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Online Shoppers Increasingly Fed Up With Data Breaches

For anyone who needs even more evidence that security is critical to keeping online shoppers happy: read on.

According to a report published today by research firm Gartner, consumers who have suffered through any of the all-too-many recent data breaches are more apt to alter their online payment behavior.

In fact, according to this report, shoppers -- who are already online at the merchant's Web site -- are more likely to pick up the phone to provide payment information. So much for convenience always trumping security.

This only goes to show that security matters. And that it's time for merchants to stop treating security as a necessary burden, and as the responsible cost of business it is, and as the competitive differentiator that it can be.

The findings in this report, titled U.S. Consumer Secure Payment Preferences Create Opportunities for Nonbanks, are based on an August 2007 survey of 4,500 online U.S. adults.

The study concludes that consumers prefer alternative payment types that earn banks less revenue, but which those consumers believe to be more secure. This comes despite banks' efforts to push debit card use that requires a signature -- which (not so coincidently) earns banks higher revenue.

For instance, when it comes to grocery shopping, consumers prefer entering a PIN (personal identification number) to pay for their groceries above all other types of signature-based card payments, wrote Avivah Litan, the Gartner analyst who conducted the study.

"Online businesses should therefore enhance their ability to offer secure automated phone payments," Litan said in a release. "For example, businesses can use a transaction number generated during the online shopping season to tie a purchase to an automated phone-based payment. For this customer base, online merchants should also promote alternative payments, such as PayPal and Bill Me Later, where interest in using them increases as age decreases," she continued.

The results from this survey echo the findings of a survey released earlier this month, which found that consumer privacy and security concerns, when it comes to online shopping, are on the rise.

This study, conducted by the University of Southern California's Center for the Digital Future, found that the level of concern about credit card information increased to 57%. And that, as of last year, only two-thirds of adult Internet users choose to buy anything online. That means more than 33% of all adult Internet users have decided to completely ignore the Internet retail channel.

This not only shows that good security pays, but that online shoppers will reward merchants that go the extra mile to provide a safer shopping environment, communicate those efforts to them, and also make available payment options that shoppers feel to be more secure.

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