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Web 2.0 holds promises and threats for online banking

11th September 2008
By Staff Writer

Banks are considering the implementation of Web 2.0 technologies to improve their online offerings.

Web 2.0 technologies represent a means through which retail banks can more accurately serve the modern consumer. As such, many banks appreciate the benefits that such technologies could bring to their online offerings, such as a new, more customizable and interactive internet experience. However, they remain cautious about implementing the technology due to perceived security implications.

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Banks are increasingly aware of the need to keep up with the times in serving the Facebook generation. To this end, they appreciate the potential of Web 2.0 technologies such as mashups, rich internet applications and widgets. While many have dabbled with such functionality, however, a new Datamonitor reports suggests that, in many cases, banks are reluctant to fully implement them. Indeed, they are concerned with the loss of control and the security implications of opening their online services to third-party content.

A generation of consumers is coming onto the market that not only thinks of online as the natural way to do its banking, but also expects it to be as customizable and interactive as the Web 2.0 sites on which it spends its surfing hours. This can mean anything from having one's online bank permanently available as a widget, to having third-party information such as stock prices delivered as a really simple syndication (RSS) feed, or as the bank existing as an island in a virtual world like Second Life.

However, as desirable as these Web 2.0 capabilities may be, there are clearly challenges involved in deploying them for organizations whose operational principle is to take care of other people's money, use it to make more and share the profits with customers and shareholders.

Chief among these concerns is security, since anything that opens a window for someone other than the customer is inherently dangerous from a bank's perspective. Second are the legal and reputational implications of allowing third-party content onto banks' websites: there is the potential issue of contentious material being uploaded onto the sites, and even being shared among customers and their associates.

Despite these concerns, there is an opportunity for vendors to capitalize on Web 2.0's appeal for banks, provided they can deliver the control and security they require to fully embrace the technology and roll it out for millions of customers.

Datamonitor expects to see some Web 2.0 capabilities such as mashups launched by the more innovative banks over the next year. However, large-scale adoption will require work by enterprise software vendors to convince the great majority of banks that the technology will not compromise their security measures.
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