Americans' e-Commerce Conundrum

By Kenneth Corbin | Posted February 15, 2008

A new study from the Pew Internet Project casts light on the love-hate relationship many Americans have with e-commerce. In response to the survey, 78 percent of U.S. Internet users said that online shopping is convenient, and 68 percent said it saves time. Yet, 75 percent said they don't like giving out personal information like a credit card number over the Internet.

The security risks, real or perceived, are hampering the growth of the Internet economy, said John Horrigan, associate director of the Pew Internet Project and author of the report. "These inconsistent notions about the online shopping environment show that, even as e-commerce matures, people's confidence in the security of online shopping remains as an issue," Horrigan said in a statement. "If people's worries about security of personal information were eased, the pool of online shoppers would be greater."

How much greater? Horrigan estimated that the portion of U.S. consumers with Internet access who shop online would increase by seven percent if the perceived threats were of less concern. Contrary to Americans' perceptions, many payment security experts agree that online credit card purchases are generally safer than in-store transactions.

Many brick-and-mortar retailers are behind the curve when it comes to payment security, said Rob Tourt, chairman of PCI Security Standards Council. For one thing, many traditional retailers are still running legacy systems that lack the security mechanisms baked into the younger, tech-savvy e-commerce payment processes.

Additionally, when a cashier swipes a credit card, the retailer snags much more information than is conveyed through an online purchase, Tourt said. A credit card's magnetic strip contains several additional pieces of data that can compromise an account in the event of a breach.

"Retailers are fighting a battle of education," said Ellen Davis, a spokeswoman for Shop.org, the online retail industry association. "Retailers know that even though their sites are safe, you're never going to be able to convince 100 percent of consumers," she said. "So it makes more sense for retailers to integrate new payment options for shoppers."

The security concerns highlighted in the Pew report are leading many online retailers to add alternative payment options like Google Checkout or Bill Me Later to their sites, Davis said. Consumers' security concerns tend to be greater when they're visiting a smaller, lesser-known retailer than when shopping with a major brand. The addition of a recognizable brand such as PayPal or Google as a checkout option can help allay those fears.

A Shop.org survey conducted in September found that one-quarter of retailers had added PayPal or some other third-party e-mail payment service. Anecdotally, those retailers reported seeing new customer counts increase and average order prices rise upon implementing the alternate payment option.

Among the Pew report's other findings, people in lower-income households were more likely to see the risk in e-commerce than convenience, whereas the reverse was true with more affluent Americans. The report also found that more people use the Internet to research products than actually make purchases. Thirty-nine percent of respondents said they had used the Internet for banking, compared with 27 percent in Pew study conducted in February 2005.

The survey also identified the increasing popularity of online classified sites, with 24 percent of respondents saying they had used Craigslist or some other online listing site, up from 14 percent in February 2005.

Adapted from Internetnews.com.

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