With the increasing popularity of the Internet among the public as a whole, Internet banking was bound to become a focus for most bankers. Yet despite the attractiveness and affordability of electronic banking, its acceptance and use has been slow. Fear about the security of the Internet, as well as cultural and practical reasons play a role in the slow adoption.
But banks have realized that offering services via the Internet is critical if they are to survive. They must have an Internet channel for those customers who demand it and the product offering must have enough functionality to satisfy their requirements. It must be secure and it must convey to the customers the same image that has characterized the bank’s reputation and image.
One of the key characteristics products must have is online access to the customer’s accounts. Some of the offerings in the marketplace today only work with the closing balances from the previous night’s closing and will not update them until the day’s closing. This is not acceptable, for most customers want to see their balances affected as they perform whatever transaction they process through this channel.
Bankers continue to debate how many Internet-related banking services they should offer. Some bankers only want to allow queries on balances, which imply a low and acceptable degree of exposure from a security point of view. Other bankers think that they should offer the full spectrum of services. The best solution appears to be somewhere in the middle. A typical Internet banking product will offer queries on account balances, payment of loans, payment of credit cards, in some countries the payment of services (utilities), opening of new products, capability of initiating transfers, stop-payment orders on checks, and other services such as request of new checkbooks, calculators, and the naming or renaming of their accounts and the capability to send an e-mail to the bank. Some even allow the opening of new accounts. The capability to download an account statement to a personal computer into a spreadsheet application is also quite common.
Insofar as security is concerned, every financial institution that engages in Internet services must take the necessary steps to protect itself against fraud-related losses and to insure that confidential information is not distributed to unauthorized users. One security risk confronted in the Internet is so-called “sniffer programs” that can collect unprotected data such as credit card numbers and passwords traveling the Internet. Others include problems of data integrity, authentication of users, non-repudiation, which requires the creation of proof of origin to protect the sender of transactions, and the protection of other bank systems once the internal network is linked to the Internet.
As the problems of Internet security have increased, so have the protection measures available to defend against its perils. Some of the latest techniques and procedures available include user IDs and passwords, data encryption (Secure Socket Layer and Secure HyperText Transfer Protocol are standard technologies in this area), certificate authorities and digital certificates to address the issues of authentication, virtual private networks, which permit the use of public telecommunication infrastructure while maintaining privacy through the use of tunneling protocols and security procedures.
Other security techniques might include routers and firewalls, which are effective measures to be taken to prevent unauthorized user access and stopping unwanted activities on the internal network, and virus protection software to protect servers and work stations. In addition, physical security of the network, including controlled access to the components of the network are important measures to be taken. Finally, redundancy and disaster recovery procedures are essential in insuring the continued operability of the network once established.
New problems will arise and new solutions will be found. What is irreversible is the continuation of the accessibility of bank accounts and services.
William Montiel is vice president banking and administration at Datapro Inc., a leading banking software provider.