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Data leaks denting Web shoppers' confidence

Growing incidences of data theft and misuse of personal information is making consumers wary of e-commerce, according to two studies.

Consumer confidence in online commerce is dwindling.

Three out of four Web shoppers say they are more cautious about where they buy goods online, while one in three report buying fewer items than they would otherwise because of security concerns, market researcher Gartner said in a study released on Thursday. The survey covered 5,000 consumers in the United States.

Gartner said most online consumers do not open e-mail from companies or individuals they do not already know. Many of them simply delete such messages.

The rising instances of lost consumer data files and disclosures of unauthorized access to personal information are the main reasons for this concern among consumers, the report said. For instance, Gartner's research shows the number of consumers who reported receiving phishing e-mails went up 28 percent in the year ended May 2005, compared with the previous year.

The market researcher said 2.4 million online consumers reported losing money directly from phishing fraud.

"Companies need to take steps quickly to beef up online security," Avivah Litan, research director at Gartner, said in a statement. "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."

Gartner analysts said consumers expect companies they do business with to provide secure online communications and to protect consumer data. Dwindling consumer trust could have an adverse impact on legitimate Web banking operations and billing transactions. About 30 percent of people who use Web-based banks say digital attacks have influenced their online banking activities.

In a separate study released on Thursday by The Conference Board, more than 13 percent of Internet users said they or a member of their household has already been a victim of identity theft. More than half of online consumers surveyed said their level of concern has grown over the past year, and many are buying fewer goods online. Nearly 70 percent of users have installed additional security software, while 54 percent just discard special offers.

The nonprofit research group said 54 percent of online consumers are more concerned about the security of their personal data now than they were a year ago. Their concerns varied with the type of transactions. While three out of every five users claim they are "extremely concerned" when conducting financial transactions, about half are just as concerned when buying goods online. However, younger consumers are less bothered.