One in three consumers shun internet shopping due to fraud fears, with online retailers losing out on a potential £1.6 billion in the run up to Christmas, new research shows.

The global Unisys survey found that 31 per cent of UK users do not purchase goods on the net because of concerns over potential internet fraud and identity theft. The study also shows that nearly half of those surveyed admitted that they would consider switching banks to one that provided increased security.

Moreover, 95 per cent of respondents claim financial institutions, such as banks and building societies, should give more practical advice to customers around internet safety.

"These statistics highlight the enormous revenues being lost to financial institutions and online retailers through enduring public fears over online fraud," said Nick Wilson, vice president of Unisys UK. "There is still work to be done on convincing people that they can trust companies with their personal details and that shopping on the net is safe and reliable. It is down to website based retailers, and the card-issuing banks and building societies, to address these concerns if internet trading is to reach its full potential".

With an estimated £5 billion being spent in the UK leading up to the festive period, Wilson believes there is too much at stake for businesses, if they fail to take steps to make consumers feel secure when shopping online.

"Christmas is a critical time for all retailers, often accounting for substantial percentages of annual turnover. There are obviously huge sums at stake here for those trading online and the sooner both shops and banks work to allay the public's fears the better."

However, monthly internet retail sales in the UK reached £3 billion for the first time in November, according to the Interactive Media in Retail Group (IMRG). The organisation claim consumers spent an estimated £3.26 billion last month - an average of £4.57 million per hour and a 45 per cent increase from the same period last year.

"Though no longer a surprise, growth of this magnitude is nevertheless breathtaking," said James Roper, chief executive of IMRG. "In 2000, the first year in which we collected hard online sales data, Christmas trading was worth well under £500 million, and we thought that was huge at the time. Now we can see that the e-retail market is just getting into its stride, with large potential for long-term growth."