Can you bank on Internet banking?

Internet banking has as many advantages as disadvantages. There are still questions as to what extent online banks will be held culpable for security breaches and/or fraud occurring in an online situation. Another negative aspect is the amount of personal interaction that will be lost between the client and bank personnel. However, South Africans who are used to the overall poor standard of service in this country may deem this aspect to be negligible.

Among the advantages of online banking is the amount of time that is saved, as the client does not have to worry about standing in long lines waiting to be served. The traditional end-of-the-month queues may also eventually become a distant memory. Bank charges for Internet transactions are also considerably less than traditional client-to-teller transactions.

We all know the real-life security shortfalls of banks when visiting branches and using ATMs, but how secure are financial institutions on the Internet? All four major banks in SA (ABSA, Nedcor, Standard Bank and FNB) offer basically the same type of online facilities. Clients can conduct balance enquiries, inter-bank transfers, pay beneficiaries, etc. The only transaction that a person cannot do over the Internet is withdraw money.

All four major banks use 128-bit encryption. This is the highest encryption currently available for export. Recently there have been murmurs concerning the export of better encryption from the US, but this has to be approved by Parliament first. Meanwhile, the security provided by 128-bit encryption is considered to be safe enough for Internet banking.

At the beginning of last year, US export regulations were amended to allow approved companies in the healthcare, insurance and electronic commerce industries in 46 selected nations to obtain Web servers capable of performing 128-bit encryption. This encryption is made possible by the use of a Server Gated Cryptography (SGC) certificate. To use this certification, however, SGC capable browsers are necessary. These are versions 4.x of Netscape and 4.x of Internet Explorer.

Unfortunately fraud is something that can never be completely eliminated. While the security of transactions between client and bank, via the Internet, can be ensured, nothing prohibits fraud from occurring at either end. In other words, online transactions entail the same degree of risk as when using an ATM card. Carol-Ann van der Westhuisen, Internet consultant at ABSA Cresta, says that for a business or private individual to access their Internet account a password and account number is generally needed. This password enables the user, whether it is a company chairman or a student, to proceed with any online transaction. It is therefore possible for any person that has access to the password of a business account and that particular account number to commit fraud.

A business can make transfers of up to R200 000 per day at some online banks. Consider the damage that can be done if the password and account number falls into the wrong hands.

Van der Westhuizen says banks cannot be held responsible for fraud occurring through the use of a client`s password. Generally, the best safeguard is to keep the company account number and password secret from all people other than those whose responsibility it is to conduct online transactions.

The growth in the amount of businesses doing online transactions is tremendous. All of the Big Four banks have reported significant increases in company applications for online banking facilities and see this as a potential growth area for their individual client base.

Banks work on a daily basis to ensure the security of both online (via the Internet) and offline (via client to teller) transactions. And while total security will prove to be an elusive pipe dream for now, biometrics could provide the solution for password-protected services. However, the initial cost and the necessity for extensive client education will have to be gauged before it is considered in the local environment.

Future developments in online security remain endless. As long as there is a system that claims to be completely secure, there will be someone that will try to break into it.

Related sites:

.         ABSA Home Page

.         Nedbank Home Page

.         Standard Bank Home Page

.         FNB Home Page

.         Electronic Banking Digest