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Financing the virtual house,
by a virtual bank,
with virtual money
with real risks.
By Daniel Eaton
The largest challenge in the future of online banking technology addresses the issues of identity. As a Bank or lending institution, how do I know with certainty, that you are who you say you are when you are on the other end of this very long wire called the Internet? This coming Sunday, October 3rd, NBC will air an expose on the real and perceived risks of online banking.
Knowing your customer is a definative problem as the scope of online banking grows beyond merely the ability to provide online transactions to the ability of accepting online deposits. Standards are being set by federal regulatory agencies to protect the public.
Problems were defined as early as 1997 as described in a Subcommittee on financial institutions and consumer credit committee on banking and financial services. In a electronic paymets task force public meeting on the privacy and security of electronic payments information held on Thursday, July 17, 1997, attendees included members of BITS, Banking Industry Technology Secretariat, which is the division or separate entity from the Bankers Roundtable. The Bankers Roundtable is the 125 largest bank holding companies in the U. S. BITS is, the board of BITS is made up of the ten largest banks. And they represent 70 percent of the deposit assets in the U. S. There were also representatives from the ABA and the IBAA on that board. The mandate for BITS came out of concerns in the public and also concerns on behalf of the financial services community about security and privacy. The mandate for BITS is to promote the security and safety and soundness of the payments and financial services delivery systems. It took nearly a year later to develop a framework for electronic bill presentment and payment on the Internet.
The Office of the Comptroller of the Currency is also well aware of the risks of online transactions. The Office of the Comptroller of the Currency serves this interest by maintaining and promoting a system of bank supervision and regulation that promotes safety and soundness by requiring that national banks adhere to sound management principles and comply with the law; and, encourages banks to satisfy customer and community needs while remaining efficient competitors in the financial services market. According to the OCC, Few banks and thrifts offer customers the option of conducting transactions over the Internet but their numbers are growing rapidly, according to a new study by the Office of the Comptroller of the Currency (OCC). Bank and thrift Web sites that permit on-line banking transactions grew from an estimated 103 at the end of 1997 to 258 by June 1998, an annualized rate of over 300 percent. With such grow, it is no doubt that we will see further regulation for online banking.
Some banks are taking a proactive approach in dealing with these issues because they know it is in their best interest as well as the interests of the cybercitizens. They are establishing specific policies and procedures to safequard thier potential customers, the are also helping to protect the future of the online process.