Viewpoint: Online Authentication as a Selling Point

By De Santis, John | American Banker, November 3, 2006 | Go to article overview

Viewpoint: Online Authentication as a Selling Point


De Santis, John, American Banker


If you're part of a financial institution, chances are you've memorized the Federal Financial Institutions Examination Council guidance on online authentication and, with risk assessment in hand, are most likely fast-tracking some sort of authentication investment before 2007.

Most likely you'll be approaching FFIEC audits with a "good enough" mentality, meaning that whatever you install to protect people against online fraud and identity theft is better than what you had -- and the less invasive to the consumer, the better.

While the FFIEC guidance has fast-tracked new conversations and partnerships between business and IT organizations, that may not be enough; the hard and fast deadlines are forcing strategic IT investment decisions in a pressure-cooker environment driven by multiple agendas.

Add to that a rapidly changing threat model, and it's easy to see why the FFIEC has created cause for worry. When it comes to online services, banks have two main mandates: Keep online customers happy, and continue to reap and expand the high margins of the online channel.

Given the high margins associated with online banking, banks believe that erecting too many electronic barriers between customers and their money will drive them away from online services and back into the branch.

This belief was not formed in a vacuum; plenty of money has been spent on well-executed market research to reach this conclusion. However, things change.

The notion that users place a higher premium on the convenience of online banking may not prevail in light of huge increases in theft and fraud perpetuated on the online channel.

The challenge presented by the FFIEC regulation is that it proposes a variety of two-factor options that could be appropriate.

Which one makes the most long-term business and security sense depends on such variables as the number of online users, the primary nature of their online transactions, their current network infrastructure, etc., that can vary widely from institution to institution.

Will buying decisions for authentication based on customer convenience and "good enough" security serve banks as threat models change? Possibly ... as long as what you purchase today provides the ability to calculate a more strategic, long-term plan that accounts for two major shifts:

* IT security will become less reactive as IT and business units deepen partnerships to expand online business models.

* End users care about security and are willing to adjust their behavior accordingly.

Supporting these conclusions is the fact that authentication vendors are moving toward what is generally known as a risk-based, or adaptive, approach, which allows organizations to adjust authentication to account for specific sets of customers or types of transactions.

The riskier the transaction, the stronger the authentication. And guess what?

As you move up the ladder, users will have to participate in their own protection.

In short, online customers may be savvier and much more willing to adopt new online behaviors -- especially if they are aware of how much they have at stake.

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