Gartner Says Nearly $2 Billion Lost in E-Commerce Sales in 2006 Due to Security Concerns of U.S. Adults

Analysts Examine Strategies to Better Protect Companies and Customers during the Gartner Identity & Access Management Summit, November 29-December 1 in Las Vegas

STAMFORD, Conn., November 27, 2006 — E-commerce sales have experienced consistent revenue increases. However, recent security breaches (online and offline) are having a significant impact on buying patterns of U.S. adults. Due to consumer’s concerns about the security of the Internet, nearly $2 billion in U.S. e-commerce sales will be lost in 2006, according to a survey by Gartner, Inc.

According to the Gartner survey of 5,000 online U.S. adults in August 2006, approximately $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 U.S. 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 behavior. Of all the behaviors 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,” said 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,” Ms. Litan said. “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 U.S. adults from banking online. According to the survey, nearly 9 million U.S. 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 behavior 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,” Ms. Litan said. “For example, sending a bill electronically costs about half of what it costs to send that same bill through the regular mail.”

Ms. Litan will provide more detailed analysis at the Gartner Identity & Access Management Summit, November 29-December 1 at the JW Marriott Las Vegas Resort. The inaugural Gartner Identity & Access Management Summit is designed to help organizations address the growing exposure that identity and access management (IAM) inefficiencies and lapses create. The Summit’s three research tracks focus on the business impact of IAM, the practical applications IAM organizations are using today, and the future direction of IAM technologies. Additional information is available at www.gartner.com/us/iam. Members of the media can register for a press pass by contacting christy.pettey@gartner.com.

About Gartner:
Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for its clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 3,700 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit www.gartner.com.

Contact Information

Christy Pettey

Gartner, Inc.

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