Banks fight e-fraudsters with two-factor authentication

Banks are adding additional layers of security to lock out fraudsters from their online banking systems.

One example is Barclays Bank, which is to roll out two-factor authentication security for online banking customers next year.

The bank said the extra security will first be aimed at people who make online transactions on a daily basis.

A spokeswoman for Barclays told silicon.com: "Some customers don't want or don't need this. For those [customers] who make third-party payments, either personal or business, we'll be rolling it out to them first. We're confident that this will cut fraud."

Two-factor authentication is a second-level of security that works alongside usernames and passwords to ensure a user is who he or she claims to be.

Barclays already offers an SMS text-alert payment confirmation system and anti-keytroke logging technology to combat potential fraud.

The spokeswoman added: "It'll make sure that we've covered every angle."

Want more on two-factor authentication?

Read silicon.com's Cheat Sheet for the lowdown on this up-and-coming security tech.

The bank said it will start the rollout next spring or summer but will have more information later this year.

The cost of an online transaction is significantly lower than a physical transaction, so other high street banks are eager to reassure the public that online banking is safe.

Earlier this month, savings bank ING Direct said it is to step up its online security by giving customers a stronger authentication process for logging into their accounts.

And Lloyds TSB is installing anti-skimming devices on all its UK ATMs. Last year it issued two-factor authentication tokens to a sample of customers. Alliance & Leicester is also starting to use two-factor authentication tokens and technology.

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Identity theft emails, known as phishing attacks, cost banks £12m last year, according to the Association of Payment and Clearing Systems (Apacs).

Apacs said online banking fraud is a growing problem. Losses from this type of fraud doubled in 2005, hitting £23.2m, due to the rise in email phishing scams. And last year internet, phone and mail-order transactions - and card-not-present fraud - rose by 21 per cent to £183.2m.