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 services.

"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.

Source: The Wall Street Journal KATHY CHU DOW JONES NEWSWIRES March 24, 2005; Page D2
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