Gremlin Attack Takes Battle Of Britain Online

Gremlin Attack Takes Battle Of Britain Online

The Age
5 August 2000
DAVID M. WALKER

LONDON

Online banking, marketed as a low-cost, attractive alternative to tedious bank queues for time-poor customers, hit users in Britain with a rude shock last week as glitches and cyber-attacks revealed private information and rattled consumer confidence in the nascent online industry.

The latest in a line of British online banks' mishaps hit Barclays this week as private account details were shown to the wrong customers.

Management shut Barclays' Internet bank for about five hours on Monday and boosted password security, saying it would not reopen the system until satisfied with security. Weekend software upgrades had caused the ``unacceptable" error, a spokeswoman said.

But on Tuesday the unthinkable, and presumably still unacceptable, happened again. Some of Barclays' 1.25million Web customers saw other clients' account details. Barclays attributed the mistake to a clerk accidentally linking accounts of different customers who lived in the same street.

``It was purely clerical and we regret it," Barclays' spokeswoman said. ``It was unfortunate it came on the back of what happened on Monday."

Britain's Halifax Bank delayed launching its online banking service, Intelligent Finance, in July, and then closed it temporarily almost immediately after its launch when it suffered technical problems.

Online stockbrokers have also been hit by reputation-damaging glitches. Halifax Share Dealing has been brought undone by IT systems failures, and Prudential's online bank, Egg, has also been plagued by gremlins.

The foul-ups come as banks experiment with online banking globally to cut overheads and lure time-strapped consumers from branch-only banks. But online industry experts say online banks will suffer customer dissatisfaction until hiccups are ironed out.

All Australia's four big banks have online complements to their shopfront branches, and ANZ announced on July 19 that it would open a regional Asian Internet bank headquartered in Singapore by year's end in conjunction with Oversea-Chinese Banking Corporation. It aimed to attract 40 million ``wired affluent" banking customers expected in Asia by 2005.

``The business model has been developed after extensive study of existing pure Internet banks in North America and the United Kingdom," ANZ said.

But in Britain, Howard Davies, chairman of Britain's market regulator, the Financial Services Authority, warned online bank customers in June about security breaches, and urged banks to ensure systems were secure against external and internal attack.

``While banks tend to have reasonable perimeter security, we have sometimes found insufficient segregation between internal systems, and poor internal security," he said. ``We are encouraging banks to look at the firewalls between their different systems to ensure adequate damage limitation should an external breach occur. But, as ever, the greatest threat so far has been from the enemy within."

A report released on Wednesday by Britain's National Consumer Council found 40 per cent of consumers refused to use their credit cards online because of security concerns. Visa is partly tackling the security problem by clearing customers' credit card payments with banks directly from October 2001, not requiring customers to key in their card number on-screen. Some British online banks have fraud guarantees promising to reimburse money lost as a result of online fraud.

Ed Bowie, online banking analyst at the London office of US Internet services ranking agency Gomez Advisors said online customers consistently rated security and customer service as the two prerequisites. ``If online banks can't get their security sorted out, they will struggle to attract and retain customers," he said, and was ``surprised online banks had not tested their online systems more thoroughly before launching them ... as problems give the whole industry a bad name".

A May report from American Internet research company Cybercitizen Finance found America's online banks had turned over nearly 100 per cent of their online customers in the year to July 1999, incurring costs required to attract new customers and to retain as many existing ones as possible.

The 3.2 million new US online bank accounts opened in that period only slightly outnumbered the 3.1million closed. Only 35 per cent of those who abandoned Web banking said they would try it again, mostly citing poor customer service and security.

Chris Musto, director of financial services research at Gomez's US office, said US banks such as Bank of America had suffered in going online from poor integration of disparate IT systems. But Forrester Research says its online financial services senior researcher, Brook Newcomb, found the 4.7 million US households using online banking at the end of 1999 would still rise to 18.5 million by the end of 2003.

Gomez's UK head James Hart said loyalty was not necessarily that strong in Britain, where banks such as Barclays had failed to translate a strong High Street brand to the Internet.

A spokesman from British Internet bank Smile said online bank customers were more likely than their offline counterparts to change banks.

Back to News Index | Back to Home