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FinTech Industry Shows Why Online Banking Is Not Meant For Mass Consumption

by on December 31, 2015

Many people in the financial sector see the benefits of FinTech innovation, yet it is hard to come up with use cases that will gain mass adoption overnight. Most FinTech companies are looking at ways to come up with new payment methods, rather than thinking about making the current solutions safer. Truth be told, there are a fair few security concerns regarding the banking system as we know it, especially when they start offering solutions such as online banking.

Also read: SoFi Does Not Rely On Wall Street Or Banks To Disrupt The Financial Sector

Why Online Banking Is Not Meant For Mass Adoption Yet

From a convenience point of view, online banking makes a lot of sense. Consumers no longer have to visit their local bank branch to check their account balances and send money to other recipients. Everything can be done from the comfort of their own home, which is a major step in the right direction.

At the same time, this also creates a major security issue. When accessing online banking, users will either have to create a username and password, or authenticate through a card reader. Usernames and passwords are an inherent problem in their own right, as consumers more often than not use the same password for all online services they have access to.

Using a card reader, on the other hand, sounds like a very secure solution, yet it’s not the most practical one. Every time the consumer want to login to online banking, they need to pull out the reader, insert the card, enter a randomly generated code, and full in the response in a web form. Secure, yes, but not all that convenient.

Depending on which bank one might use, the same authentication process has to be repeated for every wire transfer sent. Luckily, most banks offer their users a chance to bundle several transactions and sign them all with one code. Once again, this is a clumsy approach, although it makes perfect sense from a security point of view.

That being said, not all banks require further authentication once a user has logged into their online banking platform. Some banks will allow users to send any wire transfer they want to any recipient – known or unknown – without requiring some form of authentication to confirm the transaction. It goes without saying this is not the best security practice; as it makes customer funds quite vulnerable to attack.

Imagine if a user’s computer was infected with malware, through which a  hacker can remotely access the device. Once the user authenticates their online banking credentials, that hacker could then empty the user’s bank account in quick succession unless the user manages to log out on time. In most cases, consumers leave their PC banking window open or exit the website without logging out properly. This creates a brief window of opportunity for hackers to steal funds.

What Banks Can Do To Improve Security

On paper, there is very little banks can do to come up with additional security without disturbing the convenience factor on online banking even further. SMS verification could be an option worth exploring, by sending customers a code when signing off on transactions. This would keep any verification away from potentially infected computers, and reduce the risks of customers losing funds that way.

This is where the FinTech sector can play a major role over the next few years. Companies working on platform security will be the center of attention from banks all over the world. A convenient way to verify user identities without relying on computers, passwords, or even two-factor authentication would be a good place to start.

The best way to prevent unauthorized access to online bank accounts is through education. FinTech companies are in a prime position to educate the masses on why and how security matters can make a difference in their banking operations. These efforts would transcend online banking on PC’s, and cover mobile banking as well, which faces the same – and other –  security issues.

What are your thoughts on innovation in the banking security sector? Are there any ideas or concepts you think would be beneficial to FinTech companies addressing these issues? Let us know in the comments below!

Header image courtesy of Shutterstock

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