There are two types of fear: fear of a known risk and fear of an unknown risk. Bet heads on a coin flip, and you know that the probability of winning is 50%, but if you suspect that the coin is weighted or that there is some type of deception in the terms, the probability of winning is unknown, and you probably won’t make the bet. Fear of the unknown explains, partly, why we hesitate to move to new cities, continue to work jobs we don’t like, and order the same item on the menu time after time after time.

For a webinar on mobile banking security we held last Wednesday, I visualized some of the data included in the Federal Reserve Board’s March Consumers and Mobile Financial Services Report about mobile banking security. (The report was low on data visualization, in general, and did not explicitly quote all the statistics below, so I did some deductive multiplying.)

How would you currently rate the overall security of mobile banking? 

The chart shows that security concerns could be a major obstacle to mobile banking adoption, a story confirmed by other industry reports such as Javelin’s 2011 report on mobile banking Smartphone Banking Security: Mobile Banking Utilization Stalls on Consumer Fears,” and Metaforic’s September survey.

We also surveyed our webinar registrants, most of whom were senior officers at retail banks or credit unions, about their perceptions of mobile security. Here’s what our registrants had to say:

How do you perceive the security of online vs. mobile banking?

The media hold varying perspectives. Here are some examples:

The optimists:

• Mobile Banking Is More Secure Than Online Banking (Business Week)
• Report: Mobile banking could be more secure than online banking (NFC news)
• Mobile Banking Is More Secure Than Online Banking (Mobile FI)

The pessimists:

• Hidden Risks in Mobile Banking Raising Concerns (Yahoo! Finance)
• Mobile Banking: Emerging Threats (BankInfoSecurity)
• Security Concerns Hold Back Mobile Banking Adoption (Computer Weekly)

The undecided:

• Robert Siciliano: Online Banking vs. Mobile Banking (HuffPost)
• Is Mobile Banking Really Safe? (Money.cnn)
• Is Mobile Banking Safe? (Bankrate)

Mobile banking security threats are not as great as the media reports suggest. For the most part, mobile banking carries mainly the same risks as online banking, plus some additional hazards because people are prone to losing mobile devices, and minus some hazards that can be addressed with mobile device GPS systems or built-in-cameras. (In fact, most of the articles above come around to this point after 200 words or so, but the average reader may never make it past past the headline.)

Of course, no one really knows exactly how safe mobile banking is. Predicting cybercrime is not the same as predicting the result of a coin toss; we know we’ve got a 50% chance of heads every time the coin flips, but cybercrime is always evolving and while we may be able to categorize a risk as greater or lesser, precision is impossible and the margin of error is large. No one knows exactly how safe online banking, telephone banking, or branch banking are either, but they have all existed for longer than mobile banking, and uncertainty about security in those channels isn’t as often discussed. It is the perceived lack of security, not the facts, that holds mobile banking back from being adopted more widely.

So, what is to be done about all of this? One thing is for certain, consumers take their cues from the media and from their financial institutions. As long as consumers feel uncertain about mobile banking security, they will stay away from it just as they’d avoid betting on a coin toss if they felt the game was rigged. So it seems that perception stands in the way of widespread adoption of one of the most exciting technologies to hit the retail banking industry this decade. I can’t reasonably ask the media to change their collective tune. After all, a headline that reads “Mobile Banking Is About as Safe as Online Banking” probably doesn’t attract as many readers as “Mobile Banking Threats!!!” Still, financial institutions can make more of an effort to educate consumers about the true uncertainties when it comes to mobile banking.

What myths do you think customers mistakenly believe when it comes to using electronic devices for banking services and what is your institution doing to address these concerns?

Original post: http://blog.andera.com/posts/2012/november/time-to-decide-about-mobile-banking-security.aspx