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Virtual Security Jitters

Financial Times, October 30, 1995, p. 13.

Online bank era dawns

By Louise Kehoe

The Security First Network Bank established by Cardinal
Bancshares -- a small Kentucky savings and loan institution is
the first financial institution to conduct true online banking
over the Internet.

SFNB's pioneering effort may influence the growth of Internet
banking. Larger financial institutions are watching for clues
as to how consumers respond and to see whether the cyberbank
can live up to its "Security First" name.

Concerns about Internet security exacerbated by incidents in
which supposedly secure software has proven vulnerable -- have
made banks cautious. SFNB claims to have created a "virtual
vault" for each customer account, using a "trusted" computer
operating system from Hewlett-Packard the second largest US
computer company, as well as encryption and user
authentification software, and firewalls.

"We have overcome the problem that has prevented banks from
transacting over the Internet," said James Mahan, SFNB's

Perhaps cyberbanking's biggest draw is that the SFNB is open
24 hours a day, seven days a week. Customers will be able to
conduct standard personal banking tasks such as paying bills,
transferring funds from one account to another and checking
the balance of an account.

Nor are there queues at the counters in the "virtual lobby" of
the SFNB which are staffed by computer renditions of
R2D2-style robots (http://www.sfnb.com).

But waiting for images to download from the Internet over a
modem may persuade users that a bus trip to their local bank
is not such a bad idea.

SFNB also faces competition from more than 20 US banks
including Chemical Bank, Wells Fargo and First Interstate that
have formed partnerships with Intuit, the leading personal
finance software company, to enable users of the popular
Quicken program to access information from their accounts and
pay bills electronically.

Services offering stock prices, information about mortgages,
loans and retirement funds as well as insurance are

Some of the most innovative include BankAmerica's new Web site
which opened a week ago with an invitation to users to "build
your own bank". By filling in a form, users can tailor the
information presented to fit their interests.

A student, for example, might be presented with information
about obtaining loans for college fees. Someone close to
retirement age would automatically be routed to information
more relevant to his interests.

One of the largest mortgage lenders in the US, Bank of
America, has also chosen to put an emphasis on property
purchases at its Web site.

Hyperlinks to real estate firms throughout the US enable users
to search through lists of homes for sale and then to link
back to the bank in order to apply for financing

Among the biggest attractions of the Internet for consumers,
including consumers of financial services, is the ability to
"shop around" so as to compare costs and advantages.

The insurance industry is taking this to heart in a new
service that goes live today. Insweb will enable consumers to
seek quotes from a range of companies and brokers on life,
home, car and medical insuranee.

The service, established by a group of 25 insuranee companies
and related organisations is the first "marketplace" on the
Internet for insurance information and commerce.

Insweb plans to enable users to purchase insurance online. In
a pilot program next month, residents of the state of Utah
will be able to buy car insurance via the Internet


Internet Law Review is a monthy paid-for publication available
electronically or on hard copy from December. Among other
issues, it will cover IT-law and the Internet; commercial
security and encryption, using contributors from North America
and Europe. Subscription is $220 a year and details are
available from <www.thinck.com/publications.html>. Meanwhile,
details of this week's Internet Law Symposium in Seattle are
available at <www.discovery.org/ils95>.