A consumer stands a greater chance of getting hit by lightning than becoming a victim of fraud or identity theft when they use electronic bill payment and account services, according to a new study.

Dispelling technophobic myths that the Internet is an open door for thieves, the study reveals just the opposite—the Internet can actually help protect consumers and businesses from two of the most common kinds of identity theft: fraudulent opening of new accounts and unauthorized use of existing accounts.

Online banking benefits come from both monitoring personal accounts and paying bills electronically.

"Turning off the paper" can help prevent more than 1 million cases of identity theft and save consumers and businesses $4.8 billion each year, according to "Online Banking and Bill Paying: New Protection from Identity Theft." The study was recently released by Javelin Strategy and Research, a Pleasanton-based consultant for financial services, payments, and commerce sector companies.

That prevention and cost savings result because, the study says, viewing and paying bills and statements online eliminates the most common means of identity theft. Information is more easily obtained in the physical world than via secure websites.

Identity thieves are not unlike burglars or other personal-property thieves in their methods of operation. They want an easy mark. It requires much more sophistication to break into online systems protected by encryption software than to snatch a piece of paper from a mailbox, trash bin or your desktop.

"ID theft is typically done through a piece of paper. Forty-four percent of all ID fraud starts with a simple theft—a wallet or a purse. In the case of new accounts being fraudulently set up, 14 percent is caused by the perpetrator taking things out of a mailbox. Paper is where the crime is being committed. If you follow the paper trail, so to speak, it leads you back to a piece of paper," said James Van Dyke, Javelin's founder and principal analyst.

"The biggest sources of ID theft are friends and family, and a paper shredder is not going to help you with that. By the time you shred the document, someone has already seen it," Van Dyke said.

The Federal Trade Commission recently reported that identity theft victimized more than 10 million Americans last year and cost businesses nearly $50 billion.

Victims bear a small percentage of the out-of-pocket cost of ID theft, spending from $500 to $1,200 cash, but the value of time lost also must be figured on the 30 to 60 hours consumers spend resolving identity-theft problems.

The Javelin Strategy and Research report analyzed findings from FTC and U. S. Postal Service reports, as well as consumer and industry studies by Javelin.

"More private personal content is being sent to mailboxes than ever before, with the average household receiving 20 paper statements and bills per month," said Van Dyke.

"By receiving and paying bills online, consumers take the information out of their mailbox and out of the reach of those who would fraudulently open an account or make unauthorized purchases on existing accounts. Businesses that encourage their customers to move to electronic billing and ask them to turn off paper bills are also helping to reduce the costs of fraud," he added.

Van Dyke also said the cost of identity fraud mounts when there's more time to commit the crime. Online banking tends to reduce that time.

Paper-based customers typically see their accounts once a month and, because of the nature of billing cycles, monthly statements can include activity that's more than a month old. Online-banking consumers, on the other hand, typically view their accounts four times as often as paper-based customers.

Online customers are more apt to view their account even more often if it is set up with triggers that automatically email bulletins to them when they make charges, exceed their credit limit, make payments and perform other transactions.

"If every consumer went out and did [paperless banking] tomorrow, the risk of identity theft would instantly drop by 10.4 percent," said Van Dyke.

The FTC offers ID theft-prevention tips online at http://www.consumer.gov/idtheft.

Javelin advises consumers:

* Sign up for account statements and bill payment, preferably through a single trusted provider such as a financial institution or portal, where payment information, passwords, settings and monitoring can be consolidated. Choose services with a no-liability guarantee of payment, on an easy-to-use site with extended-hours customer service. Likewise, sign up for automatic payroll deposits, automatic bill payments and other automatic transfers of money.

* Gain confidence in online finance management by test, using a bill payment service to pay yourself $1, and see what happens.

* Use hard-to-guess, unique passwords, based on information only you know, and change them regularly and record them in a safe place.

* "Turn off the paper." When you sign up online, discontinue paper statements. If you print from your online account, safely store copies.

* Take extra precaution when buying and selling at auction sites, an online area where fraud is more common.

* Use a secure mailbox at home and at work for paper mail and retrieve paper mail promptly after delivery. Never place outgoing checks in your home mailbox.

* Never give out your Social Security number or other private information unless you have initiated the call or transaction.

Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for
Los Gatos Weekly-Times.