Taking Bank Vaults Online
Warnings about online fraud and identity theft have made consumers wary in their online banking choices, as reported recently by Jupiter Research in "Online Banking: Employing Security as a Differentiator." The report suggests that banks that appear to have the most secure online component have a distinct advantage in winning customers.
Researchers found that 43 percent of online banking consumers rate security as one of the top-three factors in choosing a bank, and one-third of online banking customers believe that some banks are more secure than others. But survey results suggest that consumers aren't well educated when it comes to online security. The most important security touchstones were consistent across income levels, according to lead analyst Bruce Cundiff. "The critical steps customers wanted to see were fairly static between affluent online users [those with annual household income of more than $100,000] and the myriad," Cundiff says.
In users' minds the most important security measures are guaranteed reimbursement in the event of fraud, and secure log-in via secure socket layer protocol (SSL). Protection from fraud is built into every FDIC-insured bank deposit (including online), and SSL is the standard for all Web transactions--one would be hard-pressed to find an online store that doesn't use SSL, let alone a bank. So how do banks project an image of having a safer online component?
Jupiter's report indicates that most banks' "Web sites have the necessary elements for educating consumers on online security, but presentation and thoroughness distinguish the standouts." Recommended measures, based on best practices by leading banks, range from providing customers with suggestions on how to protect themselves to maintaining tight integration with call centers in regard to scams and identity theft. "Keeping branches and call centers in the loop," to use the report's language, can be crucial. "One of the main drains on resources from fraud and phishing," Cundiff says, "is the spike in call center volume when a large attempt is staged. Disseminating information via the Web, whether in an FAQ or a direct alert, is easier than by phone, and it will cut down on call center burden."
Another factor in customer perception is bank size and type. For example, 21 percent of online customers believe large national banks have better security than local banks. Banks with physical branches were considered to be safer than online-only banks among 34 percent of people surveyed.
When asked if it would make sense for smaller banks and those without a brick-and-mortar component to form a consortium to advertise their own security in relation to megabanks, Cundiff says, "It would certainly make sense." By way of analogy he mentions various Visa/Mastercard campaigns: "Both with debit cards and credit cards, the subtext is that banks are working together. And while the large banks that sit on the card companies' boards do what will make them look good, there's an advantage for smaller banks as well."
Overall, banks must walk a tightrope between security and encumbrance. Technology must be clearly noticeable by consumers, but it can't get in the way of easy transactions or customers will seek other options. Even the amount of information on security must be moderated--too little communication makes a bank's security seem lax, but too much may give the impression that the bank is under siege and scare customers away or, even worse, into the waiting arms of a competitor.
This fine line means that there probably isn't a security war brewing among banks. "Banks are wary of marketing on security," Cundiff says, "because it's using fear as a marketing tool." History would seem to bear out that fear is bad for the banking industry. "Most banks we've spoken with are shying away from mentioning security--it's the elephant in the corner," Cundiff says. "Our report shows that banks can and should differentiate based on the security of their online operations, because consumers do perceive a difference."
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