Given this reality, it’s no surprise that some of the most frequent questions regarding online banking involve security. No matter how reassured banks try and make their customers feel, they continue to fear that their money may not be safe, that someone can access their account information and transfer their funds without their knowledge.

Unfortunately for banks, many of these fears are well founded. Just consider …

The Federal Trade Commission (FTC) reports that identity theft has risen 177% over the past two years. In 2003, the FTC received 301,835 fraud and 214,905 identity theft complaints. Bank fraud accounted for 17 percent -- more than 36,000 -- of the identity theft complaints. That number represents only those victims who filed a complaint with the agency. The FTC estimates there were 9.9 million identity theft victims that year.

Equally unsettling, 39% of responding financial institutions responding to a 2003 Survey revealed that their computer systems had been compromised the previous year.

Identity theft occurs when the bad guys illegally acquire information that allows them to assume another person’s “identity.” There are two types of identity theft: “account fraud” and “account takeover.” Account takeover occurs when a thief acquires credit card information and makes purchases disguised as the real account holder. Account Fraud happens when the thief uses stolen information such as a Social Security Number to create multiple new accounts in the owner’s name. Because the thieves use a different billing address, the victim is often unaware of the crime, sometimes for months.

One online scam that thieves use to access consumer information is phishing. Phishing occurs when account holders receive an e-mail that purports to come from the customer's bank, brokerage firm or credit card company. Customers are told to click on a link within the e-mail and update their personal information. Often, the phisher is looking for the Social Security number or the credit card number with expiration date and PIN. Unsuspecting consumers click on the link and are taken to a phony website that often looks legitimate. They enter their personal information and soon find their identity has been used fraudulently, their bank account emptied or big bills have been racked up on their credit card.

Commenting on this phenomenon in an article posted at Banknote.com, Dan Maier of the Anti-Phishing Working Group notes that phishers are far more successful than spammers.

"We've heard of response rates ranging up to 5% of bank customers responding to the e-mails. One bank said $4 million had been drained from accounts over a period of a couple of days, says Maier. “Sometimes the site is hosted overseas by Web-hosting sites that specialize in anonymous hosting and protect against law enforcement shutdowns. So they may be actively hindering shutdowns. Early on, amateurs, hackers and spammers were among those who had gone to the dark side. More and more the attacks are professional and widespread.”