Online Insecurity Is Eroding Consumer Confidence
Lapses in consumer data security, coupled with double-digit growth in the volume of phishing attacks, are gutting the public's confidence in online commerce and banking, according to a survey by Gartner. Response to the increasing hostility of the e-environment is having serious financial and behavioral repercussions for consumers and companies alike.
The survey of 5,000 adult Internet users, "Increased Phishing and Online Attacks Cause Dip in Consumer Confidence," shows that the number of people targeted by phishing email attacks grew 28 percent in the year ending May 2005. An estimated 73 million U.S. adults believe they received 50 or more such emails in the past year, up from 57 million in the previous year's survey. The attacks aren't slowing down, either--more than 40 percent of survey participants reported receiving phishing emails in the two weeks prior to the survey, with another 23 percent in a month's time.
This translates to a large economic drain: 2.4 million consumers report losing money through being phished, with 1.2 million of them totaling a loss of $929 million in the year covered by the survey. Banks and credit cards repaid most of the money, according to survey participants.
The study notes that more than 80 percent of U.S. online consumers said concern over security issues has reduced their trust in email from companies and individuals they don't know personally, with 85 percent of that number simply deleting suspect email without examining it. The danger that consumers perceive will likely mean higher communication costs for banks and other organizations that email their customers, according to Avivah Litan, vice president and research director for Gartner. "This figure has serious implications," Litan says. "For example, a bill sent electronically costs about half of what a bill costs when sent through [the] mail." A bright spot in these figures is that 51 percent of consumers who were targeted by phishing emails chose to report the occurrence to the company being impersonated, and the consumers rated their satisfaction with company response at 3.73 out of 5.
Change is also occurring in consumer behavior. While 73 percent of respondents are regularly using online banking services and 63 percent pay bills online, customers are changing their usage patterns, Litan says. "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."
The survey also indicates that more than twice as many consumers worry more about shady characters getting undetected access to credit reports and other sensitive data than about defending against phishing attacks. Inappropriate access to credit data is even more of a concern now that the U.S. government has mandated that consumers be given unlimited free access to their own credit reports by September 2005. This move will make it easier for consumers to monitor credit issues, but about a third of survey respondents are "extremely concerned" that they will suffer identity theft because of unauthorized access to this data.
Gartner estimates that 77 percent of the U.S. online population shopped via the Internet in the 12 months leading up to the survey. Three quarters of them said they were more cautious about where they buy goods online, and one in three reported that security concerns caused them to buy fewer items online. "We are seeing unprecedented levels in consumer transactions online," Litan says. "Yet businesses cannot rely on the Internet to lower costs and improve marketing efforts indefinitely if consumer trust continues to decline."
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