Internet
Banking
E-commerce CE52302-2
Su Ferneyhough
Contents
Internet Banking ................................................................................................................................... 4
What is internet banking?................................................................................................................... 4
The History of Internet Banking .......................................................................................................... 4
Approach ............................................................................................................................................... 5
Internet ............................................................................................................................................... 5
Libraries ............................................................................................................................................. 5
Market Research .............................................................................................................................. 5
Research ............................................................................................................................................... 6
Access................................................................................................................................................ 6
Facilities ............................................................................................................................................. 7
International companies .................................................................................................................. 7
Security Issues ..................................................................................................................................... 8
Problems ............................................................................................................................................. 8
Security Protection ............................................................................................................................. 8
Encryption ....................................................................................................................................... 8
Password Protection ....................................................................................................................... 9
Card Reading Machines .................................................................................................................. 9
Security teams monitoring internet banking. ................................................................................. 9
Timed Log outs .............................................................................................................................. 10
Online Security Information in the form of Quizzes ..................................................................... 10
Free Software ................................................................................................................................ 10
Future security measures being researched and introduced. ...................................................... 10
Online versus traditional way of banking ........................................................................................ 11
Advantages of traditional banks ................................................................................................... 11
Disadvantages ................................................................................................................................ 11
Advantages of Online banking ..................................................................................................... 12
Disadvantages ................................................................................................................................ 12
The “how to…” of Internet banking .................................................................................................. 13
Conclusion ........................................................................................................................................... 14
Bibliography .......................................................................................................................................... 16
Websites........................................................................................................................................ 16
white papers ..................................................................................................................................... 16
Online magazines .......................................................................................................................... 16
Su Ferneyhough 30 September 2008 Page 2
Online Banks ................................................................................................................................. 16
interviews...................................................................................................................................... 16
References ........................................................................................................................................ 17
Appendix .............................................................................................................................................. 19
Card Reader Technology .................................................................................................................. 19
Registering for Online Banking ........................................................................................................ 20
Managing Your Account Online ....................................................................................................... 21
Su Ferneyhough 30 September 2008 Page 3
Internet Banking
What is internet banking?
Online banking is the technology that allows account holders to access their
accounts and interactively access all the facilities provided by their banks.
“Almost anything you would traditionally need to go to your bank for can be done
from anywhere, at any time of the day via the internet” (www.apacs.org.uk).
I have chosen to research internet banking as I find the topic very interesting and am
amazed at the range of services available. It is a fast growing trend to bank online
and I am sure that it will massively affect the way that businesses and customers
interact.
The History of Internet Banking
Internet banking has been around since the 1980‟s but only became popular with the
opening up of the internet to the general public
I found a lot of contradictory information on the origins of internet banking with a
variety of banks being the “first online bank”.
The first American internet bank was Security First Network Bank which opened in
1995.
“On October 18, 1995, SFNB formally opened its virtual doors to the world,
becoming the first Internet bank to be federally insured by the Federal Deposit
Insurance Corp. (FDIC)” (www.smartcomputing.com).
www.apacs.org.uk claims that HBOS, launched by the Bank of Scotland was the
first online banking system in 1985. Other sources state that the actual date was
June 1997 (www.rbs.com).
Nationwide launched their internet banking service on 27th May 1997
(www.nationwide.co.uk).
In 1998, the internet only bank, Egg, was opened.
“In the 10 years since the successful launch of Egg, it has grown into the world's
largest internet-only bank. In the decade since the internet revolutionised banking,
internal processes, fraud protection and risk management have also been
overhauled by technical developments.” Lindsay Clark, (www.computerweekly.com).
Su Ferneyhough 30 September 2008 Page 4
There are now a few other online banks such as First Direct, but banks with
branches still seem to be the most popular option.
Internet banking is now available to all from a huge range of suppliers and is
essential to some businesses and customers alike.
Approach
Internet
I decided to approach my essay by first researching online. I chose this method as
internet banking is fast changing and the internet would provide the latest
information. I also researched the details of several online banking facilities and the
difference between them.
I have tried to use only reputable sites for my research. I have not used sites such as
“Wikipedia” as I have learnt that the articles are not vetted before insertion and so
could contain false information.
I have also used e-journals and white papers, written by experts. I found the most
recent information using these.
Libraries
I also looked in libraries (both University and locally), and my existing collection of
books to see if I could find information there. I also decided to find out how to
research using journals, both online and in the University library. I will include
information found in the journals.
Market Research
I then decided to speak to people I knew about their feelings on internet banking,
making sure that I spoke to a wide range of people, who use different internet
banking companies.
Su Ferneyhough 30 September 2008 Page 5
Research
According to www.computerweekly.com “The number of UK citizens using an online
banking service has increased from 3.5 million, seven years ago to more than 21
million last year. This accounts for about a third of the UK population and is more
than half of internet users.”
In America, numbers of users are also increasing. Technology concerning internet
banking is more advanced.
“Online banking is growing faster than any other method of delivery in the US and is
rapidly becoming the most powerful retail channel, according to research from
TowerGroup. The financial analyst firm found that the number of US consumers
using online banking will grow by 27% annually in comparison to a growth rate of
10% across all other channels between 2006 and 2010. It said the internet will be the
future of bank delivery.” (www.computerweekly.com)
Internet banking is growing in popularity around the world, figures all over the world
are rising greatly. This includes countries such as India.
“The total number of registered users for Internet banking in India is over two
million. India has a little less than a million active Internet banking users. And though
this is just 0.096 percent of the total population, it represents 15 percent of the
India‟s Internet user population. Thus indicating that the concept of Internet banking
is surely catching on.” (www.expresscomputeronline.com).
With the development of speech technology the internet banking industry could
reach new levels. Banks can operate all over the world without language barriers.
“In fact, the natural convergence of these technologies and standards is that one day
all customers would be able to log into a bank‟s services from anywhere in the world.
And simply by talking through their PC, be able to provide and receive information on
their account, in a safer and more accessible technological environment – no matter
what language they speak.”, Brian Turner (www.financemarkets.co.uk).
Access
Internet banking is available to all customers who can access the internet. This is no
longer restricted to PC‟s and laptops as mobile phones and other small devices can
now access the internet.
www.pcmag.co.uk report that, “800 million people will bank via mobile devices by
2011, according to a report from Juniper Research.”
Su Ferneyhough 30 September 2008 Page 6
Apple has also introduced the “I-pod Touch”. A new feature on this I-pod is that it can
access the internet using Wi-Fi standards and technology; this means that you can
now bank using your I-pod.
“Nationwide Building Society has become one of the first financial services providers
to allow access to its online bank via the Apple Mac i-Phone and i-Pod Touch, giving
members greater flexibility and choice in how they manage their finances.”
(www.nationwide.co.uk)
Most employees now have internet access at work or can gain access via “internet
cafes” or libraries. Some businesses also offer free “Wi-Fi” facilities as a gimmick to
tempt people to use their facilities and become customers.
Facilities
There is a huge range of facilities available through internet banking. It is fast,
convenient and you can see what is happening instantly. Users can transfer money
between accounts, pay bills such as credit cards or utility bills. Banks are using the
pages to advertise other services available to their customers such as home
insurance or travel insurance and conversion rates.
There is also a mine of information for the users, including different accounts
available, interest rates and even specialised services such as “wealth planning”. For
the inexperienced user there are step by step demonstrations and full explanations
of how internet banking works and security issues.
http://whitepapers.zdnet.com/ report that, “Internet banking program functions and
features have made some progress in the last year, primarily in the area of business
banking.”
B2B – This is a highly profitable area where banks and businesses alike can benefit
from internet banking. Businesses obviously have more revenue than customers and
therefore.......... Banks also provide specialist services to businesses such as “bulk
payments” services.
International companies
International companies can trade around the world without worrying about differing
currencies. Internet banking provides a currency conversion tool and businesses can
see instantly what the figures would be in pounds or whatever currency they wish to
trade in. There are also specialised services available through internet banking, such
as special exchange rates. A large international company may hold accounts in
several different countries with the same bank. (www.offshore.hsbc.com).
Using internet banking makes moving money between countries and keeping track
of the accounts easier.
Su Ferneyhough 30 September 2008 Page 7
Security Issues
Problems
One of the biggest obstacles to online banking is the fear of online banking fraud.
Media hype informing the public of hackers is common. Most users may not
understand how internet banking works and fear that their money will become lost or
stolen.
One of the biggest problems facing internet banking is „phishing‟. This is when an
email is sent and requests users to enter personal information such as username,
passwords or credit card details.
Theodore Green, President of SpamStopsHere.com writes that, “Spam has evolved
from a minor annoyance into a new and dangerous form known as “phishing”. A
typical phishing scam consists of an official-looking email, supposedly sent from
institutions that are known to have personal sensitive data on file. Financial
institutions, eBay and PayPal are often the target.” www.spamstopshere.com
Most “phishing” scamsters are located overseas and cannot collect the money
directly due to laws on cross border transfers. UK citizens are drafted into the scams
and act as “money mules”. Their job is to collect money into their account via the
scams and then wire it over seas, minus their commission
(www.banksafeonline.org.uk)
“There were 1,087 money mule recruitment incidents in 2006, compared with 473 in
2005.” Francois Paget (www.avertlabs.com).
Security Protection
Banks have increased security protection and new technology is being trialled and
added. It is in the best interests of both the customer and banks to have the best
security on the internet banking system as it is good for the banks reputation and
protects the users. The security is at many levels of the log-in, below are some
examples
Encryption
Banks use encryption methods to make the data unreadable, the data is then sent
and decrypted at the other end. 128 bit technology is used for banking as it makes
payments and the sensitive nature of the material protected. The standard used for
internet banking is, Secure Sockets Layer (SSL) technology (www.verisign.com)
http://compnetworking.about.com explain that, “Compared to 40-bit encryption, 128-
bit encryption offers 88 additional bits of key length. This translates to 288 or a
whopping
Su Ferneyhough 30 September 2008 Page 8
309,485,009,821,345,068,724,781,056”
Password protection
Most internet banking accounts are protected by passwords. This is usually a log-in
password used with the internet account number. A second security screen then
asks for three letters of a secret answer, the whole answer is never asked for.
The only danger is that the user will not first log out before closing down the screen,
dependant on the computer, some will automatically save details (such as auto
complete). This means that the session could be restored and access gained.
Card reading machines
Some banks such as Barclays and Nationwide have introduced card reading
machines. These are kept with the bank account holder and used to gain access to
their internet accounts. The card readers generate a unique 8 digit number after the
user enters their pin. The number is then typed in to allow the user access. It is also
used to set up any new payments (standing orders, etc). This prevents fraudsters
from setting up automatic payments from your account.
The card readers are not linked in any way to just one computer, the users can use
any computer to access their accounts.
"The system does not just rely on the customer log-on the card reader, debit card
and Pin are also used to set up new payments. It offers protection against both
current and future threats because of its use in the authentication process of the
destination account number and the amount of the payment.”, Barnaby Davis,
director of electronic banking at Barclays. (www.computerweekly.com)
www.computerweekly.com report that “Losses from online banking fraud have
dropped by a third in a year, even as the number of people using the services
continues to increase. Figures from the Association of Payment and Clearing
Services (Apacs) revealed total losses for online banking fraud were £22.6m in 2007,
compared to £33.5m in 2006.”
Security teams monitoring internet banking.
Halifax has a team of people working solely on internet banking.
“Our dedicated security teams analyse and monitor online transactions, 24 hours a
day. If there's anything suspicious, we're the first to know about it”
(www.halifax.co.uk).
Su Ferneyhough 30 September 2008 Page 9
Timed log outs
Most banks operate a timed log out of 10/15 minutes. This means that if there is no
activity logged then the bank will automatically log you out after the allocated time.
This reduces the risk of someone accessing your account if you forget to log out of
the session. This is a particularly good service when using shared computers.
Online security information in the form of quizzes
All of the banks that I researched had information pages for frequently asked
questions and problems. I found them very useful and some had an interactive quiz
to gain and test the user‟s knowledge. I thought that the quizzes were a very
effective way of teaching users of the dangers and risks without users having to read
screens and screens of information.
Free software
Some banks offer free security software downloads. Others make users aware that
they must always make sure to keep up to date with their browsers updates to keep
their connection to the internet secure.
Future security measures being researched and introduced.
Finger print readers are also being introduced. No longer just an idea on sci-fi films,
these are widely available in America and vastly reduce the risk of online fraud. UK
banks may introduce this system in the future.
Voice recognition systems are also in use in the USA. This will definitely be a key
feature of internet banking in the future. One of the major problems in international
internet banking is that they have to be split geographical due to language
difficulties.
The W3C consortium is working on developing a standard around the SSML
(“Speech Synthesis Markup Language a voice recognition protocol which will be
included in Microsoft‟s Vista and Office applications in the future) to include
languages of Asian origin such as Hebrew, Japanese and Arabic. This means that
banks can operate in other countries without the language barrier. Voice recognition
security systems would dramatically benefit online banking around the world
(www.w3.org)
“The current developments in technology and software protocols – specifically voice
recognition across key language groups – means that in the future banks may not
need to roll out different platforms for users in different countries.”
(www.fairinvestment.co.uk)
Su Ferneyhough 30 September 2008 Page 10
Online versus traditional way of banking
Although most traditional banks offer internet services, there are also banks that
operate solely on the internet.
Advantages of traditional banks
Face to face dealings with bank staff, which has a more personal touch.
Customers with little or no computer experience can access all the facilities of
their bank.
Customers with no access to the internet can fully use the banking service.
Problems may be sorted out quicker as there is less chance of
misunderstandings.
Customers who prefer to deal with cash (withdrawals or payments) can do
this over the counter
Customers have the ability to pay in cheques or cash into their accounts.
Small businesses may not need an online banking facility, for example, a
market stall owner; the charge for this service may out weigh the need.
The facility to change money into different tender, for example, some small
businesses may need a large amount of small change for their tills.
Disadvantages
Bank opening and closing times limit when you can access some facilities.
Time consuming, including the paperwork needed and waiting in queues to be
seen by bank staff.
Appointment waiting times may be lengthy to discuss any issues.
Changes may take a long time to take effect, for example, payments made.
Su Ferneyhough 30 September 2008 Page 11
Advantages of Online banking
Access to your accounts 24 hours a day, 7 days a week, 365 days a year.
Up-to-date information about your accounts and interest rates.
Speed of transactions, changes, and applications, for example, overdraft
facilities can now be applied for and take effect in minutes.
Access to online statements: track payments, search statements or even
download statements into a financial application such as spreadsheets.
Manage payments (direct debits, quickly and easily).
“Faster Payment Service” this is a new facility being introduced by banks. It
means that transactions are greatly speeded up, from days to hours.
“You can now make payments in Sterling from your personal account to most
non-Lloyds TSB accounts - including business accounts - in a matter of hours
rather than days.” (www.lloydstsb.com).
Internet only banks are saving money through reduced overheads (property,
staff) and so can pass on these savings in reduced costs to their customers.
A reduction of paperwork being sent if the user opts for „paperless‟. This
means that instead of receiving the information through the post, the account
owner simply prints off the information required.
During my interview with Mr. Robert Shirley he disagreed that it became
completely paperless as the bank still get paper copies of transactions of
online activity as it needed to be backed up. Maybe when the law regarding
electronic signatures and online paper trails are changed, this will reduce the
need for this.
Disadvantages
Lack of face to face contact with bank staff. This could lead to
frustration if any problems arise.
Some banks are sometimes slow in showing up to date information.
Miss N Smith found this to be true of HSBC.
Security is still an issue with internet banking. Although banks are
improving the security, hackers still find ways of gaining access.
“Phising scams” (fraudsters who send false emails asking for
passwords or personal information) can fool account owners into giving
the information. This can give fraudsters access to your account.
Some internet only banking sites have a clause stating that high
monthly amounts have to be deposited into the account to qualify as a
customer. This limits the options to the user.
Su Ferneyhough 30 September 2008 Page 12
The “how to…” of Internet banking
Setting up an internet banking account is quite simple if you are computer literate.
Application forms are available to download from most banks for users to look at and
make notes (and often mistakes) on. Application packs and information packs are
also available through the post. This enables less confident users to look at the
application and gain confidence as to what is needed.
The user is presented with a series of screens to enter information and is guided
through the process with explanations of what is required, and help screens for
further information. Demonstrations of the process can be viewed before starting the
process; these also contain information about what is needed in each box.
Once the bank account is set up, there are also help screens to explain what is
available and explanations of services.
I have included screen prints of the process in my appendix.
Su Ferneyhough 30 September 2008 Page 13
Conclusion
Earlier this year I would have been very confident in the future and growth of internet
banking. However, I think that the present economic climate could damage trust in
the service. In a time where banks are going bankrupt and the future of banking is
unsteady, I think that customers trust in it may waiver.
Perhaps in the future money will be in the same currency all around the world. This
would make trading around the world even easier. Perhaps in a time that banks
around the world are failing this would solve some problems.
www.ecommercetimes.com say of this, “E-banking is another factor that lends itself
to some sort of currency amalgamation. With this type of banking, funds routinely
cross borders without going through traditional banking systems. Certainly, e-
banking is here to stay, thus further contributing to the economic factors that favour
currency consolidation.”
I fully believe that the technology involved in internet banking will continue to evolve
and therefore will become even easier to access. I would love to see technology
evolve that much that holographic screens are projected anywhere and any time so
that the internet and all its services could be accessed, including internet banking.
www.emarketer.com report that, “Banks are experimenting with mobile banking and
other Web 2.0 services, such as social networks and blogs, video and even
interactive games. They are also looking at interactive tools and applications to
encourage consumers to opt in to various offers, sign up for more information, enrol
in new services and take quizzes or qualify for product promotions. In short, banks
want to deepen their relationships with consumers by engaging them online.”
Mobile banking is now being introduced by all of the major High Street banks. Mobile
banking is accessing your bank account via your web-enabled mobile phone and is
predicted to be the next big thing. In a world where even 7 year old children now
have mobiles, access to this service is open to everyone.
“Mobile banking users will reach almost a billion within four years and will complete
62 billion transactions in 2012, according to a survey carried out by IMS Research.
The combination of contactless mobile payments, mobile banking and over-the-air
payments will push the number of mobile banking users to 884 million in 2012.The
research said the growth is being fuelled by adoption in developing countries where
mobile is often the only way to access financial services due to a lack of banking and
fixed communications infrastructures.”, Karl Finders (www.computerweekly.com)
It will be especially popular in countries that do not have widely available internet
services such as, the Middle East and Africa. I don‟t think that this will be as
advantageous to users who have internet access on their phones, especially as
there is a charge from some banks for the mobile banking service, for example
Lloyds TSB are currently charging £2.50 per month (www.lloydstsb.com)
Su Ferneyhough 30 September 2008 Page 14
“Mobile banking could be failing to capture the imagination of consumers, according
to a survey of 2,500 retail financial services customers across Europe. The research,
conducted by TNS on behalf of Fujitsu Services, found 65 per cent of respondents
prefer to access banking services online.”, Julian Goldsmith (www.silicon.com).
Su Ferneyhough 30 September 2008 Page 15
Bibliography
Websites
http://www.banking-guide.org.uk/internet-banking.html
http://www.internetbankingfacts.com/
http://www.webinternetbanking.com/
http://www.banksafeonline.org.uk/protecting_yourself.html
http://www.ecommercetimes.com
http://compnetworking.about.com
White papers
http://whitepapers.zdnet.com/
Online magazines
http://www.computerweekly.com
http://www.pcmag.co.uk/
Online Banks
www.lloydstsb.co.uk
www.barclays.co.uk
http://www.firstdirect.com/
http://www.hsbc.co.uk
www.egg.com
Interviews
Mr. R. Shirley (bank manager of Natwest)
Miss N Smith
Su Ferneyhough 30 September 2008 Page 16
References
Website Author Date
access
ed
http://www.apacs.org.uk/media_centre/documents/070522_FINAL_On 5/11/0
lineBankingFactPack.pdf 8
http://whitepapers.zdnet.com/ 10/09/
08
http://www.talentscotland.com/view_item.aspx?item_id=46208 5/11/0
8
http://www.computerweekly.com/Articles/2008/07/22/231574/egg- Lindsay 19/10/
marks-a-decade-of-internet-banking-revolution.htm, 22 Jul 2008 Clarke 08
http://www.ecommercetimes.com/story/48104.html (01/06/06) Theodore 10/08
F. di
Stefano
http://www.halifax.co.uk/securityandprivacy/technology.asp 5/11/0
8
http://www.computerweekly.com/Articles/2007/05/18/223977/online- Karl 01/11/
banking-rapidly-becoming-most-powerful-retail.htm. 18/5/2007 Finders 08
http://www.computerweekly.com/Articles/2007/04/24/223388/barclays- Miya 31/10/
readers-welcome-but-no-cure-all-say-experts.htm Knights 2008
http://www.financemarkets.co.uk/2007/01/18/speech-technology- Brian 10/08
could-open-up-online-banking/, 18/01/07 Turner
http://www.expresscomputeronline.com/20020916/indtrend1.shtml 5/11/0
(16th September 2002) 8
http://www.smartcomputing.com/editorial/article.asp?article=articles/archive/l05 10/08
09/28l08/28l08.asp&guid= (September 1999)
http://www.computerweekly.com/Articles/2008/05/30/230886/mobile- Karl 05/11/
banking-users-to-soar.htm (30/5/2008) Finders 2008
http://www.computerweekly.com/Articles/2008/05/30/230886/mobile- Karl 05/11/
banking-users-to-soar.htm (30/5/2008) Finders 2008
http://www.silicon.com/financialservices/0,3800010322,39169100,00.h Julian 05/11/
tm (9 November 2007) Goldsm 2008
ith
http://www.lloydstsb.com/ways_to_bank_with_us/faster_payments.as 30/10/
p 2008
www.nationwide.co.uk/mediacentre/PressRelease_last.asp?ID=1124 (10/200
(10/10/2007) 8)
http://www.apple.com/pr/library/2007/09/05touch.html 05/09/2
(10/2008) 007
http://www.offshore.hsbc.com/1/2/international/how-can-we-help-
you/country-guides-home/country-guide-hong-kong (11/2008)
http://www.avertlabs.com/research/blog/index.php/2007/09/20/money- Francois 20/09/2
Su Ferneyhough 30 September 2008 Page 17
mules-recruitment-in-action/ Paget 007
http://www.fairinvestment.co.uk/deals/news/banking-news-Speech- 11/08
recognition-could-help-with-banking-across-language-barriers-60.html
(16/01/2007)
www.banksafeonline.org.uk/moneymule_explained.html 10/2008
Su Ferneyhough 30 September 2008 Page 18
Appendix
Card Reader Technology
Su Ferneyhough 30 September 2008 Page 19
Registering for Online Banking
Su Ferneyhough 30 September 2008 Page 20
Managing Your Account Online
Su Ferneyhough 30 September 2008 Page 21
Additional Security measures
Su Ferneyhough 30 September 2008 Page 22
Su Ferneyhough 30 September 2008 Page 23