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Fraud fear in internet banking and reducing fears

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Critical investigate the risk assessment and fraud prevention for banks, payment and processing service providers using internet banking.

Evaluate and analyze that why are dwindling customers' confidence on internet banking and huge loss of reputation, find out reasons, methods of securing the internet banking.

A relatively analysis on Banks about the world trepidation an enormous loss of reputation and diminishing clients trust in their Internet daises through very intellectual and increasingly triumphant Internet banking attacks.

Introduction

Halifax plc is banking and insurance company in the United Kingdom, a wholly owned subsidiary of the Lloyds Banking Group having been taken over in January 2009. It is the holding company for Bank of Scotland plc, which operates the Bank of Scotland and Halifax brands in the UK, as well as HBOS Australia and HBOS Insurance & Investment Group Limited, the group's insurance division. HBOS was formed merger of Halifax plc and the Governor and Company of the Bank of Scotland and the formation of HBOS was heralded as creating a fifth force in British banking as it created a company of comparable size and stature to the established big Four UK retail banks. It is also the UK's largest mortgage lender. HBOS Group Reorganisation Act 2006 saw the transfer of Halifax plc to the Governor and Company of the Bank of Scotland, which was now a registered public limited company, Bank of Scotland plc.

Although officially HBOS is not an abbreviation of any specific words, it is widely presumed to stand for Halifax Bank of Scotland. The corporate headquarters of the group were located on The Mound in Edinburgh, Scotland; the former head office of Bank of Scotland. Operational headquarters were based in Halifax, West Yorkshire, England; the former head office of Halifax. The group became part of Lloyds Banking Group through a takeover by Lloyds TSB. This came into effect on Monday 19 January 2009 after both sets of shareholders approved the deal. HBOS continues to operate as a separate organisation within the new group, although over time it is likely to be restructured. Lloyds Banking Group has stated that the new group will continue to use 'The Mound' as the headquarters for its Scottish operations and will not cease the issue of Scottish bank notes. The services and products Halifax offers include: different types of bank accounts and saving accounts, travel packages, credit cards, investments, loans, mortgages, insurance and online banking.

Background

Halifax has now released monthly figures for March estimating UK house prices have dropped 2.5%. Some areas are down twice that. House prices have now fallen year on year. In March 2007, Halifax had the average UK house price at £194,094. For March 2008 it's down to £191, 556. (Halifax doesn't highlight the fact, instead focusing on three month rolling averages to record a small year on year gain.) Key data from the Halifax report House prices fell by 2.5% in March. Prices in Quarter 1 were 1.0% lower than in 2007 Quarter 4. House prices in March were 1.1% higher than a year earlier. The biggest rises were in Greater London (1.6%), East Anglia (1.4%) and East Midlands (2.2%).There were price falls in a number of regions, with the biggest falls in West Midlands (-5.0%) and Wales (-4.7%).

Amusingly for students of spin, the Halifax obfuscates these numbers with a few paragraphs of Don't Panic waffle: We expect there to be a modest (low single digit) decline in UK house prices this year. Any declines, however, should be viewed in the context of the significant price rises over recent years. UK prices have increased by 171% over the past ten years and by 51% over the last five years. The average UK price has risen by £120,860 during the past decade from £70,696 to £191,556. All 12 UK regions have experienced substantial house price rises over the last ten years, ranging from 146% in Scotland to 271% in Northern Ireland. Average prices increased by 191% in Greater London, 188% in Wales and 150% in West Midlands during the period. Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. The Bank of England is certain in my view to cut rates on Thursday by 0.25%, but whether that can reduce the interbank lending rate that has increased mortgage rates let alone stems the steady withdrawal of mortgage products remains to be seen.

Internet banking allows customers to perform a wide range of banking transactions electronically via the bank's Web site. When first introduced, Internet banking was used mainly as an information presentation medium in which banks marketed their products and services on their Web sites. With the development of asynchronous technologies and secured electronic transaction technologies, however, more banks have come forward to use Internet banking both as a transactional as well as an informational medium. As a result, registered Internet banking users can now perform common banking transactions such as writing checks, paying bills, transferring funds, printing statements, and inquiring about account balances. Internet banking has evolved into a "one stop service and information unit" that promises great benefits to both banks and consumers.

Internet banking services are crucial for long-term survival of banks in the world of electronic commerce (Burnham 1996). The market for Internet banking is forecast to grow sharply in the next few years, affecting the competitive advantage enjoyed by traditional branch banks (Duclaux 2007). Indeed, it also was estimated that financial institutions that 0failed to respond to the need for Internet banking services would likely lose more than 10% of their customer base by the year 2000 (Orr 2008; Tower Group 1996). Internet banking would help banks present a potentially low cost alternative to brick and mortar branch banking. Burnham found that the majority of banks with Web sites spent less than £25,000 to create a Web presence, and less than £25,000 a year maintaining it. He suggested that even if these figures were to rise as banks began to offer Internet banking services, they would still be less costly than the traditional branch banking. For example, it requires £1.5 million to £2 million to set up a traditional brick and mortar branch and £350,000 to £500,000 a year to operate it. Note that Burnham's figure of £25,000 is just for creating an electronic presence on the Web. A fully functional Internet banking site is likely to cost £1 million to £2 million. However, while traditional banks' operating costs account for between 50% and 60% of revenues, running costs of Journal of the Association for Information Systems 5 Internet banking is estimated at between 15% and 20% of revenues (Booz-Allen & Hamilton 1997).

From the consumers' perspective, Internet banking provides a very convenient and effective approach to manage one's finances as it is easily accessible 24 hours a day, and seven days a week. Besides, the information is current. For corporate customers, sophisticated cash management packages offered through Internet banking provide them with up to the minute information, allowing for timely funds management decisions (Kalakota and Whinston 2008).

Web banking customers with Halifax are being put at risk of fraud because of serious loopholes in their security systems; it is claimed 27 August, 2009. An expert assessment of the security regime at the ten leading online banks put the two household name firms at the bottom of the league. The news follows a 132 per cent rise in web banking fraud against UK consumers last year to a total of £52.5million.

"Internet banking" refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent device. Internet banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for consumers. Ultimately, the products and services obtained through Internet banking may mirror products and services offered through other bank delivery channels. (Comptroller of the currency, Administration of National Banks, 2007) Sophisticated criminal gangs, many based in Eastern Europe and China, are finding ways to access the web bank accounts of victims in order to grab their cash. Most often this is done through phishing, where the criminals send out emails pretending to be from a person's bank directing them to a bogus site where their access passwords are stolen. However, there is also a problem where criminals implant a virus or spying software - malware - on the computers of their targets, which tracks the websites visited and the keystrokes used. (Sean Poulter, 27 August 2009)

Online banking is now huge with some 21million active accounts, providing a lucrative pot of cash for the thieves who can circumvent bank security. Computing, published on 27 August 2009, found Halifax has one of the least secure log-in procedures. It asks for three pieces of information to confirm a customer's identity. As each entry is typed in full, it makes the information vulnerable to a simple key logger virus (a virus that sits on a computer and tracks every keystroke with the aim of collecting passwords). The Halifax allows customers, real or criminal - to transfer money out of the account without making additional security checks. Customers of Halifax are not immediately logged out if they browse away to another website. This means that if they walk away from a shared computer, someone else could access their account. Computing editor Sarah Kidner (August 2009) said: 'There are surprisingly big differences between big banks' visible online security systems. (Sean Poulter, 27 August 2009)

'Some simple measures, like the use of drop-down menus, could improve safety considerably. The banks may say it's the hidden security measures that count, but to have real confidence in an online account, customers need to see security in place.' Halifax, which is now part of Lloyds, said the bank has additional security measures beyond those immediately apparent to a customer. Halifax said they give the 'highest priority' to the security of customers' accounts and its systems are constantly reviewed and improved. A spokesman for the banking industry payments body, APACS, said: 'Online banking customers are increasingly being targeted by malware attacks, which is why the industry continues to remind customers that they have their computer's firewall switched on and anti-virus software installed and kept up to date.' (Sean Poulter, 27 August 2009)

In the context of the framework, intention to adopt Internet banking services is thus the dependent variable, while the independent variables comprise attitude, subjective norms, and perceived behavioural control. In the below framework, the research framework for the Internet banking services:

(Margaret Tan, National University of Singapore, 2008)

Halifax: Would not it be nice if your bank thanked you properly for your custom? Our new Reward Current Account does just that - rewarding you with £5 each month. So we know what they are saying but it this exactly true? I don't think there is any logic at all behind this new Reward Current Account and their certainly not giving anyone "extra". That is £5 of taxpayers' money that you get back when you pay into your account £1000 or more in your account a month. After all most of these banks have been being bailed out with taxpayer's money anyway. I find it to be unbelievable that they have the cheek to say they are rewarding their customers. After all, it's not rocket science to figure out their basically giving you £5 of tax payers money that you bailed them out with a few months back anyway. It is time they got their "thinking caps" on and start rewarding their customers for real instead of making them believe that they are being rewarded because when you look at it from this viewpoint scenario you know you're not exactly being rewarded.

The Halifax Bank of Scotland adverts have entertained us and made us cringe and their cross-branding can get confusing at times but these days with everyone and their dog (no offence Churchill) able to start up an internet based insurance company many are turning back to the reliability and comprehensive cover that you generally only get when a well known financial institution is at the helm, not just financing the boat. Although it is expected, due to their extensive mortgage facilities and experience, for the Halifax to sell home cover they also insure your car, pet, travel and health. Unlike most insurers these days, the Halifax's website is geared towards getting you to phone so that they can tailor your policy and as incentive they offer deals like premium fixing which only available offline is. They also have quite a stringent online questionnaire with things like making more than two claims in three years and working from home requiring you to phone them. Confusing to us because surely if you wanted to call them you would have opened the Yellow Pages, not logged online to find their website. Anyway, discounts that apply with either application include up to 30% no claims discount plus a further discount if you buy both buildings and contents cover together.

(James Slack, Home Affair editor, 26 May 2010)

The latter normally has some of the lowest combination discounts we've seen (e.g. 5% a few months ago) but it's good to see a strong effort with the ever growing trend of no claims bonuses attached to home insurance. As you would expect they pride themselves more on service than the cheapness of their policies with a no-form-filling claims inquiry process, a dedicated Halifax claims manager to process that claim and a 24 hour repair/replace promise once that claim is settled. Travel insurance from the Halifax is not as extensive as specialised travel insurers but if you're looking to have general cover for your holidays and you want to keep all your policies in one place there is nothing wrong with the cover provided for such. Single trip travel insurance, individual annual cover, world travel cover, winter sports and family travel insurances are all available with a discount for buying any policy online. Halifax pet insurance services are less generous with the discounts with only a few pounds off should you buy online but you do get an extra discount if you insure more than one pet with them. Big plus is the no age limit with some insurers capping at five years for some breeds. The Halifax Bank of Scotland Group (HBOS) has been providing insurance and closely related services such as mortgages for many years which give them a unique perspective to create comprehensive home cover. They quote themselves as the largest mortgage and savings provider in the UK and one of the leading insurers.

Key Literature

There have been numerous studies identifying the key service quality attributes in the physical banking environment, where personal interaction between customers and bank employees is a primary aspect of service deliver. However, relatively little literature has investigated service quality attributes in the Internet Banking Sector (e-Service) where non-human interaction is the main component of service delivery. Joseph (2009) investigated the influence of technology, such as the A.T.M., telephone and Internet on the delivery of banking service in UK. Using the Hemmasi (2004) importance performance technique, their study identified five underlying dimensions of electronic banking service quality. First is convenience/accuracy, second is feedback/complaint management, third one is efficiency, fourth is queue management and the last is accessibility and customisation. The main limitation of this study is that they took a generalised perspective on electronic banking and did not consider that each type of technology might have a different effect on customers' perceptions of quality. Jun and Cai (2008) have focused specifically on the issues associated with Internet banking quality.

Using the critical Incident technique they revealed a total of seventeen attributes of Internet banking service quality, which they classified into three broad categories: customer service quality, banking service, product quality and online systems quality. They concluded that Internet banks should pay attention to all seventeen attributes in order to maintain a high level of overall banking service quality. However, to reinforce competitiveness in an extremely competitive market place and given limited organisational resources, they recommended that banks offering Internet banking services should focus on the following six key attributes; responsiveness, reliability, access, ease of use, accuracy and product variety/diverse features. Their research findings have revealed that these six attributes tend to have a strong impact on customers' satisfaction, depending on the quality performance of those attributes. These six attributes were, therefore, used as a basis for the research described in the paper.

Banks around the world fear a huge loss of reputation and dwindling customer confidence in their Internet platforms through very clever and increasingly successful Internet banking attacks. Furthermore, experts are now convinced that securing Internet banking through IT security methods (user authentication, encryption, authorisation codes) is not enough, since almost every security system can be cracked in practise (man-in-the-middle and man-in-the-browser attacks have a high success rate nowadays), especially if the security system has to remain affordable and user-friendly. IT security measures can be ideally supplemented by a risk assessment of every transaction on the Internet banking server. Even internet provider such as airlines (online ticket sale) or online shops are confronted with a high number of fraud losses.  An international study conducted by the consulting agency Deloitte proved that 79% of all airlines have to fight against fraud. Most of the fraud cases are caused by payment via credit card. During the last years, the losses due to fraud have increased worldwide fivefold. The losses in total add up to 600 million British Pounds.

Justification

I have chosen this topic and bank branch because I have

Halifax bank is incredible managing all financial services in personal banking, business banking, Private banking and Commercial banking. In my point of view and according to market survey, Small and Medium Enterprises (SME) are affecting in the time period of 2007 to 2010. There are several reasons of influence and main reason of this time period is recession. Specially; SME businesses have an effected. Halifax (Walthamstow Branch) has been playing greatly rationalized role in the SME market in the form of lending. This bank branch has offered various plans to SME market for making better improvement in business. As I mentioned above about Halifax offers for SME Lending and Halifax Lending activities to make more suitable and helpful for every kind of business under different circumstances and excellent offers comparatively other banks and building societies. This Branch is trying to improve the business in the particularly area SMEs. I have chosen this company because this Bank is providing on the specific level of business and it wants to help in real business market. Halifax bank understands all issues of SME business like how these businesses are surviving in the recession time? How will SME improve in this critical situation of businesses?

Hypothesis

Halifax has improved in a number of ways to access the account. In recent years the Bank has therefore been focusing on areas of more specific interest and concern that is fraud fear on internet banking. Examples of this increased focus are the Bank's report on The Financing of Technology-based on usage of internet banking, published in October 2008, and the report on Smaller Exporters, published in January 2008. This latest report in that series focuses on the financing of ethnic minority firms in the Ilford, London, UK, concentrating on the smaller end of the business sector and on the start-up and early growth stages.

Halifax is to cut interest rates on a range of products by up to 0.65 per cent, it has been revealed. The changes will take the form of a new range of fixed rate and lending. Among the new products is the bank's lowest rate ever a two year fixed lending at 3.49 per cent. Remortgage customers will also see the cost of lending fall, with deals on offer from 3.79 per cent. John Russell, director of branch (2009) internet banking department, said: "They remain committed to online banking to our customers and offering highly competitive securities during these challenging online fraud, hacking, phishing in less security conditions."

Methodology

Primary Research

The primary data in this research will be will be collected through conducting a questionnaire survey. This research study depends upon both primary and secondary data sources. Mostly research will be dependent on questionnaire survey or primary data.

Types

In the primary research, there are multiple types for example; Interviews with consumers and bank service providers, surveys, focus groups and questionnaires.

Advantages/disadvantages

Using primary research, it will help me to find out problems in internet banking and banking problems for fraud what they are facing. They will get original and authenticate data but still Halifax cannot provide all information because they think it could be drawback for the market competitor's point of view.

Chosen

I have chosen this topic because my personal account in this bank and this branch is near to my accommodation and I can get easily more authentic information for my research according to various users. Objective: with the objective of fulfil the research requirement and fraud fear on internet banking in the current century (2010).

Secondary Research

Types

Secondary data will be gathered from books, journals, articles, research agencies and from other online recourses. Both categories of secondary data, internal (inside the organization) and external (outside the organization) data will be themed.

Advantages/disadvantages

In the secondary research, it will help me to find out all previous data, facts and figures and surveys which have done in past. So, I can theme this data for my research and it will help me for my research and future data.

Objective

I have chosen it because I have already study of Internet banking in different societies and banks for example; Halifax, Halifax, RBS, and HSBC. Objective: using my all information; I can achieve my targets for this research and I can complete my research for dissertation.

Quantative / Qualitative

As the quantitative data or information is obtained from the available secondary sources it will be achieved in this dissertation from articles, published reports, magazines and online recourses. Qualitative data provides the information with nearest approach of reality and reliable quality. So qualitative data of dissertation will be collected from the interviews, question is survey and focus groups.

Scope

After completing my research on internet banking for Halifax customers in particular bank branch (Halifax Ilford branch). This research would help to improve the internet banking and analyze the consumers view with the reference of Halifax internet banking in different areas, situation.

Limitations

During the research, interviews and statistic data; I will try to get more information for my dissertation. The greatest impact of Halifax bank is through its internet banking policies, and through the companies and personals that it usage of Internet Banking and allows to operate. Only smile, as part of the Halifax Bank, has a complete ethical internet banking policy. Halifax Ethical internet banking providers only invest in ethical companies and funds - generally, ethical internet banks will avoid doing fraud in internet banking in business with companies that have anything to with green or ethical violations.

Ethics

In the proposal, I consult all the data and information from Halifax bank report, journals and books and I themed all references and give the credit to original authors and writers. I have not themed any illegal websites, books or any other way of material for this research. Secondly ethical banking of Halifax is an umbrella term for putting your money where you morals are and choosing financial products which are in line with your own ethos. But it's not just ethics that encourage people to choose green, as some ethical investment products, for example, have been known to outperform their non-ethical counterparts, so it can make good financial sense too.

Recommendation

Halifax Bank was asked to tackle the enquiry of permission to fraud fear in internet banking under the Ilford branch for social movement. This research report has needed supplying evidence on the present obligation for and providing of business economics banking and personal banking on internet for social endeavours in the UK and has also calculated forthcoming reasons of internet banking fraud fear, which may be fundamentals to description for the social benefits of public endeavours' movements. The proof accessible in the statement reveals the complexity of the substance in the area of Internet banking for the personal, business and commercial customers. As the Bank's appraisal demonstrates, the 'division' is composed of a various diversity of administrations for controlling the online banking fraud, that are building up a plan in instruct to protected a more maintainable internet banking for Halifax customers. Communal endeavours, like all commercial, need access to use to several way of access the account especially online banking. Our investigates illustrate that, while a substantial amount of public schemes do access internet banking, there are problems on both the need and offer side that can create it more hard and tricky for hackers of internet banking.

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