Security concerns cloud holiday shopping

The big increase in online sales expected this holiday shopping season comes amid what appears to be unprecedented consumer concerns over data privacy, online fraud and identity theft.

The results of a new survey of 1,005 consumers released Wednesday shows that while 78 percent of U.S. Internet users plan on shopping online this year, more than 69 percent of those shoppers will limit their online purchasing because of concerns about the possible misuse of their personal information.

The survey was conducted by San Francisco-based Truste, a nonprofit privacy organization, and market research firm TNS Global in New York. It found that privacy concerns would deter more than 40 percent of the respondents from buying from smaller online retailers, and about 22 percent said they will not be purchasing online at all.

The survey was conducted online between Oct. 27 and Nov. 1.

"There's definitely a reason for both consumers and merchants to feel more concerned" about data security and privacy issues compared with previous years, said John Pescatore, an analyst at Stamford, Conn.-based Gartner Inc.

For consumers, the biggest risks come from the increasing use of keystroke logging and password acquisition tools by hackers, Pescatore said. Such remote access tools allow cyber thieves to capture sensitive information such as credit card numbers from consumers who are doing business online, he said. A Gartner study in March showed that despite a higher awareness of phishing scams, a large number of consumers continue to be fooled into visiting Web sites that download such hacker tools.

Dan Clements, founder of Cardcops.com, a Malibu, Calif.-based company that enables consumers to check for stolen credit card numbers, said that the number of stolen credit cards and pieces of personally identifiable information appears to be growing. "There is a definite underground where you can buy and sell this stuff without the threat of law enforcement," he said.

Much of the stolen information appears to have been snagged through hacks into systems containing confidential data and from phishing scams, he said.

"Almost every day we see a new merchant being hacked" and information being stolen from their systems, said Clements, whose company scours known hacker sites, chat rooms and other online locations for stolen credit cards and personally identifiable bits of data.

Over the past three years, Cardcops has alerted more than 500 merchants about data compromises resulting from potential hacks into their systems. Clements said the company has also found more than 1 million stolen credit cards and between 7 million and 10 million pieces of personally identifiable information associated with those cards, such as last names and addresses, he said.

Most of the time, the merchants involved appeared unwilling to take responsibility for their security lapses, he said. "When you show them the data, they only fess up to what is put in front of them," Clements said.

But Cathy Hotka, senior vice president of technology and business development at the Retail Industry Leaders Association in Washington, said that much of the concerns about online security is overblown.

"I don't believe for a second that anybody's enthusiasm has been dampened" by online security concerns, Hotka said. "The track record of online security is great. We've demonstrated safe e-commerce for years, and consumers love it. If anything, there's concern about phishing and the effect that it can have on brands."

The results from the Truste survey appear to reinforce the findings of other recent research that reveals similar consumer concerns.

In a nationwide survey of 1,009 consumers conducted by Forrester Custom Consumer Research for the Business Software Alliance, one in four consumers said they would not shop online because of Internet security concerns. Another survey of 2,008 consumers released on Nov. 22 by Sun Microsystems Inc. showed that 83 percent of the respondents think they're most susceptible to identity theft during the holiday season.

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