Dan Jones talks to David Mitchell,
senior manager of operations and fraud at UK bank Barclays, about
the group’s numerous recent anti-fraud initiatives. Barclays has
announced that the deployment of hand-held card readers has proved
very successful with its UK customers, with around 1.5 million
using the system

Barclays says its PINsentry digital
security system, supplied by Dutch fintech specialist Gemalto, has
had a dramatic effect on cutting fraud, with over a million users
and higher-than-expected acceptance levels among UK customers. The
bank is also deploying a more comprehensive online software package
as it looks to maximise take-up of its online banking

David Mitchell, senior manager of
operations and fraud at Barclays, told RBI that PINsentry
take-up is now close to 1.5 million, and remains confident the
technology, which uses handheld card readers and chip and PIN
technology to verify users’ identities, is the right choice for
Barclays customers. “We are still convinced that PINsentry is
currently the most robust solution”, said Mitchell, who added that
the number of complaints amounts to less than 1 percent of the
customer base.

Customer acceptance of the device is 30
percent higher than anticipated, though other UK institutions have
remained resolute in their refusal to launch such devices. A recent
study by Abbey concluded that less than one third (32 percent) of
its customers are in favour of being provided with a separate
security device.

While Mitchell acknowledges that using the
device remains an individual choice and does not foresee PINsentry
becoming mandatory for all Barclays customers, those wanting to
make third-party payments will be expected to “step up” and use the

“We will probably keep slightly different
functionality depending on you as a customer [but] I do see the
industry as a whole taking on board some type of two-factor
authentication. With faster payments coming in, and more
sophisticated fraud attacks, I think it will be an industry that
will have to move to more sophisticated methods of authenticating
customers than just static PIN and password credentials.”

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Authentication methods continue to vary,
however. In the UK, Royal Bank of Scotland and Nationwide Building
Society have joined Barclays in rolling out the chip and PIN-based
systems; Rabobank and KBC are among European institutions providing
similar offerings. A variation on the theme can be found at Lloyds
TSB, which has introduced a chip keychain which generates passcodes
without the need to insert a card.

Santander-owned Abbey, meanwhile, favours
more vigilant monitoring of online transactions, pointing to its
study results showing that more respondents (40 percent) wanted
increased online monitoring as opposed to card readers. “The
research suggests people want security with the least hassle,” said
Neil Wilson, director of financial crime at Abbey.

HSBC has refrained from introducing card
readers in favour of improved monitoring, and is looking to
introduce a phone-based two-factor system. “The feedback from our
customers was [card readers] were a little too intrusive,” HSBC
spokesperson Tim Pie told RBI.

HSBC has not yet closed the

Mitchell, however, believes that HSBC has
not yet closed the door on this particular kind of authentication
process – a statement echoed by Pie. “We are watching quite closely
how the card readers work out for our competitors in the market,”
Pie said. “Once we have got at least a year’s worth of meaningful
figures in terms of fraud experience we may well look at it

Barclays, for its part, has said it has
seen no instances of online fraud among PINsentry users in the 12
months since the launch of the initiative. UK banks’ continued
vigilance of fraud has seen significant strides made over the past
12 months: 2007 figures from UK payments association Apacs show
that online banking fraud fell by 33 percent last year to £22.6
million ($45.3 million).

The figures, which reported that total
card fraud rose by 25 percent to £535.2 million during 2007,
support Mitchell’s claim that online fraud “is miniscule compared
with other types out there in terms of hard figures”.

Online security as a whole remains a
pressing concern for customers, however, and Barclays has
consequently announced that it will provide Kaspersky internet
security software free to its two million online banking customers
for the next two years.

In a challenge to the practice of offering
discounts on online security software at other UK banks such as
Lloyds TSB and HSBC, Barclays is offering the Kaspersky software
free of charge across three PCs per customer account.

The deal, worth £102 to each customer,
replaces an offer which saw Barclays provide customers with the
F-Secure anti-virus system.

Phishing attacks continue to

Phishing – where a hoax message directs a
web user to enter their bank details on a webpage purporting to be
part of the bank’s website – was one of the more widely publicised
forms of online fraud in 2007. Figures from Apacs show the number
of incidents rose sharply to 25,796 from 14,156 in 2006.

It is the rise of such banking fraud that
has prompted the likes of Barclays, which says it has bucked the
trend and seen phishing attacks fall over the past 12 months, to
offer a more comprehensive security package designed to protect the

It has launched an online video designed
to educate customers about the dangers of phishing and other
fraudulent activity and claims a 91 percent year-on-year reduction
in money lost to such crimes.

Mitchell says his bank sees online safety
as a key part of its drive to increase its online banking uptake.
He revealed that the bank is looking to double its online banking
customers by 2010, targeting one million new users in both 2008 and
2009. “PINsentry helps us to do that,” he added. “It enables us to
look at those higher risk transactions which we are now able to
offer our customer base. Our aspirational target for this year is
three million customers.”