Net fraud? Here's a device to fight it

Banks and brokerage firms have plans to test a small device that would help customers prove their identities while logging on to online banking, brokerage and bill-payment programmes, in an effort to fight Internet fraud.

The hand-held devices, small enough to attach to a keychain, will be issued to customers and are expected to cost customers roughly $10.

These devices display a six-digit number that changes once a minute; people seeking access to their accounts would type in that number as well as a user name and password, according to a report The New York Times.

The devices are freestanding, as they do not plug into a computer. Some banks already use these hardware tokens to identify employees and corporate customers, and say they are evaluating the technology for retail banking use.

"Every single major bank is considering it," said James Van Dyke, principal and founder of Javelin Strategy and Research of Pleasanton, which advises financial services companies on payments and technology issues was quoted as saying.

Although there are drawbacks in terms of cost and convenience - as well as questions about what would happen if a customer lost the device or it were stolen - there is growing pressure from bank regulators to add safeguards of this type to online financial services, the report said.

E*Trade Financial, said The New York Times report, will introduce such a product in early 2005. Several banks plan to test the device.

Several American and European banks issue such hardware tokens to customers, the cost of which at times is borne by the customers, said the The New York Times report.

America Online introduced 'AOL Passcode' in Septmeber 2004 that allows subscribers buy the keychain device for $9.95 and use it for authentication purposes, at a subscriber fee of $1.95 to $4.95 a month, depending on the number of screen names linked to it, reported The New York Times.