E-banking needs good security

There are times when you just have to wonder whether the billions being poured into electronic commerce represent the greatest folly since alchemy. The investment by millions of ordinary individuals as well as every institution scared of being left behind in the "new economy" is based on the assumption that one day the Internet will supercede the high street for a large portion of citizenry.

That is all very well but any chance of such a transformation is predicated on transactions over such an electronic medium being secure. Despite the constant reassurances from those in the industry - blinding us with their jargon - the evidence is that this remains the biggest stumbling block to e-commerce, despite the recent legislative changes in the Republic designed to improve security of business over the Internet.

In this scenario, the admission this week by Barclays Bank, the leader in British Internet banking that it was hit by a security flaw which allowed people gain access to details of others' bank accounts was not the sort of news the industry was looking for.

Already Barclays and others, including the leading Irish banks, have been using the advances in branchless banking and the need to reduce cost bases to justify branch closures. This week Bank of Ireland signalled the end of five Dublin branches. With trust in electronic banking not yet attaining critical mass, mishaps like that at Barclays run the risk of hitting bank profits hard in two ways - the relocation or establishment of alternative arrangements by customers and the writing off of massive Internet investments by the sector.

In truth, we are a long way from such doomsday scenarios, but the news that the Barclays' glitch was down to a software upgrade error is discomfiting.