U.K. consumer confidence in online banking 'fragile'

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Confidence in internet banking among U.K. consumers is "fragile," with half of active internet users telling the Financial Service Authority (FSA) that they were "extremely" or "very" concerned about fraud risk when making transactions.

According to the FSA's latest Financial Risk Outlook, due to be published tomorrow, consumers who conduct their banking online are taking steps to protect themselves against fraud by installing security software on their PC. However, over a quarter admitted they did not know when they last updated their software or updated it infrequently.

APACs, the U.K. Payment Association, noted that fraud losses through internet banking were $25.9 million in the six months to June 2005. Although this is relatively low, losses have more than tripled since the same period in 2004. The FSA's research found that if banks were to tackle these losses by shifting the liability fully towards the consumer, more than three quarters (77 percent) of users say they would abandon internet banking.

Nearly all users (95 percent) surveyed believe that at least some security responsibility should lie with the bank, while 45 percent believe banks should take sole responsibility.

Some five percent of online bankers polled for the FSA report admit to having no security software installed on their PCs. The most commonly cited reasons for this include that it is too expensive, and that the users don not understand what it is.

Additionally almost 60 percent of internet users believe it is possible that someone could access an online account and commit fraud without the account holder having supplied their log-in details.

Philip Robinson, financial crime sector leader at the FSA, said: "If consumers were asked to foot the bill for internet banking fraud losses, our research shows that they would stop using the tool. Most consumers recognize they have some responsibility for security but they are not necessarily following this obligation through. To tackle the losses associated with fraud, banks should continue to drive security and this must include educating consumers on the importance of protecting themselves.

"We recognise that many banks are already taking steps to engage consumers. Initiatives like the "Get Safe Online" campaign between the government and the private sector show consumer education is beginning to happen. But banks need to look carefully at consumer attitudes and whether their initiatives are effective in maintaining confidence." The research was conducted by NMG Financial Services Consulting/IPSOS on behalf of the FSA in October and November of last year. A sample of 1,508 respondents who had used the internet within the past six months and who held a current account completed the survey.

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