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Security concerns cost merchants $110B in abandoned credit card sales

By , CardRatings contributor
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Consumers have grown so nervous about using credit cards online, merchants stand to lose as much as $110 billion in sales each year. Those figures come from a fall 2011 consumer study released by Javelin Strategy & Research and PaymentOne. Four out of five consumers surveyed told researchers that they would spend more money online if merchants offered a more secure alternative to entering a credit card number directly into a website checkout form.

Half the survey's respondents expressed concern that their credit card details would be intercepted during the ordering process, or that thieves would gain access to their data from a hacked merchant website. Just over a third of consumers surveyed told researchers about fears of dishonest merchants abusing their credit card numbers, or that thieves would steal data from wireless transmissions.

Credit card users ask for online shopping alternatives

Those consumer concerns aren't entirely unfounded. A recent Gartner Group survey of IT professionals revealed that roughly one in five organizations failed to meet the Payment Card Industry Data Security Standard. Gartner's report suggested that budget cuts at large organizations let to IT managers taking more risks with customer data, such as credit card account numbers and other personally identifying information.

Intel and MasterCard recently announced a collaboration that would help shoppers use "tap and go" credit cards to pay for online purchases. Meanwhile, eBay has staked its claim on the secure payment marketplace by offering both virtual wallet and financing products through its PayPal subsidiary.

Three in five consumers in Javelin's survey suggested they would be willing to replace their credit cards with systems that would bill purchases directly to their wireless phones. However, the Federal Communications Commission and consumer advocates both warn that outdated rules leave shoppers even more vulnerable to fraud via their cell phone bills than their credit cards. FCC officials warn that 20 million people pay fraudulent phone bill charges every year, with only 1 in 20 victims catching the incorrect transactions.

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