Keychain-sized tokens fight online identity fraud

IHT - NY Times: "Financial institutions once just offered kitchen appliances to new customers. Now a growing number of banks and brokerage firms want to fight Internet fraud by providing devices that help customers prove their identities when logging on to online banking, brokerage and bill-payment programs.

The devices, which are hand-held and small enough to attach to a keychain, are expected to cost customers roughly $10. They display a six-digit number that changes once a minute; customers trying to gain access to their accounts would type in that number as well as the user name and password that they use now. The devices are freestanding; they do not plug into a computer.

Several large banks in Europe and Australia - including Credit Suisse, ABN AMRO and Rabobank - already issue these tokens to customers, sometimes making them bear the cost of the device.

In the United States, Time Warner in September introduced a program, AOL Passcode, that lets American Online subscribers buy the keychain device for $9.95 and use it for authentication purposes, at a subscriber fee of $1.95 to $4.95 a month, depending on the number of screen names linked to it.

E*Trade Financial intends to introduce such a product in the first few months of 2005. And U.S. Bancorp says it will test a system, though it has not given a timetable.

There is growing pressure from bank regulators to add safeguards of this type to online financial services. In a report this month, the Federal Deposit Insurance Corp., which insures bank deposits, said that existing authentication systems were not secure enough and that an extra layer of security, like a hardware token or a biometric identification feature, should be added to the sign-in process."