SMS: Banking`s more inventive signature

Around the globe banks are reporting massive reductions in credit card fraud. These banks are primarily the ones that have enabled SMS-based transaction alerts on their customers` accounts. But the promulgation of good advice around protecting PIN numbers, not giving out personal details and keeping passwords secret, doesn`t seem to be curbing the growing success of phishing attacks and e-mail spoofing.

SMS, however, can also greatly assist in the battle against these more technologically `advanced` criminals. SMS-based transaction alerts, by their very nature, ensure users are instantly made aware of any fraudulent activity on their accounts regardless of what new cyber criminal activities emerge.

The Anti-Phishing Working Group, an industry association focused on eliminating identity theft and fraud that results from phishing and e-mail spoofing, reported that in May 2005 there were 3 326 sites dedicated to tricking recipients into revealing financial data such as credit card numbers, usernames and passwords.

Overall, phishing has increased by 26% from July last year to February this year. And identity theft through phishing is just one way in which the security of transactions can be compromised. Criminals will find new ways to exploit any future vulnerability as services become more sophisticated and more users start doing their banking online.

But, whose concern is security really? Banks can go to great lengths to ensure the integrity of their own systems. User behaviour and lack of responsibility is unfortunately not that easily managed. Banks face a double-edged sword because they can`t force clients to take action against identity theft, for example, yet have to offer protection and insurance against any unauthorised account transactions.

Initiatives that share the responsibility for account security are, however, within easy reach, and mostly welcomed by customers. And SMS is winning the stakes hands down. SMS has proven its worth as an effective buffer against fraudulent account transactions for many banks around the world. In South Africa, First National Bank has indicated a 43% reduction in fraud. It has also brought about increases in Internet banking security.

But, significantly, the bank has also achieved a 15% increase in customer retention and reduced call centre costs.

SMS is possibly the most effective, yet simplest solution against fraud as well as most other security attacks. The National Australia Bank, for example, launched an SMS system to provide pin-protected access to Internet banking services. According to an internal report, executives at the bank predict that online fraud will decrease by 90% once 90% of customers have signed up for the scheme.

It is the very nature of SMS and cellular phone use that contributes to these success rates. People are always reachable by a text message regardless of their location. People are also more likely to read text messages than they are an e-mail or other typical forms of communication.

While SMS`s success in preventing fraud is unsurpassed, it is also a cost-effective solution that offers exceptionally high reach. Estimates by Portio Research, a UK-based consultancy, indicate that worldwide SMS traffic volumes will grow to 2,379 billion by 2010. In its latest report, Mobile Messaging Futures 2005 - 2010, Portio maintains that the deployment and adoption of 3G services will further drive the growth of texting, as operators increase bandwidth and network capacity and reduce the cost of SMS even further.

With SMS, banks are also not introducing anything customers are not already familiar with. It is simply an ideal form of peer-to-peer communication. But, it also offers tremendous "soft" benefits. SMS brings the bank closer to its customer, shows that the bank is innovative and at the forefront of best banking practices and raises brand awareness. SMS is not just a technology; it`s another channel to the customer.

Customers can for instance be alerted if credit card payments are overdue, with all the necessary reference numbers at hand, or if their current account balance gets too low - enabling them to curb their spending or save on interest charges.

As more and more banks start offering SMS alert services, it is in fact these value-adds, enabled by SMS, that will start to offer greater product and brand differentiation.

Criminals will remain in our society, but the implementation of proactive SMS based alert services will place a huge barrier in their paths. SMS is the most accessible messaging technology in the world and, by simply receiving a text every time a transaction takes place, money is transferred or an account is accessed, customers have immediate visibility of their account and can alert their bank about suspicious activity. According to Visa, 47% of fraud is due to counterfeit cards, and 29% is due to lost and stolen cards. Banks simply cannot afford not to protect their customers and themselves adequately.