UK online retailers fear Internet-based fraud will jump in the coming year as chip and PIN systems are rolled in shops, a new report has found.

The survey, commissioned by e-commerce tools vendor CyberSource , found that 56 percent feared the new technology would have the side-effect of encouraging fraudsters to target them instead.

The underlying problem is that chip & PIN - where people using debit or credit cards have to type in a PIN number when paying in person - has arrived just as online sales are booming.

A quarter of businesses surveyed said they would respond to the increased threat by hiring more staff to review card not present (CNP) transactions, increasing costs. Twenty percent felt their current fraud detection system was inadequate.

At present, online companies were using an average of five anti-fraud checks, including address verification services, card security checks and manual reviews carried out by in-house staff.

The survey found that direct fraud losses currently ran at 1.6 percent, with a further 6.0 percent being declined and 20 percent requiring checking.

The survey questioned 104 online retailers in September and October 2004, 20 of which had a turnover in excess of £5 million per annum. A further 35 said turnover exceeded £250,000.

A parallel survey of 348 US online companies was also conducted, finding high levels of concern about the possible increases in online fraud in 2005. Chip and PIN technology is not currently used in the US.