Online fraud is costing UK retailers as much as £580m a year, and could rise to £1.5bn by 2010, according to research published today.

Almost two thirds of retailers (64 per cent) admit falling victim to online theft and 36 per cent say it has increased since the introduction of chip-and-PIN.

Online theft is costing some as much as five per cent of their annual turnover, says authors of the e-fraud barometer 3V and online retail industry body IMRG.

And with both sales figures and card-not-present fraud rising, some 43 per cent of retailers acknowledge the issue is now a top priority, says IMRG director of projects and marketing Andrew McClelland.

‘This highlights just how serious the problem of internet fraud has become for the online retail industry,’ he said. ‘While the industry is rapidly expanding it obviously provides a tempting target for fraudsters.’

Nearly two thirds of retailers (64 per cent) have increased security measures on their web sites, but 21 per cent feel systems introduced in the last three years by payment providers place an increased burden on consumers.

Retailers highlighted the problems customers have in signing up to the likes of Verified by Visa and Mastercard Securecode. As a result, 57 per cent say they have no plans to introduce either system on their sites.