Security concerns are eroding Internet users' confidence and slowing online sales, Gartner has warned.

Alarmed at the startling rise in phishing attacks, spyware intrusions, virus infections and the compromising of personal data, Internet users are limiting their e-commerce activities and this will slow down business-to-consumer sales growth between one and three percent in the coming years in the US, the research company claimed.

"This concern is affecting online consumers' behaviour and dampening their willingness to use the Internet to transact," said Avivah Litan, author of the study - Increased Phishing and Online Attacks Cause Dip in Consumer Confidence. Consequently, ISPs, financial institutions, online retailers and other companies selling goods and services to consumers via the Internet must address these concerns and put safeguards in place to protect their clients, Litan said.

Gartner also warned that the total dollar value of business-to-consumer online sales could grow at a slower pace than the company previously predicted. Without accounting for the possible slower growth resulting from security concerns, Gartner expects sales to increase 18 percent in 2005, 15 percent in 2006 and 11 percent in 2007. Each of those rates could fall by as much as a percentage point, Litan said.

Online consumers are increasingly dismayed and frightened over the rising rates of a variety of security threats. A big one is phishing, in which scammers dress up e-mail messages to make them look like they came from a legitimate organisation, such as an online store or a bank. Between May 2004 and May 2005, phishing e-mail grew 28 percent and about 1.2 million US consumers suffered losses totalling about $929 million, according to Litan.

Another security problem frightening consumers is spyware, which is malicious software installed on a user's machine without knowledge or authorisation. This type of software comes in different flavors, with some that furtively log users' keystrokes to steal passwords and other sensitive information and others that search hard drives for information and transmits it.

But the security problem online consumers find the spookiest is unauthorized access to their personal and financial information that criminals can use to steal identities and inflict serious damage to their finances and credit, Litan said. Examples of this are recent incidents of lost, misplaced or unsecured data at companies such as CardSystems, ChoicePoint, Citibank and Wachovia that could potentially affect millions of consumers.

Gartner found that consumers expect the companies they do business with over the Web to be much more effective than they are now at detecting and preventing fraud. The survey also found consumers are underwhelmed by government initiatives to address online security problems, with 66 percent of respondents saying they want laws that would let consumers opt out of having their personal data shared with third parties without their consent.