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Consumer Authentication for Retail Banking: Compliance Does Not Equal Security
Javelin Strategy & Research, July 2008, Pages: 26
With the majority of financial institutions in compliance after the frenzied rush to meet the authentication requirements of the 2005 FFIEC Guidance, a number of financial institutions have relaxed into a satisfied mode. Compliance is not security, however, and complacency increases risk. Weaknesses have already been proven for widely adopted methods such as mutual authentication and device recognition. In this report, Javelin takes a hard look at how two-factor authentication has impacted consumers’ attitudes toward online banking, as well as some of the obstacles that banks continue to face despite the stronger verification controls that are now required to authenticate online bankers. Included is a projection of the number of consumers that would bank online if institutions could provide the necessary assurance and education to prevent them from worrying about security.
Primary Questions
-Three years on, what are the lessons learned from meeting the 2005 FFIEC Guidance, and how can they be applied for financial institutions (FIs) considering
deployment of multifactor authentication for other channels, such as telephone or mobile?
-How has the 2005 FFIEC Guidance impacted consumer usage of, and attitudes toward, online banking and its security measures?
-How do security concerns figure into some consumers’ reluctance to embrace online banking, and how can FIs overcome these obstacles to increase adoption?
This report is mainly based on data collected from several online consumer surveys as well as Javelin’s 2008 Identity Fraud Survey. The Javelin Annual Household Finance Survey is an online consumer survey that was most recently deployed in March 2008, with a sample size of 2,350 respondents (longitudinal data of this survey from previous years was also utilized for comparison). Data was also extracted from an online consumer survey deployed in October 2007, with a sample size of 2,192 respondents. All surveys targeted respondents based on representative proportions of gender, age and income as compared to the overall US online population.
Overall margin of sampling error is ±2.1 percentage points at the 95% confidence level. Javelin also projected the number of security-concerned offline bankers. For this projection, Javelin used the percentage of consumers who said security was the primary reason they do not bank online multiplied by the number of US adult citizens 18 and older who do not bank online with Internet connections as per the US Census data. All survey data is demographically representative by age, income, ethnicity and gender. Four executive interviews with risk and fraud executives of leading US financial institutions were also conducted to provide qualitative data analysis.
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