The threat of identity theft and concerns over fraud has led to an estimated 2 million people opting not to use internet banking services in the past year.

A pan-European survey has found that identity theft, "phishing" e-mails and other internet scams have seen 13 per cent of online banking customers abandon the internet for managing their financial affairs in the past year

The research found that internet banking was attracting customers, but not quickly enough to replace those who were leaving, resulting in a 3 per cent reduction in the total number of people using the online services.

The fear of identity theft was the principal reason given by consumers for deciding not to bank online, the survey found.

Over the last year, there have been a number of high-profile incidents of identity theft, including a case yesterday when The Sun newspaper found that it was possible to buy the names, addresses and account details of customers of British banks for as little as £3 each.

Customers are also being put off by the increasing incidence of "phishing", where fraudsters send bogus e-mails to solicit banking log-in details in order to empty the accounts of unsuspecting customers.

A report in last Saturday’s Times Money highlighted the increasing sophistication of recent e-mails, which, as well as looking genuine, actually warn about the dangers of responding to unsolicited mail, before inviting would-be victims to do just that.

The survey, conducted on behalf of an internet security company, will come as a blow to banks such as Natwest, Barclays and Lloyds TSB, which have invested millions of pounds in internet services.

But a spokesman for Barclays denied that there had been any reduction in the number of people using its online banking service.

"We have more than five million online accounts and that number is rising," he said.

He said that the problem of internet banking should be seen in perspective.

"Online fraud cost the banking industry £12 million last year, which was much less than the credit card industry. As far as Barclays customers are concerned, there is a guarantee that we will cover any losses to fraud so our users have no reason to be fearful."

Nonetheless, Phil Richardson, the managing director of Entrust Europe, the company that commissioned the survey, suggested that British banks could do more to protect their customers.

"If you were to have a league table of how well personal information is protected, the model that is prevalent across UK banks is in the second division. Other countries are taking this issue much more seriously.

"This is reflected in the statistic that people in Germany are far less worried by identity fraud than people in the UK. In Germany, the banks have a better system.

The survey did contain some potentially good news for the banks. Two-thirds of customers who did not use internet banking said they would consider doing so if security was improved.

Furthermore, of consumers who use online banking at least once a month, 80 per cent said they would take advantage of additional, higher value services if their identities were better protected.

Bill Conner, the chairman and chief executive of Entrust, said it was perfectly feasible for the banks to make their online services more secure and advised them to do so.

"At a time when internet usage is sky-rocketing, the survey data indicates that any bank that can combat identity theft and provide services that are securely available online will achieve real competitive advantage."

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts