IT security experts have warned banks and financial institutions to beware of increased dependence on outsourcing as inadequate security safeguards for data could leave them vulnerable to fraud and data misuse.

A report in the Emirates Business quoted un-named banking officials in the Middle East as saying that they were facing a spurt in unauthorised ATM withdrawals and credit card heists. Therefore, banks need to be more careful about security programmes that run on their ATM network and other banking software, they said.

The paper quoted a senior official of Wipro Infotech to state that since it is a common practice amongst banks to outsource their data processing, there is a need to build in layers of security like flexible one-time password systems that are not saved on any server.

"IT security and data safety is vital for the financial services industry. Companies looking to optimise cost by outsourcing vital work may compromise on security. Now we are offering a co-sourcing model for our clients in the Gulf," the paper quoted the Wipro Infotech official Rajender Singh Beniwal as saying.

The experts also said that it was essential to have in-house management of banking and ATM networks to ensure maximum levels of security for the customers. Recently, banks across the UAE alerted customers to change their PIN numbers following a surge in fraudulent ATM withdrawals made abroad, the article said.

Co-sourcing avoids the dangers of outsourcing and increases the clients' control over sensitive data and Wipro has implemented this with several multinational banks and financial institutions in the US, Europe and India, the official was quoted as saying.