Gartner: Web security fears cause $2 billion online commerce loss in 2006

Consumer anxiety about internet security has caused a $2 billion loss in e-commerce and banking transactions this year, according to a Gartner analyst.

Nearly half of those surveyed said their concerns about information theft, data breaches and web-based attacks affected their purchasing payment, online transaction and e-mail behavior. More than 10 percent said they spent less than half as much this year as in the past because of these concerns.

The study queried 5,000 U.S. adults about their e-commerce and banking decisions.

Though the percentage of users concerned about security stayed about the same compared to last year's sample, more consumers changed their habits due to these concerns, said Avivah Litan, vice president and analyst at Gartner.

"If you compared this year's survey to last year's, it was almost the exact same number of people that said they were concerned about security incidents," said Litan. "But this year, more people were stopping online banking than last year and also lowering their online purchasing dollars."

Litan said that even though nearly all purchases at brick-and-mortar establishments are electronically-enabled today, consumers are taking it out on online retail organizations because that is where they perceive the problem to be.

"Mainly they associate fraud with the online commerce world," Litan said. "But everything is e-commerce enabled these days. So consumers tend to take out their fears on online shopping and banking, but the stores are just as risky."

Even as consumers are beginning to protest with their wallets, e-commerce businesses and banks are improving their authentication and security standards due to new regulations. The problem, Litan said, is that the regulators were too slow to enact these rules in the first place.

"If you look at the regulators like the banking regulators and the credit card associations, they are two years behind the curve," she said. "They finally responded with PCI and FFIEC, and it is definitely improving the security situation, but if they had done this two years ago it would have been in time to prevent this loss."

Litan said that now that there is such a backlash, organizations are going to have to work to regain consumer trust. This means not only installing the right technology to improve security, but also visibly showing consumers what they are doing to secure information.

"Security has become a competitive advantage now," she said. "From the consumer's point of view, visible security makes them more comfortable and makes them more willing to do business online."

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