We’re paying more and more protection money on our financial lives. Identity theft, phishing scams, viruses and worms are turning the convenience of online personal finance into a jungle of security fears. Direct costs to banks and credit companies of computer scams like phishing and other identity theft–ultimately paid by consumers–have mounted to more than $1.2 billion, according to research firm Gartner Inc.
Sales of scanning software for virus protection and other personal computer security products continue to build, especially after massive security breaches in recent months. In one of those breaches, hackers obtained credit card and debit account data on hundreds of thousands of card customers.
That, in turn, has led to even more security measures.
Online stock trading firm E-Trade Financial this summer rolled out an optional security token that flashes random password codes. Customers who sign up for the service must input the correct password, which updates every minute, each time they log onto their account.
The E-Trade Digital Security ID is free to customers with at least $50,000 in their accounts, or to those who trade at least five times per month. Others can pay a one-time fee of $25 for the service, said Greg Framke, an executive vice president with E-Trade.
People who trade stocks, invest and bank online are becoming more of a target for identity-theft attacks, Framke said. “We wanted to get out quickly on this,” he said. The company expects to have more than 20,000 customers using the tokens by summer’s end.
Meanwhile, fears about online financial privacy are mounting, despite all the spending.
Fear of identity theft was among the top financial concerns among affluent households in a survey this summer by Phoenix Affluent Marketing Service, a Rhinebeck, N.Y., firm. It rated just below retirement planning, minimizing taxes and the health of the U.S. economy. It rated higher than paying for college, caring for elderly relatives and leaving an estate to heirs.
Gartner estimates online shoppers and banking customers are reducing their cyber activity because of privacy fears. After a June survey found 40 percent of shoppers and 28 percent of online banking users are cutting back, Gartner lowered its estimates for e-commerce sales in the coming years. The company said e-commerce revenue growth rates will slow by 1 to 3 percentage points by 2007 unless customer fears are alleviated.
None of this means customers are willing to pay for the protection, however.
“I’m not sure households are screaming to pay for a lot of security bells and whistles,” said David Thompson, vice president for Phoenix Marketing. But credit card companies, investment firms and other online account providers who offer higher security standards are likely to win consumers’ hearts, he said.
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In the Phoenix survey of nearly 1,200 affluent Americans, 86 percent said they would want their financial institution to offer immediate account cancellation if security had been breached.
In practice, Thompson said, we may not like that option so much. “I wouldn’t want that at all because I have so many automatic debits set up it would be a nightmare to transfer,” he said. “For me it would be a draconian remedy.”
Such is the dilemma for those on the cutting edge of personal finance technological capabilities. It’s easier than ever to transact personal business online, and our access to a wealth of investing data is virtually friction-free.
At the same time, and in equally astounding measure, our vulnerability has never been higher.
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E-mail Janet Kidd Stewart at [email protected].