The Financial Services Authority (FSA) has criticised the
approach taken by banks in launching their e-commerce strategies,
following a system crash experienced last week by Abbey National’s
internet bank, Cahoot.com, just 90 minutes after it launched.
The problems for Cahoot.com came at the same time as Prudential
floated a minority stake in its internet bank, Egg.com, on the
London Stock Exchange. Some retail investors were unable to sell
their Egg shares for a short time because incomplete account
numbers had been supplied.
Howard Davies, Chairman of the FSA identified the key risks
which banks must manage as they introduce and develop their
e-banking services. He said that: “There is a risk that people with
strong technological, but weak banking skills can end up driving
e-initiatives,” and added, “E-banks are easy to set up, so lots of
new entrants are arriving on the scene. And old-world systems,
cultures and structures do not encumber these new entrants.”
Davies said the FSA had at times found “poor security” in
e-banking initiatives. He said the FSA is “encouraging banks to
look at the firewalls between their different systems to ensure
adequate damage limitation should an external breach occur.”
He said that many banks going on-line have significantly
misjudged volumes of traffic, usually making estimates which turn
out to be too cautious. He also pointed to the security risks that
could arise in outsourcing the development work.
Cahoot.com has said that customer security was not at risk as
there were no registered customers at the time of the system
crash.
