Nearly $2 billion in US e-commerce sales will be lost in 2006 due to consumer concerns over the security of the Internet, according to a survey by Gartner, which also found that fear of fraud and identity theft have prevented around 33 million US adults from banking online.
The survey of 5000 online US adults in August 2006 found that recent security breaches - both online and offline - are having a significant impact on buying patterns and use of Web banking facilities.
Nearly half of those surveyed (46%) said concerns about theft of information, data breaches or Internet-based attacks have affected their purchasing payment, online transaction or e-mail behaviour. Of all the behaviors affected, online commerce - which includes Internet banking, online payments and Web shopping - is suffering the most.
Almost nine million US adults have stopped using online banking, while another estimated 23.7 million won't even start because of fears over security.
Garnter estimates that approximately $913 million in e-commerce sales was lost in 2006 because of security concerns among online shoppers. The analyst group says another $1 billion was lost from consumers who refuse to shop online because of security worries.
Avivah Litan, vice president and distinguished analyst at Gartner, says financial institutions and e-commerce providers need to beef up security to retain customers, but they must be careful to keep the added measures convenient.
"A layered approach to solving security problems is the most effective," says Litan. "Companies should implement back-end fraud detection, stronger user authentication (beyond single factor passwords), transaction verification for high-risk transactions, and data masking/truncation of sensitive data that is shown on Web-based screens."
The research also shows a growing consumer distrust of e-mail. Nearly 70% of online consumers whose behaviour has been affected by recent security breaches say their concerns have affected their trust in e-mail from companies they don't know personally. Of these, more than 85% delete suspect e-mails without opening them.
"This figure has serious implications for banks and other companies that want to use the e-mail channel to communicate more cost-effectively with their customer base," says Litan.