The banking industry faces a near-impossible dilemma. It wants to encourage more customers to use the internet. But the growing threat of ID theft means that the more successful online banking becomes, the wider the risk of fraud.

There is real fear that the growth in web banking will stall, as tales of stolen personal details move away from being newspaper headlines, and reach the stage where everybody knows somebody who has a story to tell.

So it is inevitable that leading banks are looking into new authentication technologies.

Even so, it's not going to be easy. Many of those shunning online banking do so because of fear of technology as much as fear of being a victim of fraud.

For experienced web users, a device such as a unique password generator is likely to be readily accepted. For the cautious majority, yet another gadget may not overcome their doubts.

The banks are taking a carrot approach, carefully avoiding the stick. But if new measures fail to halt the problem, the onus might shift to the consumer. Banks may one day only indemnify customers against fraud if they have the necessary precautions in place - from suitably secured home PCs to two- or even three-factor authentication tools such as biometrics.

That could lead us down a rocky road - a banking community divided by technical ability and personal security. Would the days of better interest rates for more secure customers be far behind?

This is not an option that anybody - banks or their customers - would want to consider.

The government is looking to the finance industry to pioneer internet security (Computing, 7 April), and is even discussing ways to make the proposed national identity card part of financial transactions.

But online security is a critical test that will affect the entire technology community, and benefit every IT director if it can be resolved.

Educating users, promoting confidence in the internet and providing secure, easy-to-use applications are factors that mean everyone can contribute to finding a solution.