THE FEATURES AND SECURITY STRATEGIES
FOR ONLINE BANKING
Kuo Lane Chen
School of Computing, University of Southern Mississippi, Hattiesburg, MS 39406
Yu Zhang
Department of Accounting and Finance, Eastern Michigan University, Ypsilanti, MI 48197
Huei Lee
Department of Computer Information, Eastern Michigan University, Ypsilanti, MI 48197
Jiaqin Yang
Georgia College and State University, Milledgeville, GA 31016
ABSTRACT
The purpose of this paper is to analyze the features and security strategiesfor online banking. Approximatelyone hundred and ten web sites were studied. The most important strategies used by online banking today are service features and security methods. Service Feature strategy ranges from basic features strategy to financial shopping mall strategy. Security features include: password, security questions, limited to registered computers, and a banner or icon to certify the website.The results indicated the commercial banks tend to offer more online service features than credit unions. However, there is no significant difference between commercial banks and credit unions in the online security methods.
INTRODUCTION
Onlinebanking is currently one of the popular services for e-commerce activities. According to one of the reportsfromeMarketer, “online banking was the preferred banking method for 44% of US consumers ages 18 to 54 and the second most popular method for those ages 55 and older, according to the American Bankers Association.”(Tavilla, 2011). The move toward e-commerce, for any kind of business, presents many benefits and challenges. While online banking has received a great deal of attention, some of the research issues have not been fully explored. Some of these issues are:
1)How is the size of the banks related to the service features and security methods of online banking?
2)How is the charter type of the banks related to the service features and security methods in online banking?
3)Are there any differences between commercial banks and credit unions in service features and security methods?
The purpose of this studyis to examine the service features and security methods of online banking. This paper is organized as follows. First, we will review past literature on e-commerce and online banking. Second, we discuss service features and security methods used by online banking. Third, the research method and research framework are described. Fourth, the data were collected and analyzed. Finally, we discuss the conclusion and future research implications.
LITERATURE REVIEW
Online banking service is a typical case for B2C e-commerce. Online banking has been one of the most successful e-commerce sectors and its growth continues. The major reason that online banking is popular is that it is convenient and has many benefits. Although a customer cannot get cash from a desktop computer,he can pay the bills through the account transfer feature. Just like the ATM in the 1970s, more banks are realizing the advantages of online banking and are using it as a competitive edge (Chen, et al., 2004).
There is a great deal of attention on online banking in the literature. Literature on online banking is dived into the following categories: 1) online banking adaption, 2) resistance on online banking, 3) online banking performance, and 4) others. The authors and studies described in this session are spread fairly from countries to countries: Bangladesh, France, Finland, Germany, India, Iran, Poland, Saudi Arabia, Taiwan, UK, USA, and Yemen.
Online Banking Adaption
Xue, Hitt, and Chen (2011) discussed the determinants and outcomes of Internet banking adoption from a large retail bank. Polasik and Wisniewski (2008) analyzed Internet banking in Poland. Gorbacheva, Niehaves, Plattfaut, and Becker (2011) conducted a survey in Germany andthe results shows, “the strongest factor influencing the intention to adopt Internet banking services is the degree to which an individual believes that it is safe to use such services.” Zolait (2010) examined the potential prominent factors relating to the adoption of the financial services of Internet banking in Yemen. Gilaninia, Fattahi, and Mousavian (2011) presented a case study which identified behavioral factors of usingthe Internet banking services in Iran. Alsajjan and Dennis (2010) proposed an Internet banking acceptance model to measure consumers’ acceptance of Internet banking. Mirza, Wallstrom, Beheshti, and Mirza (2009) studied the differences between private banks and governmental banks in Internet banking service adoption in Iran. Yaghoubi and Bahmani (2010) developed a theoretical model based on Technology Acceptance Model and the theory of planned behavior to study the factors affecting the adoption of online banking in Iran.
Resistance in Online Banking
Kuisma, Laukkanen, and Hiltunen (2006) mapped the reasons for resistance to the online banking in Finland. Laukkanen, Sinkkonen, and Laukkanen (2009) discussed different kinds of resistance: functional resistance and psychological resistance. They also suggested different communication strategies to overcome different resistance.
Online Banking Performance
Callaway (2011) studied the impact of web site traffic rank on bank performance. Archarya, Kagan, and Lingam (2007) examined “the impact of online banking intensity on the financial performance of community banks.” Cyree, Delcoure, and Dickens (2009) discussed the performance of internet-primary bank. Ho and Wu (2009) presented a method of performance measurement for Internet banking using data envelopment analysis (DEA) and principal components analysis (PCA). Baten and Kamil (2010) presented a stochastic frontier model on measuring online bank deposits efficiency in Bangladesh. Malhotra and Singh (2009) described the impact of Internet banking on banking performance and risk in India.
Other Literature
Heinonen (2006) discussed the perceived value of online banking service. Chuang and Hu (2010) explored consumers’ perceptions of Internet banking services in Taiwan. Howcroft, Durkin, Armstrong, and Emerson, (2007) discussed the role of online banking and small business. On the technology side, Thiyagarajan, Aghila, and Venkatesan (2011) proposed a dynamic pattern-based image steganography to step up Internet banking security. Dubois, Bobillier-Chaumon, and Retour (2011) studied the impact of development of customer online banking skills on customer adviser skills.
BUSINESS STRATEGIES USED BY ONLINE BANKING SERVICES
Today online banking use different business strategies to attract and retain customers. Two major strategiesare the service features and security the online banking provides. The following e-commerce strategies are used by online banking:
I. Service Features
1) Basic FeatureStrategy. The basic service feature strategy is that banks should provide basic services so customers can access banking online. Normally, this strategy is used by small banks and credit unions which have faced the pressure to move online. However, it takes a lot of resources to maintain a complex website. Therefore, basic service feature becomes an obvious choicefor loweringoperating costs.
2) Financial Shopping-Mall Strategy. On the contrary to the basic service strategy, the financial shopping mall strategy is a one originally used for online retailing. The theory is that online banking is a reflection of the financial power and company strength to meet the technology change. It presents consumers with a variety of online banking services. With almost 24/7 full service, it offers more convenience than traditional banking. A comprehensive online banking will provide checking, saving, investment, wealth management, and mobile banking.
3) InnovativeIdeas. Some banksnot only offer a variety of services but also provide innovative ideasto retain customers. For example, some banks offers image service for used checks (See Figure 1). A customer can view a check from the website. Some banks or credit cards companies offer business analysiscapability or business intelligence (BI) strategy as additional services. For example, Discover credit card provides a spendinganalyzer as in Figure 2.
Figure 1: The Features of Viewing Check Images in a Banking Website
Figure 2: Spending Analyzer
The spending analyzer provides information about what category the consumer spends the most. Other innovative ideas include 1) using social networking to promote the name of the bank, and 2) providing mobile banking services, and 3) offering a good search engine. Search enginesinclude aggregating information on a broad range of topics. A customer can search a topic which offersmore specific information pertaining to a single area of interest such as wealth management. Online banking service is a popular addition to the major financial portals.
II. Security Methods
To protect the consumer’s financial and confidential information, online banking websites use a variety of security protection methods:
1) Basic Security.Basic feature is that a customer can just enter user id and password to login into his account. The user IDs and passwords have been the major methods of authentication for most online banking websites.
2) Encryption. In addition to basic security, many banks use Secure Socket Layer (SSL) or Transport Layer Security (TLS) to protect website security. Built into a web browser, SSL uses encryption, digital certificates, and other authentication techniques to protect the communications websites. It protects application layer and can be used to prevent eavesdropping (Panko, 2009).
3) SecurityQuestions. More banks or credit unions use CHAP or MS-CHAP security protocols. In the CHAP protocol, a challenging question will appear after the user enters his user id(Panko, 2009). In the beginning, the user has to setup different questions. In the subsequent access to the Internet, a security question will pop up. If the end user does not have right answer, the login process will not continue.
4) Limited to aRegisteredComputer. The website is able to recognize end user’s computer after registration. Specifically, the end user has to first register his computer and the bank website will put a cookie into the end user’s computer. Later, if the end user uses a different computer to access the website, the bank website will not allow the end user to access to the website site or send a warning message to the end user.
5) A Banner or Icon in the Address Bar. Figure 3 shows an example when accessing the bank website. It avoidsaccessing a fake website when the end user accidentally makes a typo error.
Figure 3:A Banner or Icon in the Address Bar
7) Online SecurityDescription. While banks can use all kind of protections to prevent fraud, the end user also has responsibility to make sure all the security rules are followed. One of the problems is that customers tend to use a common password for all the accounts. Once the password is broken, all the accounts will be compromised very soon.
8) Others. Other security methods include: a). Customers have to change the password after certain time. b). If the customer does not use the computer for a period of time, the website will be out automatically (see Figure 4).c).Banks implement an early warning system. Citibank contacts a customer if the bank detects an unusual online behavior.
Figure 4: Session Time Out from an Idle Website
RESEARCH METHODOLOGY
The primary purpose of this research is to study the service features and security strategies regarding online banking. Website observationswith a questionnaire are used in this research. One hundredand ten banking websites around the nation were chosen for studyduring May 2011. Online banking websites, ranging from popularto less popular ones, were chosen for investigation. Large banks include Bank of America, Chase, Citibank, and Wells Fargo.
Research Framework
In order to study how different factors influence the service features and security strategies for the online banking, an initial research framework is created (See Figure 5).
Figure 5 Research Framework
Hypotheses
Based on the above research framework, we have proposed the following hypotheses:
H1a: There is a positive relationship between number of states covered and the banking service features
H1b: There is a positive relationship between bank size and the banking service features
H2: There is a negative relationship between charter type and the banking service features
H3a: There is a positive relationship between number of states covered and online banking security methods.
H3b: There is a positive relationship between bank size and online banking security methods.
H4: There is a negative relationship between charter type and online banking security methods.
H5: There is no difference between commercial banks and credit unions in online banking service features.
H6: There is no difference between commercial banks and credit unions in online banking security methods.
In the next session, we discuss the results of the data analysis for these hypotheses.
RESULTS
H1a: There is a positive relationship between number of state covered and online banking service features
H1b: There is a positive relationship between bank size and online banking service features
Pearson correlation tests were used to examine Hypotheses H1a and H1b. Table 1 shows the relationship (r) between service features and size factors. Size factors include 1) number of states covered and 2) bank size in dollar amount. It appears that there is no strong/medium relationship between number of states covered and services features except the following ones: mobile banking (r = 0.4209), credit card account (r = 0.3389),and investment brokerage accounts (r = 0.3339). The online checking or savings account, online statements, and online bill-pay service are the three most basic services that banks offer on the Internet. Therefore, there is not much variation across banks with different degree of geographical presence. However, mobile banking is a new feature that comes out recently with the prosperity of smart phones. Larger banks with more financial capability or with more branches and more customers tend to adopt new technology earlier. The investment services are typical products offered by larger banks. Small community banks or credit unions focus more on the mortgage or small business lending. Thus, it is not surprising that online investment service is very restricted among community banks and local credit unions. It appears that there is medium/weak relationship between bank size and services features in the following ones: mobile banking (r = 0.2887) and online chat help (r = 0.2862).
Service Features / Number of States Covered / Bank Size / Charter TypeChecking or Saving Accounts / -0.0161 / 0.0403 / -0.106
Statements Online / 0.0996 / 0.0906 / -0.2261
Bill-Pay Service Online / 0.0534 / 0.0712 / -0.1593
Credit Card Account / 0.3389 / 0.2333 / -0.3491
Loan Account or Loan Application Online / 0.1772 / 0.1379 / -0.1204
Investment Brokerage Accounts / 0.3339 / 0.1647 / -0.5245
Comprehensive One-for-All Accounts / 0.2292 / 0.144 / -0.4447
Insurance Account or Insurance Application Online / 0.3114 / 0.24 / -0.2967
Mobile Banking / 0.4209 / 0.2887 / -0.1963
Link to Social Media (i.e. Facebook, etc.) / 0.1299 / 0.014 / 0.0774
Transfer between Depository and Other Accounts / 0.1992 / 0.2139 / -0.251
Account & Activity Analysis / 0.2241 / -0.0087 / -0.287
Online Chat Help / 0.2583 / 0.2862 / -0.1644
Non-profit Services (i.e. Calculator, Weather, etc.) / -0.1425 / -0.0605 / 0.168
Table 1: The Relationship Matrix between Size/Charter Types and Service Features
H2: There is a negative relationship between charter type and online banking service features
Pearson correlation tests were used to examine Hypotheses H2. Table 1 above shows the relationship (r) between service features and bank charter types. There are three bank charter types in the survey: commercial banks, coded as 1, credit unions, coded as 2, and savings banks, coded as 3. It appears that there is no strong/medium relationship between charter types and services features except the following ones: investment brokerage accounts (r = - 0.5245), comprehensive one-for-all accounts (r = - 0.4447), and credit card account (r = - 0.3491). Since most credit unions and savings banks are local institutions, they focus mostly on personal or small business loans. Investment services are rarely provided either in physical branches or online.
H3a: There is a positive relationship between number of states covered and online banking security methods.
H3b: There is a positive relationship between bank size and online banking security methods.
Table 2 shows the relationship (r) between security methods and bank size factors. It appears that there is no strong/medium relationship between number of states covered and security methods except Banner or Icon in the Address Bar (r = 0.3186). It also appears that there is no strong/medium relationship between bank size and security methods. Although, the larger banks typically maintain a well-designed and secure websites by themselves, the local banks or credit unions usually provide online services through the third party, i.e., link to the outside companies who provide online banking to many banks. By providing the services through the third party, the local banks or credit unions can still give basic online services to their clients but reduce the maintenance cost.
Security Method / Number of States Covered / Bank Size / Charter TypePassword / 0.1094 / 0.061 / -0.1869
Encryption / 0.129 / 0.0717 / -0.2292
Security Questions / 0.1799 / 0.0486 / -0.2444
Registered Computer / 0.1461 / 0.143 / -0.1058
Online Security Description / 0.174 / 0.1487 / -0.3476
Banner or Icon in the Address Bar / 0.3186 / 0.1796 / 0.2327
Table 2: The Relationship Matrix between Size/Charter Type and Security Methods
H4: There is a negative relationship between charter type and online banking security methods
Pearson correlation tests were used to examine Hypotheses H4. Table 2 above shows the relationship (r) between security methods and bank charter types. It appears that there is no strong/medium relationship between charter types and online security methods except the following ones: Online security description (r = - 0.3476).
H5: There is no difference between commercial banks and credit unions in banking service features
T-Test was used to compare differences in service features between commercial banks and credit unions. Table 3 shows the comparison between commercial banks and credit unions in service features. T-tests show that there is a significant difference in online service features between commercial banks and credit unions in the following areas: Statement online (t = -4.8568), online bill-pay service (t = -2.7752), credit card account (t = -3.6373), investment brokerage account (t = -6.4331), comprehensive all-in-one account (t = 5.2918), mobile banking (t = -2.1661), as well as transfer between depository and other accounts (t = 4.7151). Data has failed to prove that there isa difference in service features between commercial banks and credit unions in the following areas: checking and saving accounts, loan account or online loan application, insurance account or online insurance application, link to social media, account & account activity analysis, online chat help, and non-profit services.