Something Phishy’s Going On

Given the recent rash of data thefts, it should come as no surprise that consumer confidence in online commerce is starting to wane. This presents a major threat for banks that are pursuing online strategies. According to a recent Gartner (Stamford, Conn.) study, which surveyed 5,000 U.S. adults, 28 percent of respondents say online attacks are curbing their Web-banking activity.

The study reveals that phishing attacks - in which scammers e-mail consumers with links to convincing facsimiles of legitimate Web sites to steal their personal data - increased 28 percent in the past year, with an estimated 73 million people reporting such e-mails. And even savvy consumers are at risk, according to Gartner vice president of research Avivah Litan. "I've had friends tell me that they would have opened these e-mails if I hadn't told them about phishing," she relates.

As a result, people are losing faith in e-commerce. More than 80 percent of survey respondents say phishing affected their trust in e-mail from entities they do not know personally. Of these people, more than 85 percent simply delete suspect e-mail without opening it.

This is bad news for banks trying to drum up business in cyberspace. According to Litan, financial institutions fear losing the gains they have made online, both in marketing and service.

"From my discussions with banks, that's the most threatening result [of phishing]," Litan says. "Consumers are losing confidence in the online channel and this is undermining banks' efforts to switch customers to this low-cost channel. Now, they'll be more likely to use the call center, which is more costly."

Although banks cannot directly monitor the world's e-mail systems, they can subscribe to services that alert them when a phishing attack is being waged against them, Litan notes. "Any one vendor can catch 70 percent of attacks," she asserts. "If you use more vendors, this can increase to 90 or 100 percent."

Though it may seem apparent that the situation online is becoming dire, Litan questions if banks are doing enough to combat declining consumer confidence. "Banks are moving very slowly on this," she contends. "There's no sense of urgency."

To prevent further erosion of consumer confidence, Litan suggests banks need to be more proactive. "They need to offer more guarantees, like Bank of America's zero liability for online banking," she says. "Banks have an opportunity to step up to the plate and show consumers they can be trusted."

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Going Offline

According to a recent Gartner study, an estimated 73 million people received an average of more than 50 phishing e-mails in the past year, and more than 2 million online consumers report losing money directly because of these e-mail assaults. Twenty-eight percent of survey respondents say online attacks affect their Internet banking activity.

Of this group:

75 percent log in less frequently;

14 percent have stopped paying bills online; and

4 percent discontinued online banking altogether.