Chances are, your bank probably didn't make the deadline: Only about half of U.S. banks got their multi-factor authentication (MFA) deployments off the ground by last year, according to a new study, and the rest won't be operational until late next year.
The banks are attempting to come into compliance with the Federal Financial Institutions Examination Council (FFIEC)'s regulations that require them to provide customers with multiple layers of authentication. Today, 50 percent have operational MFA for retail online banking and 40 percent have it for small business banking, but those numbers will jump to 90 percent by year's end, Celent's report says. About 60 percent have MFA for corporate banking today, and that figure will increase to 95 percent by the end of the year, according to the report.
"Banks are still scratching their heads that there are so many [MFA] options, and they've got to get something out the door," says Jacob Jegher, senior analyst with Celent, a research firm that works with financial institutions. "The regulators are telling [them] they've got to act on this, but they are worried about the affect on the user experience."
The banks must add telephone and mobile banking to their MFA project lists as well, he noted.
Although most banks will have their multi-factor authentication systems in place by the end of this year, that doesn't mean it will be a done deal, he says. Today's authentication schemes may not hold up to the next wave of threats, so banks need to regularly study their anti-fraud measures to make sure they are still effective, according to the Celent report.
Early on, financial institutions agonized over how they could distribute and then support hardware tokens for authenticating their consumer customers. Managing and provisioning hardware was unwieldy and pricey ($30 a token), so many went with software-based solutions that augment the old standby password. (See Putting Security in the Bank and Banks Launch Authentication Project .)
"Many of the security vendors thought that the FFIEC guidelines would cause tokens to fall from the sky like manna from heaven. It hasn't worked out that way, owing largely to the usual issues -- cost and usability," says Andrew Jacquith, senior analyst with the Yankee Group. Jaquith says hardware tokens are pricier, so software-based authentication, such as PassMark, has emerged as a more affordable and easily provisioned option.
"But these, too, aren't foolproof, and present a learning curve for consumers," Jaquith says.
Celent's Jegher says as soon as you deploy a multi-factor authentication system, however, the bad guys are already working on ways to circumvent it. "There will be attempts to work around it," he says. "And banks will possibly have to add additional security measures."
As always, end users are the weakest link. Jegher points to a recent multi-factor authentication study conducted by Harvard University and MIT to test whether users would look for their authenticating image and phrase before typing in their passwords. They were given their login screen, but without the visual cues that signal they are on their bank's site. It didn't go well for multi-factor, with 97 percent of users logging in, even though the additional authentication layer was missing.
Meanwhile, Celent says banks are way behind in deploying MFA for telephone and mobile banking, which also fall under the FFIEC regulations. Only 30 percent of banks will deploy MFA for telephone banking this year, according to Celent, as many struggle to balance technology with human intervention in the process. Voice authentication holds promise, but Celent doesn't expect it to take off any time soon.
As for mobile banking -- banking over your PDA -- Celent says SMS and WAP will be key to authenticating these transactions, as well as downloadable applications that would run on the PDAs.
Meanwhile, who's inside the bank may be the greater threat: Anywhere from 50 to 70 percent of bank fraud comes from bank employees and other insiders, according to Celent, which plans to tackle the insider threat at banks in an upcoming report.
Kelly Jackson Higgins, Senior Editor, Dark Reading