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A recent APACS (Association for Payment Clearing Services) report showed card-not-present (CNP) fraud, which includes online shopping, added up to more than £90m - an increase of 29 per cent - during the first six months of 2005.

However, Internet fraud itself only rose five per cent, although it remained the largest part of CNP fraud. Figures from CyberSource's second annual UK online fraud survey suggests that even this rise might only be a result of increased online sales, putting the real rate of online fraud growth even lower.

Of the 160 retailers surveyed, around two-thirds said that fraud had either plateaued or even dropped. And only roughly one sixth said fraud had risen as a percentage of revenue.

Nathan Jackson, managing director of CyberSource commented: 'While fraud remains a problem, there is a clear disconnect between consumer feeling and retailer reality about the extent of online fraud. While retailers are investing heavily in beating fraud - often successfully according to our research - the public is being made to feel nervous about shopping on the Web. The online

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retail community needs to continue working to beat fraudsters, but while we should be promoting prudence we shouldn't be scaring the consumer away from buying online.'

With the introduction of chip and PIN services at retail, the fear was that fraudsters would be driven online. But the figures show this doesn't appear to have happened to any noticeable degree. Rather, they are using other CNP channels, such as mail order and telephone transactions.

Retailers responding said that the staunching of online fraud is largely down to their investments in anti-fraud technologies, with nine in ten citing this as a key factor in combating the problem. However, many used the human touch to weed out fraudulent transactions: some 61 per cent employed a team of staff to manually review orders, looking for fraud.

For the future, the retailers expect the uptake of online versions of chip and PIN, such as MasterCard's SecureCode, and Visa's VerifiedbyVisa systems, to be the technologies they will most likely adopt.

However, they cited concerns that consumers needed to register their cards with the service in order for it to work.

Despite these fears, UK online retailers remain upbeat about future sales, with nearly a quarter expecting increases in excess of 50 per cent.

'Online retail is a rapidly growing sector in the UK economy, with our latest figures showing 38 per cent growth in September, year on year. We need to ensure that consumers continue to be prudent when shopping online, but the fact is that online shopping is no more risky than heading to the high street,' said Jo Tucker, managing director of the Interactive Media in Retail Group (IMRG).