Addressing consumers’ concerns about online security: A conceptual and empirical analysis of banks’ actions

Abstract

Online security is a major problem for financial institutions worldwide. Account hijacking and online fraud are on the rise. Financial losses in the banking industry due to attacks have been estimated in 2003 to be about US $1.2 billion in the US alone. Studies also indicate that security concerns are a major issue for an increasing number of consumers. The rapid growth in phishing attacks threatens the future of online banking. In the absence of an adequate response, banks are likely to incur even greater costs and experience a significant decline in consumer trust. Thus, the fight against these serious problems entails the management of perceived, as well as actual, security. This paper examines how banks are responding to these challenges. First, assessments of the actual and consumer perceived threats along with the available technical solutions are provided. Second, a conceptual approach to dealing with the issues is proposed. Essential among the recommendations is the need to involve the consumer in managing security concerns. Third, an empirical study examines the actual response of the 200 largest US banks. The findings indicate that many banks are not meeting these challenges and that significant opportunities for improvement exist. Smaller banks, in particular, are failing to take the necessary actions. Specific recommendations to help improve actual security and increase consumer trust in the system are proposed.