Report highlights mobile banking risk

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BOSTON – An impact study carried out by Aite Group, an independent research and consultancy firm, says financial services firms face a range of new risks associated with the rising popularity of mobile phone banking.

The number of US mobile banking users is expected to reach 1.6 million by 2008, soaring to 35 million users by 2010, says the report, entitled ‘Mobile Banking Security: The Black Cloud Attached to the Silver Lining’.

Wireless networks can now provide broadband speeds to handsets that have the computing power equivalent to the personal computers of just a decade ago.

However, the associated risks are evolving just as rapidly. Trojan viruses and other security threats once had to spread individually through file transfers, which could be monitored and contained (through Bluetooth, for example), but this is no longer the case.

“The level of ability to attack a mobile device has increased,” says Nigel Jones, director of UK consultancy Technology Risk.

It is feared the same data security and personal privacy breaches afflicting online banking today could jeopardise mobile banking uptake, as the problems that have plagued customers online will inevitably migrate to the mobile market.

Lack of consumer education on potential threats, combined with the proliferation of millions of transaction-enabled handsets across a global market, will make large-scale criminal attacks over mobile networks almost inevitable.

Nick Holland, the author of the study, says: “Banks must not shun offering mobile transaction services. The end user will become savvy with time, and the channel will eventually develop mechanisms to further aid the customer. The key is for banks to get started sooner rather than later, to accelerate the learning curve and lessen exposure to mobile fraud when it does occur.”