Is fraud frightening online shoppers this Christmas?

There could be some good news for those of us who dread battling through the crowds to complete their Christmas shopping - the high streets could be a good deal quieter than usual this year.

Instead of swarms of shoppers hitting the shops, more people are buying gifts on the internet.

Paul Lucraft, vice president and of business services for payments firm MasterCard, said: "We are seeing a lot more transactions online. We're anticipating another big increase in online shopping. It's convenience more than anything."

Analyst Deloitte predicts a 50 per cent increase in the use of the internet for Christmas shopping this year. This figure is more than Royal Mail's prediction – it claims the UK will spend £5bn online this December, £1.5bn higher than last year's figure of £3.5bn.

Sharon Fraser, partner in the consumer business practice at Deloitte, said: "This tells us convenience ultimately defines where we shop and where we spend money. A combination of store location and a tailored range of merchandise will be ever more crucial to retailers in the battle to keep customers coming through the door. Location and accessibility are now vitally important factors."

Interestingly, a Deloitte survey found fewer people (32 per cent) were concerned about fraud this year than last (34 per cent). This shows that despite analyst claims of greater fears putting people off buying online, people seem keener than ever to part with their cash on the web.

Although the overall use of credit cards is due to drop this year, the Association of Payment and Clearing Systems (Apacs) said more people are using them online for the fraud protection service they offer.

Sandra Quinn, director of communications at Apacs, said: "Our overall prediction is that the UK will spend less on credit cards. But that's been down all year. I think it's a combination of messages about rising debt - people are very aware of this issue. There's fraud awareness everywhere so people are careful how and why they pay online."

To boost the confidence of online shoppers, MasterCard has introduced a two-factor authentication service called SecureCode – a pop-up box that requires a password to authorise any transactions used with MasterCard. As with an ATM, the transaction can be confirmed in seconds. Visa has a similar system and most card issuers now provide insurance in case someone loses money through online fraud.

Other forms of payment are gaining in popularity as well - PayPal claims to have 10 million user accounts in the UK.

Earlier this year, analyst Gartner urged banks and vendors to sell PayPal payment services to retail customers instead of trying to compete with the online company. It said the payment company will outstrip traditional payment methods and online transactions.

The report followed a pricing strategy from PayPal that makes it cheaper for people to trade goods under $3. The analyst said PayPal was able to lower prices for a long time but waited until it had a large enough customer base.

Apacs's Quinn added: "There are alternatives. People have other arrangements for paying. It's just another way to spend online. Online usage will be up quite highly. [People] are not going to ditch plastic because of the consumer protection it provides. That's not matched in other ways of paying."

But Lucraft said the real competition is not between the payment firms but where the shops are located.

He said: "I think both will do well. The trend is there to stay at home and shop so I think the main competition is between is between the high street and the internet. From our point of view we're trying to make people feel safe so they don't get their cards compromised."