Monday, August 27, 2007

Secure Authentication for Online Transactions

ComScore Networks estimates that more than 40 million U.S. customers now bank online, with the number growing at an average annual growth rate of 27%. The proliferation of online banking and e-commerce applications has exposed the users of these applications to face increasing risk in the form of malicious attacks, network infiltration, identity theft and denial of service attacks. According to an FBI survey, such risks and other computer-related crimes cost U.S. businesses a staggering $67.2 billion in 2005.

Gartner estimates overall IT spending for 2007 will grow at about 3% year over year. Within the IT spending, areas like Business Intelligence are expected to see spending growth in excess of 10%. IT security is not far behind with a projected spending growth of about 9.8% over 2006. Vendors and customers feel that barring a significant upturn in macro trends that downside risk relative to the Gartner forecast is more likely than upside.

According a recent IDC forecast, the worldwide internet security market is projected to grow at a CAGR of 16% from 2005 to 2010. IDC further predicts the Identity and access management part of internet security businesses is projected to have a market share of $4.5 billion in 2010 representing 11.2% CAGR over 2005. This growth rate projection is rational as financial institutions try to upgrade their authentication to meet FFIEC regulation and invest in long-term IT infrastructure to protect the growing online customer base. Highly publicized incidents like stolen credit card information have created a sense of discomfort among consumers and have the potential to become a detriment to the growth of e-commerce. Regulators like government and independent bodies have stepped up to formulate guidelines and benchmarks for protecting consumer information. One such regulatory requirement is multifactor authentication for online banking. Companies are taking a long-term approach to IT than in the past and such regulations have augured well for the growth of the internet security companies. Regulation continues to be the prime driver of growth in this industry.

The demand for secure access has never been stronger. As the demand for secure access to public and enterprise networks has seen growth, the landscape to be populated with a lot of authentication/secure access solution providers. Today, many companies like RSA (security division of EMC), Actividentity Corp, Secure computing, Entrust, Aladdin Knowledge systems, SafeNet, and Vasco Data Security International are among the many providers of this technology. The result is an industry characterized by intense competition and fast changing technological developments. These trends indicate that the wide range of alternatives for the market segment has resulted in a "buyers market" for security technology. To be successful, the solution must have features like reliability, interoperability and ease of implementation. Being a part of the OATH (Open authentication) consortium is a strong plus as this will enable interoperability under multiple enterprise and security infrastructure environments. The primary cost of the technology to the customer comes from hardware and software components, maintenance and services. The total cost of ownership thus forms a metric by which customers access the cost of implementing the technology. The market for authentication is expected to expand from the Consumer space and enterprise space in the traditional sense to other high growth areas like Enterprise Internal.
Thanks Morgan Keegan & Co., Inc. August 2007

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