Report: Security fears seriously hamper UK e-commerce

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LONDON (Reuters) -- Britain's potential for becoming the hub of e-commerce in Europe is being seriously hampered by the fear of security breaches, a new report said on Wednesday.

The UK's National Consumer Council said online shoppers were nervous about releasing credit card and personal details on the Web as the virtual world can present real risks.

"Unless the total online shopping environment is made more secure, some consumers will never have the confidence to explore the opportunities," council director Anna Bradley said.

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Security on the Net

Recent high-profile security breaches on the Web have raised questions over whether the Internet is safe, and consumer groups believe the search for secure software must be a top priority.

Earlier this year the Financial Services Authority warned banks that they must take more care over security.

The UK's biggest Internet bank Barclays, which has 1.25 million online customers, was forced on Monday to temporarily shut down its Web site after a so-called glitch allowed users to access other customer accounts.

Less than two weeks earlier utility company PowerGen launched a review of its online security systems after a customer discovered he could access someone else's bank details.

The company later offered unspecified compensation to any of its 2.5 million customers inconvenienced by the incident.

The most recent figures from the National Statistics Office show 6.5 million UK households, 25 percent of the total, are now online. The numbers have doubled in the last year.

But fear of fraud remains one of the biggest deterrents to taking the plunge into e-commerce.

The National Consumer Council's research showed that almost four out of 10 adults see the need to release credit card details as a major disadvantage of Internet shopping.

"Among Internet users, more than half feel the same way," Bradley said.

She said shoppers tried to minimize the perceived risk by shopping from online channels run by established, well-known brands and retailers.

"Around 28 percent of Internet users say they would look for a recognized brand name while 22 percent feel safer shopping on the site of a High Street retailer," she added.

The government's e-commerce minister, Patricia Hewitt, said she would be studying this latest survey very closely.

"This report will help us to focus on shoppers' specific worries," she said in a statement.

The government is keen to nurture the potential of the Internet and recognizes that building trust is a key issue.

Last month Hewitt launched TrustUK, a government-backed joint venture between the Consumers' Association and the Alliance for Electronic Business, which will monitor businesses and ensure they provide protection for online shoppers.

The only sites that will be accredited will be those that comply with the Data Protection Act and offer security for credit card usage together with a complaints procedure.

Separately, the Consumers' Association has awarded its own electronic seal of approval to more than 500 Web sites.

The association said its research showed that 51 percent of Internet users had bought nothing online and only 23 percent of Internet users felt it was safe to shop online.

Consumers who are anxious about Web security have been advised to look for sites where there is an encryption facility to scramble card details while in transit. These sites usually display a key or padlock when the payment screen is selected.

Net protection has also become a key concern in Brussels where legislators are currently pursuing seven e-commerce laws to protect consumers from unscrupulous traders.

The European Distance Selling Directive legislation came into force last month and requires retailers to offer consumers a seven-day cooling-off period during which they can withdraw from a contract with a full refund.

Prudential's high-profile Internet bank Egg, which has 1.1 million customers, has just begun to trial technology developed by UK company EarthPort, which seeks to take all sensitive information off the Web to guarantee security.

The technology, based around a "virtual wallet," was first devised to handle lottery payments for the International Red Cross. Egg's customers will enter their details onto a secure site held by the company's server, minimizing the risk of fraud.

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