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Ask the expert: Is mobile banking safe?

October 28, 2010

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

Q: I'm interested in using my iPhone so I can access my bank account anytime, anywhere. However, before I start looking into specific banks and apps which best facilitate mobile banking, I have a fundamental question to ask: are there security issues with mobile banking?

A: Mobile banking is a hot new development in the banking world, with more banks providing mobile services, more apps becoming available, and more customers participating. Unfortunately, with all this rapid adoption comes a less desirable development -- more security breaches.

According to a recent report by Javelin Strategy & Research, the proliferation of smartphones like the iPhone has sparked a rise in mobile banking. Smartphone users are the most likely users of mobile banking services, and they currently represent one-third of all mobile phone users. With the number of smartphone users expected to double by 2015, look for a surge in mobile banking usage.

Already, large banks represent tempting targets for cyber criminals. According to the Javelin report, 65 percent of national banks have been the target of some form of online attack. These attacks can range from the introduction of malicious software to disable banking systems, to misappropriation of sensitive financial data.

Smartphones can create a new area of vulnerability, especially when the user accesses banking services via a WiFi network. This makes information susceptible to interception by third parties. One possible solution is device-specific encoding, which would verify whether a call was coming from the bank customer's phone. This would be harder to falsify than passwords and other traditional security measures -- unless, of course, someone gets their hands on your phone.

In summary, security should at least be part of the conversation before you dive into mobile banking. Along with researching nifty apps and mobile-friendly services, compare the security measures different banks would take to protect your information and your money.

Got a financial question about saving, investing, or banking? MoneyRates.com invites you to submit your questions to our "Ask the Expert" feature. Just go to our home page and look for the "Ask the Expert" box on the lower left.

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