The bank will begin issuing the keyring-sized access code devices free of charge to its 180,000 Internet business banking customers in the UK from May. The device generates a single use security code which customers use alongside their user ID and password when making online banking transactions.

The bank says the Vasco device will replace the existing authentication system which is based on digital certificates. As soon as a customer activates the security device, their digital certificates will no longer be required.

HSBC says the device offers "a significant additional line of defence" against online fraud such as phishing, keylogger trojans, remote hacking and screen capturing.

The bank has already issued Vasco devices to customers in Brazil and Hong Kong. Simon Wainwright, head of business banking at HSBC, says: "Our experience in other parts of the world shows that this kind of two factor authentication is an extremely useful weapon in the fight against Internet crime."

UK bank Alliance & Leicester has launched its own two-factor authentication service, which is based on the PassMark system.

Lloyds TSB has also conducted trials of a Vasco two-factor authentication device. But although the trial was a success the UK bank has no plans for a large-scale roll-out of the technology and is instead waiting for guidance from Apacs on plans for an industry standard card-reading system.

Apacs said in April last year that UK banks were close to agreeing a common industry standard for two-factor authentication of online transactions and banks were expected to begin distributing the authentication devices to customers within the year, but as yet no system has been introduced.

It was thought the standard would be based on a technical specification developed by Visa and MasterCard which would be adapted for domestic use, in the same way that the Chip and PIN standard was adapted.