Securities and Brokerage Survey Shows Firms Take Page From Banks in Fight Against Online Fraud and Identity Theft
Results Indicate Most Consider a Layered Approach to Online Security
ATLANTA — February 11, 2008 — Securities and brokerage firms use lessons learned from the banking industry to take a more proactive stance against online fraud and identity theft, according to a recent survey conducted by Digital Resolve, a leading provider of online authentication and fraud detection solutions.
Although a majority of security professionals at these firms say they have already implemented technology to proactively address the growing issue of online fraud and identity theft, almost one-third have not yet employed solutions to address these threats — many are still evaluating options or taking a “wait-and-see” approach.
“We conducted this study to examine the issues of online fraud within the securities and brokerage industry as well as to evaluate the marketplace’s readiness to circumvent the attacks associated with this fraudulent activity,” said Dennis Maicon, executive vice president of Digital Resolve. “A secondary goal was to look at the type of solutions security professionals were employing. In today’s rapidly changing online criminal environment, effective security cannot be a ‘one-size-fits-all’ solution. It is important to implement technologies that address all of a firm’s top security concerns while covering every customer touchpoint.”
Seventy-six percent of the securities and brokerage professionals responding to the survey believe their companies fully understand the seriousness of online fraud and identity theft. They also recognize the ramifications for not only their firms, but also for the industry as a whole, if these threats are not addressed aggressively. In fact, 80 percent of respondents’ firms claim they have not even experienced an incident of identity theft or online fraud within their online channel.
“As banks continue to strengthen their online security, criminals will move to industries they deem more vulnerable such as securities, brokerage, insurance and even non-financial targets,” said George Tubin, research director at TowerGroup. “Securities and brokerage firms, in particular, have taken a good, hard look at the trials and tribulations experienced by the banking industry — especially as it relates to the mandates within the FFIEC guidance. Securities and brokerage houses are applying lessons-learned from banks, making them better versed in the necessary online security approaches needed to protect customers and combat the evolving techniques of criminals.”
An October 2007 TowerGroup study indicates that 95 percent of U.S. banks are now compliant with the FFIEC. And, according to Tubin, preliminary results, based on anecdotal observations, show fraud has decreased 30 to 40 percent in the online channel from 2006 to 2007 due to the government’s authentication guidance.
According to the Digital Resolve survey, a large majority (82 percent) of respondents do, in fact, anticipate regulations for strengthening online security (such as those introduced for the banking industry by the Federal Financial Institutions Examination Council) will soon be mandated by the Securities and Exchange Commission (SEC).
In addition to regulatory compliance concerns, survey respondents list unauthorized systems access and customer data breaches as their top-three security concerns. And, according to Tubin, this comes as no surprise. “Taking yet another page from the banking industry’s playbook, we’re seeing these three key issues intimately tied to one another in the fight against online fraud, so it’s natural that securities and brokerage firms have these concerns top of mind when it comes to risk-based authentication technologies.”
Ninety-four percent of respondents consider stronger log-in authentication beyond usernames and passwords to be a “very important” security feature to their business. A majority of respondents also feel transaction monitoring as well as fraud research, analysis and reporting are also keys to business security, as 84 percent and 66 percent respectively say these are “very important” features.
“Our securities and brokerage clients understand that protecting their customers’ assets against fraud is an essential part of a commitment to help them achieve financial success," said Maicon. “They also understand that today’s customer base is more mobile which requires security solutions that address customer touchpoints at every level. And, integral to building solid security, they must look at layering different technologies in order to provide a comprehensive fraud prevention program that prevents as well as detects online fraud.”
And, according to the survey, securities and brokerage firms state they are already embracing a multi-layered approach to combat online fraud. Of the respondents who currently employ security technology, approximately two-thirds claim to have deployed both multi-factor authentication and transaction monitoring. Others are also integrating tokens, smart cards and mutual authentication. Interestingly, among those firms that currently do not have fraud-prevention technology in place, their plans only include front-end authentication — many still considering single-factor authentication as a viable option.
However, firms across the board agree that the following benefits of online security technology are “very important”:
- Seamless, transparent functionality that does not interfere with the customer experience;
- Ease of integration with other technologies and platforms; and
- Easy to use and manage for administrators.
With a slightly different perspective than their counterparts, respondents currently using fraud-prevention technologies also see the benefit of real-time capabilities as a very important feature.
The online survey was conducted in November 2007 and represents responses from a number of high-level security executives within more than 50 different firms across the securities and brokerage industry. An executive summary of the survey results is available in the online Digital Resolve Resource Center.
About Digital Resolve
Digital Resolve is committed to securing online identities, information, accounts and transactions against fraud and identity theft by developing solutions that provide 360º protection for the online channel. The company’s comprehensive online fraud detection and prevention solutions are helping financial institutions and enterprises of all sizes eliminate online fraud, delivering peace of mind that the online channel is safe and profitable.
For more information visit www.digital-resolve.net. Digital Resolve is a business unit of Digital Envoy, part of the Landmark Interactive division of Landmark Communications.
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