E-commerce sales have experienced consistent revenue increases. However, recent security breaches (online and offline) are having a significant impact on buying patterns of US adults. 

Due to consumer concerns about the security of the Internet, nearly $2-billion in US e-commerce sales will be lost in 2006, according to a survey by Gartner.
According to the Gartner survey of 5 000 online US adults in August 2006, about $913-million in 2006 e-commerce sales is lost because of security concerns among online shoppers. Another $1-billion is lost because of shoppers who refuse to shop online because of security concerns.
Nearly half of online US adults, or 46% of more than 155-million people, say that 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 behaviours affected, online commerce (including online banking, online payments and online shopping) is suffering the highest toll.
“Financial institutions and other e-commerce service providers need to beef up security in their online channel to retain customers, but they must be careful to keep the added measures relatively convenient,” says Avivah Litan, vice-president and distinguished analyst at Gartner.
Gartner recommends that enterprises employ a two-prong strategy – one part to increase consumer confidence and one part to reduce fraud and keep the crooks out.
“The two goals don’t necessarily call for the same technical solutions since the most-effective fraud prevention applications are often invisible to consumers and criminals,” says Litan.
“A layered approach to solving security problems is the most effective. 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.”
Gartner estimates that these security concerns have kept approximately 33-million US adults from banking online. According to the survey, nearly 9-million US adults have stopped online banking altogether, while another estimated 23,7-million won’t start because of their security concerns.
Perhaps the biggest impact is a newfound and serious consumer distrust of e-mail. Nearly 70% of online consumers whose behaviour has been affected by recent security incidents say that their concerns have affected their trust in E-mail from companies or individuals they don’t know personally. Of these, more than 85% delete suspect 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,” says Litan. “For example, sending a bill electronically costs about half of what it costs to send that same bill through the regular mail.”