Security is a nagging issue for online banking, and will not go away. The matter of security guarantees is not adequate it would appear, because all the top US banks, the source of this study, have security guarantees.

Study: US consumers losing trust in online banking – INTERNET – ENGLISH NEWS – NEWS – PC-Welt – pcwelt.de

U.S. consumers are not as enamored with online banking as they once were and are citing online security as their top concern, according to a report.

“The result is a slowing rate of adoption, with online banking households increasing by only 3.1 percent in the last quarter of 2005 — the lowest increase in three years,” according to Lisa Phillips, senior analyst at eMarketer and the report’s author. “The number of online banking households as a percentage of total online households is pretty stagnant, too. It is expected to grow by just 4 percentage points between 2006 and 2010, from 45.4 million in 2006 to 56.2 million in 2010.”

We know that consumers become morecomfirtable with online banking, following longer online tenure, but this study suggests that is not enough.

“Being able to trust a banking site is extremely important to customers, with more than 87 percent saying in an Ipsos Insight survey that they wanted assurance that the bank would not sell their personal information, and 83 percent wanted assurance that such data was protected from hackers,” according to the report.

The difference between US and the European experience is astounding, and eMarketer says that is directly tied to stronger security, and authentication policies.

Phillips said 75 percent of European consumers do more than half of their banking business online, compared to 38 percent of Americans. Europeans have confidence in internet financial transactions as a result of more advanced authentication and ID policies, she said.

 Then in a somewhat unrelated point, eMarketer makes the link between web capabilities, and customer retention.

“Technical difficulties, encountered even one time, are enough to drive 34 percent of online bankers to find better service on a competitor’s site,” Phillips said in the report. “The link between customer satisfaction with a bank’s Web site and overall satisfaction with the bank is overwhelming.”

Relevance to Bankwatch:
Security cannot be passed off as something that will just be ok.  Even two factor authentication, that is being implemented for regulatory reasons in the US will not be enough.  Banks’ each need a comprehensive security programme that satisfies customers about their security concerns.