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Fraud puts online banking at risk of collapse

Fraud puts online banking at risk of collapse - vnunet.com

Consumer confidence 'fragile', reports FSA
Iain Thomson, vnunet.com 23 Jan 2006
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Over three-quarters of UK surfers currently using internet banking could abandon the services because of fraud, according figures to be released on Wednesday by the Financial Services Authority (FSA).

The watchdog's Financial Risk Outlook 2006 warns that 77 per cent of UK users would close their accounts if banks started refusing to reimburse customers for internet fraud.

The FSA went on to describe consumer confidence in the internet banking system as "fragile".

"If consumers were asked to foot the bill for internet banking fraud losses, our research shows that they would stop using the tool," said Philip Robinson, financial crime sector leader at the FSA.

"Most consumers recognise that they have some responsibility for security but they are not necessarily following this obligation through.

"To tackle the losses associated with fraud, banks should continue to drive security and this must include educating consumers on the importance of protecting themselves."

The report quoted figures from the Association for Payment Clearing Services suggesting that fraud losses through internet banking reached £14.5m in the six months to June 2005.

Although this is relatively low, losses have more than trebled since the same period in 2004 when the total was £4m.

Nearly all users (95 per cent) surveyed believe that at least some security responsibility should lie with the bank, and 45 per cent believe that banks should take sole responsibility. One in 20 respondents had no security software on their PC.
Research by Forrester last year estimated that 600,000 UK internet users had stopped using online banking because of security fears.

"We recognise that many banks are already taking steps to engage consumers. Initiatives like the Get Safe Online campaign by the government and the private sector show that consumer education is beginning to happen," said Robinson.

"But banks need to look carefully at consumer attitudes and whether their initiatives are effective in maintaining confidence."

January 25, 2006 at 09:12 AM in Financial Services | Permalink | TrackBack (18) | Top of page | Blog Home