Banks to suspend online loan services
By Kim Tae-jong
Major local banks will suspend some of their online services from today until they set up enhanced security procedures to fight against increasing cases of fraud.
The suspension comes as the Financial Supervisory Service (FSS) ordered lenders last month to carry out a measure to tighten cyber security, following a series of scams such as voice phishing.
“We have recently checked security systems for Internet and mobile banking services at banks to see whether they have successfully improved online security in an effort to prevent banking fraud,” an FSS official said. “But some of them are not secure enough yet, so we have sent them a letter to order them to take necessary and immediate steps.”
The basic guideline is that banks should check customers’ identity through phone calls or text messages for online transactions in addition to the verification through transaction authentication numbers (TANs)
In response, local banks have decided to suspend their online loan services until they build a safer security system. Now, they also strongly advise customers to use a one-time password (OTP) generator for online transactions instead of traditional TANs, printed on a small card.
Woori Bank will stop online loan services on Wednesday and Thursday. It will only allow customers to use online loan services from Friday when they use a security token that generates OTPs.
Shinhan Bank will also disallow customers without a security token generator to use its online loan services from Wednesday.
KB Kookmin Bank already suspended its online banking services from April 13 and plans to intensify customer verification processes, especially for loans.
Korea is one of the most wired countries, but at the same time among the most hacked nations, in the world. But regulators and banks have been sloppy in online security, although there have been numerous reports of banking fraud.
Hackers easily infiltrate banks’ databases and access customer information. They use such personal data for cyber crimes, including voice- and message-phishing schemes.
Although financial firms have introduced the purported high-powered encryption of the personal information, hackers can decode it, prompting concerns for a better cyber security system.
However, the use of mobile and online banking has seen a dramatic increase in recent years, especially on the back of the ballooning local smartphone user population.
According to the Bank of Korea, overall Internet banking use gained 17 percent year-on-year to 39 million transactions per day in 2011 with daily transactions on average totaling 31.92 trillion won, up 7.9 percent from a year earlier.
And the use of online banking more than doubled last year from a year ago, with mobile banking accounted for about 20 percent of all such transactions last year, nearly doubling from 11.2 percent in 2010, the central bank said.