interest as well.
They tried to address three primary questions with this study. First was "What security measures do consumers most want to see banks implement?" Next, "Which authentication solutions resonate with consumers?" and then, "How can banks overcome the common public misconception surrounding identity fraud?"
The findings revealed some interesting information although not really surprising. With regard to the first question about consumer preference for security measure, the number one choice by a long shot was guarantees. 45% of all consumers surveyed chose a money back guarantee as the best choice for security issues. Javelin data suggested consumers feel most at ease when banks offer a full guarantee against fraud losses.
Consumers chose identity insurance and credit monitoring services as the two and three choices although, really, the numbers were basically tied at about a third each. Other possibilities also included user defined emails, user selected images at the website, user defined prohibitions of certain transactions, prohibitions of embedded Internet links in outbound emails and provide security education.
In their study, Javelin makes a distinction between new account fraud, defines as using illegally obtained information to open an account in someone else's name and existing account fraud, defined as stealing money from someone's account. They said each fraud results in different average loss to the institution, out of pocket losses and average time to resolved the fraud.
Their research showed that replacing stolen funds from existing accounts is still the most important with consumers. The research also showed that cleaning up messes from new accounts is much more difficult for consumers, both in terms of time spent and average losses.
The next big question dealt with "Which authentication solutions resonate with consumers?" The study showed consumers look for a balance between usability and security with their preferred authentication choices. It's also showing consumers want something more than external devices - either key chain tokens or USB plugins or some other web enabled device.
The choices for this portion of the study were: challenge questions, computing device recognition, fingerprint biometric, smart card or USB token, constantly-changing PIN token, voice authentication, SMS or phone call w/ pass word, scratch off card containing one time PN or a web grid using content and pattern recognition together.
The biggest choice, without a doubt was the challenge questions at nearly 60% followed by computing device recognition. Javelin points out that these two solution represent utility. They chose simple, easy solutions that don't really require a change in behavior but consumers also wanted something better than just a username and password.
They said the one odd choice was for fingerprint biometrics. They hit 29% and third overall. They suggested that while consumers were comfortable with this method and recognized the convenience and security associated with a fingerprint read, they may not have realized the logistical issues involved in equipping all user machines with fingerprint read capabilities.
They did recommend one middle ground option for financial institutions is to selectively require stronger authentication - either on a transaction basis or on a consumer opt-in basis for higher or riskier transaction or as an added precaution if suspicious account activity is detected.''
To put things in perspective, they point out that for new accounts, the industry loses $14 billion total, averaging $11,253 per case and the consumers lose $1.7 billion total and $1,393 total and taking an average. Fraud through existing accounts costs the industry $32.5 billion total at $6,319 per case and victims lose $4.4 billion total at an average of $862. Jupiter suggests that with these types of numbers, the industry really need to be doing more than they currently are.
Javelin makes a brilliant point with much of this information. Financial institutions are one of the foundations of the world's economy. As history has shown, confidence in them is absolutely essential to keep the economy alive. Much of the world is moving toward electronic, online transactions and security is crucial because as it stand now, many transactions aren't secure at one level or another and banks have a responsibility to their customers not only to provide avenues for secure transaction but also to let their customer know they have secure transactions.
Most institutions now just have a username and a single password system for nearly all their customer accounts. It more than obvious that's not enough and consumers realize it. At this point, cybersecurity for financial institutions is an inchoate process and at this point will remain that way until institutions take this problem more seriously and consumers demand better protection.
About the Author:
John is a staff writer for SecurityProNews covering cyber security.
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