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CU System
Online personal finance sites open door for ID theft
NEEDHAM, Mass. (6/25/08)--New non-bank online personal finance sites that combine traditional account aggregation services with Web 2.0 concepts such as social interaction are missing a critical component: adequate fraud prevention capabilities. New research from Needham, Mass.-based TowerGroup says such sites' failure to have adequate fraud prevention capabilities leaves an open door for identity thieves. Many new online personal finance websites, such as Banzai, Mint and Wesabe, leverage intuitive user interfaces to offer personal financial management tools, financial advice and social interaction. This contrasts to the online account aggregation services offered by traditional financial institutions, said TowerGroup. The new sites leverage consumers' propensity for online interaction and information sharing to provide services and insights not usually found on most online banking portals--such as viewing personal financial information, seeing how others manage and spend their money, and receiving free financial advice. "By incorporating state-of-the-art Web technologies and community-sharing features like Web forums and blogs, these sites seek to tap into individuals' desire to interact, share, learn and belong to a like-minded community," said George Tubin, senior research director of the delivery channels and financial information security practices at TowerGroup. However, most of these new sites pose a security risk because they use single-factor authentication--just a username and password, he cautioned. That means these sites likely will become the next target of phishers and other fraudsters--especially since most credit unions and banks have moved to multifactor authentication and they aggressively educate members and other consumers about security. The newer sites must understand the sensitive nature of their customer data, and bolster their data and Web security capabilities with stronger online authentication technologies, said TowerGroup. TowerGroup also suggested that the Federal Trade Commission (FTC) consider adopting regulations and guidance imposed by the federal banking regulators for such online sites. Consumer banks will "watch this market space closely, and will either adopt similar capabilities or partner with new independent players or acquire them," said Tubin, noting the combination of new online personal finance sites and traditional institutions' product, service and security capabilities "could lead to a compelling new combination currently unmatched in the industry." For more information about the research, "The Impact of Online Personal Finance Offering: The Good, the Bad, and the Ugly," use the resource link.
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