The Evolution of Online Banking

November 15, 2016

Blog

Marie Austenaa, VP and Head of Personal Data & Mobile Identity Programme at GSMA

In April this year, the World Retail Banking Report from Capgemini reported significant improvements for banks’ customer experience. A significant amount of progress can be attributed to the investment that banks have made over the last year to enhance their digital offering.

As digital identity technologies have developed, the financial sector has taken steps to incorporate them into core services that safeguard security and make banking easier. Most major banks now allow customers to check account balances from their mobile phones, often without the need to explicitly authenticate themselves, given the low-value risk.

Yet much more needs to be done before banking can really be described as seamless. A number of services still require account holders to physically visit a bank branch to verify their identity. Anyone who has visited a bank during their lunch break for this reason – and found scores of other people also doing the same – can attest to its inconvenience. The continued use of paper-based identity verification, via passports and driving licenses, also adds delays which are plainly out of step with the increased pace of digitisation in other industries.

Moreover, as more businesses move online, protecting vital data such as financial information has become much more difficult. Online security threats are becoming increasingly prolific and last year ‘phishing’ emails and ‘ransomware’ campaigns rose by 55% and 35% respectively with half a billion personal records stolen.

The old authentication norm of usernames and passwords are simply no longer secure. Hackers are getting better at cracking them or using social engineering to trick members of the public into inadvertently revealing them. And with the ever-increasing number of logins required today, it’s little surprise that 65 per cent of users default to using the same password for various accounts. Multiple passwords are also inconvenient: 37% admit having to reset a password at least once per month due to the sheer number they now have to remember, and 6 out of 10 businesses say this is having an effect on productivity.

The challenge for banks is balancing security with convenience. A secure digital identity solution that enables users to cut down on time lost to banking procedures is essential for the healthy development of financial services. Effective authentication solutions utilise two factors of authentication – typically relying on something the user has, as well as something they know (a PIN or password) or something they are (such as a biometric). Banks have some such solutions in place, but the common model of card-readers and PIN numbers is ineffective as few people want to carry such a device at all times.

This is where mobile authentication comes into play. By eliminating the need for an additional item, and relying instead on one the user has with them anyway – their mobile phone – it offers users the best of both worlds.  Possession and control of the mobile phone (as a single factor of authentication) can be combined with a secret (e.g., PIN) or biometrics (e.g., fingerprint). In both cases, the information submitted by the user is verified locally on their mobile phone, mitigating the vulnerability of server-side databases of passwords or fingerprints.

Such an approach is far more secure that the current ‘out-of-band’ authentication mechanisms used by banks such as One Time Passwords via SMS or Interactive Voice Response (IVR) solutions, all of which can be easily targeted by malware on the device.  Moreover, an operator solution can enhance security by leveraging unique contextual insights derived from the user’s behaviour on the mobile network to provide additional signals for capturing potential fraud.

When banks and operators pool their knowledge and expertise, they are able to create a more secure environment for transactions. In fact, the GSMA has already begun working with a number of operators and service providers to roll out Mobile Connect, an operator-based authentication service which provides a convenient and secure log-in solution with privacy protection. The digital journey in banking has started now in earnest, but there is more work to be done to ensure safe and convenient access to these new digital services.

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