As Mobile Banking Heads for Explosive Growth, Consumers Rank Simplicity, Security Supreme

With 86 percent of American adults owning a mobile handset, mobile banking is poised for explosive growth. ­Currently 36 million adults are using mobile banking (smartphone users - 18% of Americans - are the heaviest users), but by 2014 that number is expected to grow to 99 million adults, according to a new study by Javelin Strategy & Research.

Javelin says the growth of mobile banking will present new risks and opportunities in authentication - or helping protect consumers by confirming their identity - and that those financial institutions that combine affordability, consumer usability and effectiveness will have the greatest advantage.

In August and September 2009 Javelin polled 2,000 consumers to gauge their perceptions of mobile banking and corresponding authentication security methods.

It measured ease of use, effectiveness and high risk authentication and found that:

• For ease of use: six out of ten consumers prefer simple authentication methods such as image recognition. Security questions came in close second with 59% ranking the method easy to use. In contrast, three in ten consumers ranked biometrics as easy to use.
• For effectiveness: Simple security questions - or knowledge based authentication (KBA) - ranked highest in effectiveness by 65% of consumers.
• For high risk authentication - Consumers ranked an additional security question (also KBA) as the preferred method of authentication with three in 10 trusting it as their method of choice.

"Mobile banking is a convenient new channel that is enjoying widespread adoption," said James Van Dyke, president of Javelin. "While there are obviously new critical risks, this 'always-on' channel for monitoring finances can also manage risk across all other channels. A multi-layered approach to authentication provides the most effective means of mitigating fraud while improving upon the consumer experience."

While mobile banking comes with risks, according to Javelin, mobile authentication can actually help mitigate the risk of fraud across all banking channels, from ATM to branch. Collectively, new account and existing account identity fraud adds up to $48 billion, with an average per-victim cost of nearly $550.

The top two most promising authentication technologies are mutual authentication and device recognition which provide substantial protection while offering ease of use, which raises the likelihood of adoption. Javelin ranked voice and vein pattern biometrics as least promising.

"As institutions look to incorporate mobile banking into their authentication strategies, most often it will be under a multichannel umbrella," said Javelin Risk, Fraud and Security Analyst Robert Vamosi, author of the study. "The best authentication approach will leverage new and existing technologies that can cross channels as well mitigate new risks and take advantage of new capabilities afforded by the mobile handset."

Javelin designated RSA and VeriSign best in class among the 15 authentication vendors analyzed. Tyfone and M-Com ranked best in class among the 13 mobile banking vendors analyzed for their overall cross-channel authentication capabilities.

Posted to the site on 29th September 2009