Confidence in E-Commerce Waning

The almost daily assault of headlines reporting data breaches is
taking a toll on e-commerce.

According to research firm Gartner, one out of three Internet users is buying less online because of security
concerns related to data breaches, identity theft and phishing attacks.

In the Gartner survey of 5,000 U.S, adults, nearly twice as many consumers
said they worry more about thieves getting undetected access to private
credit reports and other sensitive financial data than defending against
phishing attacks.

“Companies need to take steps quickly to beef up online security,” Avivah
Litan, vice president and research director at Gartner.

“We are seeing unprecedented levels in consumer transactions online. Yet
businesses cannot rely on the Internet to lower costs and improve marketing
efforts indefinitely if consumer trust continues to decline.”

According to Gartner, more than 80 percent of U.S. online consumers say
their concerns about online attacks have affected their trust in e-mail from
unknown sources. Of these consumers, more than 85 percent delete suspect
e-mail without opening it.

“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,” Litan said. “For example, a bill sent electronically
costs about half of what a bill costs when sent through regular mail.”

The parade of bad news is also taking a whack out of online banking. An
estimated 73 percent of the Gartner respondents regularly log on to banking
accounts and 63 percent pay bills online.

“While online banking customers continue to access bank accounts over the
Internet, they are changing their usage patterns,” Litan said. “Nearly 30
percent of the online bankers say that online attacks have influenced their
online banking activities. Over three-quarters of this group log in less
frequently and nearly 14 percent of them have stopped paying bills via
online banking.”

Despite the recent focus on data breaches, phishing attacks are not slowing
down, according to Gartner. More than 40 percent of the adults who received
phishing attack e-mails received them in the two weeks preceding the survey.
Another 23 percent of respondents said they received phishing e-mails two
weeks before that.

“In general, consumers expect companies they do business with to provide
secure online communications and to protect consumer data from thieves at no
additional cost to consumers,” Litan said. “They want guarantees —
authentication — from merchants and other businesses that their Web sites
are genuine. Consumers want this reaffirmed every time they go online.”

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