BOSTON -- If you do banking over the Internet, generally the
drill is pretty simple: You enter your user name and password, and away
you go.
But behind the scenes, the bank can do a lot to check you out: Are
you at your home computer, or at one with an Internet address that,
strangely, is registered overseas? Are you logging on at an unusual time
of day, or from a super-fast connection when normally you have dial-up?
This kind of analysis is one example of the layers that bank Web
sites will add by the end of 2006 to meet new demands from federal
regulators for "two-factor" authentication. That essentially means
checking something more than just user name and password to verify a
customer's identity.
"Phishers" and other Internet fraud artists have become adept at
stealing passwords, mainly through "social engineering." Preying on
people's propensity to believe something seemingly authoritative,
criminals send authentic-looking e-mails that send unsuspecting people
to an authentic-looking Web site where they give away their data.
Many banks overseas, where data-privacy laws are stronger, already
have deployed a second level of authentication. They give customers
specialized hardware, such as a "smart card" or an electronic token that
displays a changing series of passcodes.
Cost-conscious U.S. banks are unlikely to go as far. Instead, they'll
probably perform tweaks inside their own Web servers that most of us
will barely notice.
"We're trying to come up with something here that's very
user-friendly," said Jim Maloney, chief security executive of Corillian
Corp., a Web-banking services company that offers login-analysis
software.
If the software raises red flags about a user's profile -- because,
say, he one day logs in from Denmark instead of Denver -- the bank can
confirm his identity by asking a series of questions that only he is
likely to know, such as the amount of his last mortgage payment, or the
street he grew up on.
That kind of fraud detection has long existed on credit cards, and
the fact that Web banking has yet to widely deploy it says a lot about
the state of the industry.
Although identity theft and other financial fraud have garnered a lot
of attention and are believed to be getting more sophisticated, banks
have been reluctant to do anything to increase the cost and complexity
of their Web sites.
After all, the Internet is supposed to be banks' low-cost platform,
cheaper than having customers deal with tellers or ring up the help
desk. The efficiencies of self-service Web banking likely have
outweighed the costs of fraud, which some estimates have placed as low
as $137 million worldwide in 2004.
"Right now banks don't have that much security around checking
accounts," said Avivah Litan, an analyst with the Gartner research firm.
However, on Oct. 12, the Federal Financial Institutions Examination
Council, an umbrella group of U.S. regulators including the Federal
Reserve and the Federal Deposit Insurance Corp., told banks to
strengthen their online authentication by the end of 2006. Auditors will
examine those efforts in regular inspections.
The policy was widely interpreted as a boost for security providers,
who are tired of seeing banks kick the tires of two-factor
authentication services but generally not buy.
According to a June report from the FDIC, a handful of U.S. banks had
given customers tokens with passcodes that change every minute. The
codes are generated by an algorithm programmed into the token and
confirmed on a central authenticating server, making the password
impossible to guess.
But tokens create their own headaches. They're relatively costly to
deploy and can prompt calls to customer service if they're lost. Banks
also fear a "necklace" scenario in which customers end up with an
annoying strand of tokens.
Latest Money &
Life reports 
Previous Story