Banks and Online Retailers Lose Customers to the Fear of ID Theft

R.A. Hettinga rah at
Thu Mar 24 15:41:23 EST 2005


The Wall Street Journal

 March 24, 2005


Banks and Online Retailers Lose
 Customers to the Fear of ID Theft

March 24, 2005; Page D2

Banks and online retailers are losing customers who fear they will become
victims of identity theft, according to a new study.

The study, conducted by Financial Insights, of Framingham, Mass., said that
nearly 6% of consumers have changed banks and about 18% have stopped
shopping online due to concerns that their personal information will be
stolen. This means that, overall, about 12 million U.S. consumers have
likely switched banks and 39 million have ceased online shopping, according
to Financial Insights.

The results come in the wake of high-profile database breaches where
consumer information was lost or stolen. The survey was actually conducted
before these incidents occurred, so it's likely that banks are at risk of
losing even more customers now, according to Sophie Louvel, a Financial
Insights analyst.

It's not just the banks that have experienced data compromises that need to
worry. Consumers may also leave if they perceive that banks don't have
adequate security systems or if data breaches have occurred at partner
institutions, according to the research firm.

"This clearly shows that customers are taking action," said Ms. Louvel, who
has written an identity-theft report based on the data. "I think the
fundamental issue is that some customers don't have confidence in their
bank's ability to protect them."

Separate research conducted last year by Unisys Corp. revealed that nearly
half of consumers would be willing to switch their accounts to financial
institutions they perceived as having stronger theft detection and alert

"To the extent that consumers think of their personal information as
property and assets, banks need to think this way, too," said Frank Liddy,
a partner at Unisys in Blue Bell, Pa.

John Hall, a spokesman at the American Bankers Association, said banks take
the threat of security breaches "very seriously." Institutions already have
tough security standards in place for online banking and debit-card usage
and will continue doing everything they can to prevent identity theft, Mr.
Hall said.

R. A. Hettinga <mailto: rah at>
The Internet Bearer Underwriting Corporation <>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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