Phillips said 75 percent of European consumers do more than half of their banking business online, compared to 38 percent of Americans. Europeans have confidence in Internet financial transactions as a result of more advanced authentication and ID policies, she said.

"Trust is eroding [in the U.S.] as security breaches rise," Phillips said. "There were a total of 130 data breaches reported in the U.S. in 2005, according to the Federal Trade Commission, so it is not surprising that concern about online security is on the rise."

Phishers once were considered the chief threat to online financial security, but now banks are focusing on dangers that can crop up during online banking sessions, according to the report. In October 2005, the Federal Financial Institutions Examination Council issued guidelines urging U.S. financial institutions to implement stronger, two-factor authentication practices before the end of 2006, Phillips said.

"Banks must make this as simple and as unobtrusive as possible," she said.

Online banks should take steps to ensure that their customers are satisfied with their online experiences, according to the report. Online banks also must strictly enforce their privacy policies or risk losing customers, They also must make sure they keep transaction times short.