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ChexSystems Gets Into Online Banking

By Martin H. Bosworth
ConsumerAffairs.com

November 8, 2005

Online Banking • ChexSystems Gets Into Online Banking • FDIC: Banks Must Improve Online Security • Analyst: Banks Make It Easy For Cyber-Thieves • Consumers Losing Confidence in Online Commerce, Banking • More on this topic ...

eFunds, parent company of the ChexSystems banking database, is getting into online banking. The company's "eXpress Accounts" online account setup system is supposed to enable customers to instantly open bank accounts via the Web and view money transfers in real time.

In addition, the system will enable banks to instantly identify and verify customer identities, process credit and debit payments, and track possible cases of fraud. eFunds' senior vice-president Rahul Gupta hailed the new solution as "comprehensive and easy."

"Offering a single solution gives our more than 9,000 clients the ability to more effectively compete in the market while growing their customer base and ultimately, the bottom line," said Gupta in a press release.

One key factor in the eXpress Accounts solution is its use of "single sign-on capability."

Single sign-on enables a user to log in to an online account with one click of their mouse, without having to enter their user name and password every time, or remember numerous password and user name combinations. Many financial services companies and other businesses are utilizing single sign-on to grant customers instant and recurring access to their account information and data.

Single sign-on may be fast and convenient, but it can also present a major security risk if not properly monitored. A. Russell Jones, executive editor of the DevX application development Web portal, called single sign-on "tantamount to abrogating security for convenience."

In a July 2004 article on the subject, Jones said "When you reduce authentication to a single point, a breach at that single point also compromises every application a user is authorized to access."

"In other words, when an employee, authenticated on the network, leaves the office to go to lunch, and neglects to lock down his or her computer, everyone with physical access to that computer immediately -- and transparently -- has access not only to the applications left open on the desktop, but to every application to which that user has access," he wrote.

Single sign-on can also be dangerous because of its continual usage. A 2003 Hewlett-Packard white paper on single sign-on capability noted the necessity of keeping it on around the clock.

"Even planned downtime in such a system is unacceptable," according to the author. "Given the global nature of many corporations, there is no good time to take the service offline."

Jones recommended utilizing single sign-on in conjunction with other security measures, such as biometric readers or smart cards.

The FDIC also warned against relying solely on "single factor" authentication in its call to banks to improve their security measures for online banking.

eFunds' marketing of easy-access banking information and transaction systems have won it considerable profits. The company reported increased earnings of 25 percent in the third quarter of 2005 as compared to 2004, with net revenue of $133.2 million.

The company is no stranger to instantaneous banking capability.

The ChexSystems database is utilized by a vast majority of banks and financial institutions to identify customers with histories of "non-sufficient funds" (NSF) activity. Bouncing a check too many times can get a consumer listed in ChexSystems for five years, rendering them unable to open bank accounts anywhere the database is utilized.

ChexSystems has been criticized for its inflexibility in removing unfairly listed account holders, and for identifying customers as "risks," even though eFunds claims the banks make decisions as to who to approve or decline for new accounts.

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