Relatively unknown only a year ago, email "phishing" scams have exploded in both frequency and media attention to become one of the most urgent threats to online financial services. Email scams like phishing, which are used by criminals to convince individuals to reveal confidential information, leverage the Internet's value as a low-cost and efficient vehicle for reaching consumers. Further, the Internet has shifted aspects of the burden of security from the financial institution to the consumer, who is often ill-equipped to deal with the onslaught of new fraud schemes and the gaping holes in PC security.
"Direct fraud losses attributable to phishing are expected to total just $137.1 million globally in 2004," said Beth Robertson, senior analyst in the Global Payments research service at TowerGroup and co-author of the research. "Phishing attacks can allow criminals to fraudulently obtain consumer data, but they do not as commonly result in an actual fraud event in which accounts are accessed or funds are stolen."
In fact, George Tubin, senior analyst, said "Ultimately the total cost of managing this growing menace will be far greater than the cost of direct fraud," said in the Delivery Channels research practice and co-author of the research. "One of the greatest liabilities is the potential loss of customer confidence in the Internet as a channel for provisioning financial services, not to mention loss of trust in financial institutions themselves. This is a critical issue, given the rising importance of the online channel in the retail financial services delivery mix."
Highlights of the research include:
TowerGroup believes that the true number of phishing attacks will total more than 31,000 globally in 2004. This number is expected to rise to over 86,000 by 2005, as the phenomenon spreads to customers of smaller financial institutions, new merchant/service-provider categories and new global markets. So far, phishing attacks are successful in fooling only a very small fraction of the online population and are, to many consumers, a nuisance like spam. Yet the increasing frequency and sophistication of phishing has the potential to negatively affect consumer confidence in the Internet as a viable channel to conduct commerce.
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