Authentication is a key tenet of any security strategy that seeks to verify that someone is who they represent themselves to be. Customer authentication has rapidly become one of the more pressing issues facing the security of online financial services. User IDs and passwords are increasingly being compromised but still remain the primary means of authentication for web-based financial services. New threats, growing in sophistication and risk, such as phishing and spoofing aimed at misappropriating consumer data, are revealing themselves daily, threatening confidence in the web banking business model as well as the foundation of customer trust and loyalty that banks have worked tirelessly to cultivate. More transactions being consummated via the online medium are contributing to growing losses from identity theft, which totaled over $52 billion last year, according to Javelin Strategy & Research, and financial institutions pick up much of the tab.

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Each year FTVentures talks with CIOs and other key IT and operating decision-makers across our Global Partner Network to address important corporate pain points, areas of investment focus and IT spending trends. The results of these interviews are aggregated into FTVentures IT Outlook, a report that we share with the strategic investor institutions within our Global Partner Network, which includes 38 of the world’s leading financial institutions, to provide a market barometer on IT and operations direction. (Our 38 strategic investor institutions comprise approximately one–third of the over $300 billion global financial institution IT spending.)

A key finding of the 2006 FTVentures IT Outlook this fall is that the capital expenditure portion of the IT budgets is projected to increase five to ten percent next year, while overall IT spending looks to be up two to four percent (vs. one to two percent in 2005). Top priorities for our strategic investor institutions feature some prominent recurring themes including compliance, security, data center consolidation, and business continuity planning. Maintenance and replacement of IT legacy systems continue to consume a large percent of the IT budget.

What’s Hot??

• Technology Refresh

• Desktop and legacy application/system upgrades
• ATM/teller upgrades

• Data warehousing for cross-sell and up-sell
• Data center rationalization due to cost containment
• Identity management including single sign-on and multi-factor authentication
• Outsourcing (with China on the radar screen)

If you are interested in discussing any of these areas of potential investment opportunity, please contact Jim Hale jhale@ftventures.com or Derek Lemke dlemke@ftventures.com.