Ovum argues that mobile banking is inherently vulnerable because handsets are liable to be lost, stolen or hacked and are used in situations that are less secure than sitting in an office or at a home computer.

Graham Titterington, principal analyst, Ovum, says: "Mobile networks may be intercepted either by breaking the wireless encryption mechanism or by hacking into the wired backbone of the network where encryption is not mandatory under telecommunications standards. IT malware that compromises back-end servers, but is harmless in the wireless environment, may be passed through the mobile banking interface."

Ovum says defence has to be designed incrementally to a level that is at least equivalent to that deployed in Internet banking but it cannot be a simple copy. While many of the concerns and strategies are similar, the approach must be tailored to the characteristics of the channel and the way in which it is used.

In addition, security must not detract from usability - unobtrusive enough not to interfere with normal transaction flows while still providing users with the confidence to know that their banking activities are protected.

Says Titterington: "Banks must adopt a 'defence in depth' strategy to detect and limit the effects of an attack. Network vulnerabilities can be avoided by adopting end-to-end encryption of transactions, independent of any encryption provided by the network operator.

"The main objection to this in the past has been the limited computational power of the mobile device, but the time has come to reject this argument as mobile devices become more powerful. Encryption, while not a panacea, protects against eavesdropping, message alteration, and 'man-in-the-middle' attacks."