"There's been a loss of trust in the channel, but not in specific brands," said Bruce Cundiff, a research analyst with Javelin Strategy & Research in Pleasanton, Calif., producer of a new report called "Phishing: Consumer Awareness and Behavior."

Cundiff said his company's research -- consisting of some 40,000 online surveys completed during the first quarter of this year -- suggests consumers have the "general feeling that somehow, online financial services are bad."

Other research, reported by Javelin suggests that losses due to phishing -- in which fraudsters concoct false Web sites that look like the offerings of major banks -- could have totaled as much as $367 million last year alone. The cost of damage to online banking and related enterprises could be even higher.

"There has been a loss of trust and consumer movement away from the online channel as a result of the phishing epidemic," Cundiff said.

Yet another survey, by Entrust Inc., an Internet security firm in Dallas, reported that 80 percent of online consumers are "specifically concerned" about someone stealing their identity and using that information to access their online bank accounts.

Other notable findings from the survey:

-- Seventy-two percent of consumers who do not currently utilize online banking services would do so if security were improved markedly.

-- Ninety percent of consumers who already bank online would bank more often, and use higher-value-added services, if security were improved.

-- Twenty-two percent of online customers likely would switch banks if they thought the other bank offered better security.

Industry leaders are working with the federal government to craft a strategy to respond to the crisis.

"The message we're taking to Washington is that anxiety and fear are having a major impact," said Chris Voice, vice president of technology at Entrust.

Voice said the fears over identity theft are impacting productivity and economic growth in general. During the late 1990s many businesses began centering their processes around the Internet rather than the telephone. That reduced costs dramatically and led to huge productivity gains as consumers followed suit.

Now, however, consumers are growing increasingly reluctant to do business online and are returning to old ways of doing things, whether it means writing checks manually or going to the bank in person to handle a transaction.

"In the last six to nine months, consumers are increasingly voting with their keyboards and are no longer paying bills online," Voice said. "About 13 percent of consumers here in the United States and in Europe have stopped paying bills online."

Moreover, costs are increasing for organizations that offer online services. More and more, customers are overwhelming call centers, which are not equipped to deal with inquiries about phishing. Sites also are being overwhelmed with forwarded e-mails from consumers reporting phishing scams.

"The burden on call centers and other bank communications channels is heavy," Cundiff said.

In a sense, the situation resembles the mid-1990s, when online services first emerged, and consumers are having trouble coping.

"When any new technology emerges, there are challenges," Voice said. "This is one of the challenges that has to be addressed now."

Even people who do not know what phishing is are afraid of doing business online, experts said.

"I took an impromptu and unscientific poll at a family reunion last week," said Ted Demopoulos, a consultant, professional speaker and founder of Demopoulos Associates in Durham, N.H. "A shuttle-bus driver -- a typical consumer -- stated he wasn't shopping online anymore because of the phishing threat, but wasn't quite exactly sure what phishing was."

More consumers are taking matters into their own hands to deal with fraudulent e-mails from suspect sources.

"More than half of consumers who receive phishing e-mail seeking their Social Security number or date of birth, or other private information, delete the e-mail immediately," Cundiff said.

Consumers also are demanding better security solutions from their banks -- a factor that is increasing costs and decreasing profitability for institutions online.

"Consumers want something for security that goes beyond user name and password," Voice said. "They know that once someone has stolen their password, they have stolen their identity."

One contrarian, however, downplayed the idea that better security is needed to stamp out phishing. Rob Frankel, author of "The Revenge of Brand X: How to Build a Big Time Brand on the Web or Anywhere Else," said online brands never really engendered trust in the first place.

"If these brands really took the time to develop and implement solutions that were brand-centric to begin with, there would be zero phishing issues," Frankel said.

Gene Koprowski is a 2005 Lilly Endowment Award Winner for his columns for United Press International. He covers communications and networking for UPI Science News.

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