How Web Vendors Build Trust

Transcription

1 How Web Vendors Build Trust And What Role Can a Chartered Accountant Play By: Yuan Wang For: Professor Malik Datardina July 1, 2011

2 The purpose of this paper is to examine how online vendors can establish and maintain trust with potential customers and what role chartered accountants can play in this process. This paper will first briefly discuss the importance of e-commerce and why creating trust online is vital to the success of many businesses today. Then it will examine the existing frameworks for e-commerce trust in academic literature that will help us understand and evaluate the various techniques available to online vendors. Finally, we will look at the various techniques available to online vendors and examine the chartered accountants role within this context. Importance of E-commerce Trust In the first quarter of 2011, online retail sales in the U.S. totalled 46 billion USD which accounted for 4.5% of total retail sales of 1,030 billion in the U.S 1. E-commerce is also growing quickly, the first quarter 2011 online retail sales grew 17.5% from the first quarter 2010 while total retail sales grew 8.6% 2. Online retail is also showing strong growth in Canada, Europe and Asia: the latest statistic show that online sales (both B2C and B2B) in Canada totalled 62.7 billion in 2007, which represents just under 2% of total retail sales 3. Forrester Research projects that online retail will grow at around 10% per year between 2010 and 2015 reaching $279 billion in the U.S. and 134 billion in the European Union by Beyond the statistics that show the growing importance of online retail, online retail has also transformed the competitive environment in several industries. Some examples are: 1) Online retail has greatly reduced the cost of comparing prices of similar products. Therefore, it has become harder for retailers to charge a higher price than their competitors. 2) Due to reduced communication cost, the Internet has allowed companies to target a larger geographic market. It has allowed small medium enterprises that were previously restricted to local or regional markets to expand to international markets. 3) Because of the low incremental cost of carrying additional product lines in an online store, online book, movie and music sellers such as Amazon and itunes are able to exploit the long-tail effect 5. Instead of focusing their marketing and promotional effort on a few blockbusters, online stores can carry a large variety of products that may only have niche appeal but can generate a large profit from the large market accessible through the Internet. 1 U.S. Department of Commerce (May 16, 2011). Quarterly Retail E-commerce Sales. Retrieved June 23, 2011, from 2 Ibid 3 StatsCan (April 24, 2008). Internet Sales with or without online payment. Retrieved June 23, 2011, from 4 Simone Levien (February 28, 2011). More Double-Digit Growth Ahead For Online Retail in U.S. and Western Europe. Retrieved June 23, 2011, from Digit-Growth-Online-Retail-Western-Europe 5 Anita Elberse (August 2008). Should You Invest in the Long Tail? Retrieved June 23, 2011, from 2

3 As a result of these profound changes, for many businesses, doing business online has become a strategic imperative to remain competitive and relevant in today s market. Importance of trust to e-commerce Businesses can benefit from the Internet as an advertising medium without having to build trust with its potential customers. However, trust is a pre-requisite for making sales online. In an online transaction, the buyer often has to commit to a purchase without visiting the retailer in person or inspecting the product or service. Therefore, the customer needs to be able to trust that the retailer has the ability and the intention to deliver the product as promised and in a timely fashion. Furthermore, the customer needs to trust that the vendor has both the ability and intention to safeguard sensitive customer information (such as credit card information and personally identifiable information) that was required to complete the transaction. According to the Pew Internet and American Life Project (2008), 66% of American Internet users have shopped online and this figure would have increased to 73% (an increase of 7%) if the users were more confident with sending their personal and credit card information over the Internet 6. Another survey by ISO & Agent (2009) showed that 43.5% of respondents who have not shopped online indicated security as the main reason 7. Obstacles to achieving trust in e-commerce There are several challenges unique to e-commerce online retailers must overcome to establish trust with its customers. Some of these challenges are technical while others relate to user perception of online security. 1) Because the Internet lowers the cost of setting up shop, it has enabled fraudsters and less reputable or financially stable companies to set up shop online. While consumers can reasonably judge a brick-and-mortar store based on the appearance of the store and by inspecting the desired products, it is much more difficult to judge an online retailer 8. This increases consumer distrust of unknown online retailers. 2) The Internet allows fraudsters to set up phoney websites that pretend to be the website of a reputable business. Because of the vastness and anonymity of the Internet, the low cost of setting up such sites and the lack of regulations, such imposters are difficult for reputable businesses to track down and control 9. This increases the consumer s fear of doing business with reputable businesses online. 6 Gerald V. Post, Suzanne B. Walchli (2010). Consumer Perception of Website Security Attributes. Retrieved May 25, 2011 from Journal of Information Privacy and Security 7 Ibid 8 Milan Madic (2009). Privacy and Secuirty in E-commerce. Retrieved June 3, 2011 from Pregledni rad Review 9 Ibid 3

4 3) The complexity and the open nature of the Internet create real technical difficulties in ensuring the integrity and security of online transactions. Because of the complexity of the technical solutions to these challenges, it is often difficult to explain it clearly to the consumers 10. As a result, it increases consumers perceived risk of transacting online. 4) The Internet and online shopping are relatively new tools. Many of the middle-aged consumers, who represent a significant portion of retail market, are unfamiliar with the Internet and as a result feel uncomfortable engaging in transactions online. 5) The lack of face-to-face interaction in online shopping prevents the type of relationship building between the customer and the sales representative in a traditional brick-and-mortar store 11. This can be a great impediment to building trust for some consumers. 6) In online shopping, the customer often cannot physically inspect the product before committing to the purchase 12. This increases the consumer s uncertainty regarding the vendor s ability to deliver. To overcome these challenges, businesses have employed a great variety of techniques to establish and maintain customer trust. Academics have also constructed a variety of models to study trust in the e- commerce context. Frameworks for understanding trust In this part of the paper, we first discuss several relevant models for trust in the academic literature. Then we synthesize the various models into a comprehensive model that we will use as a framework for understanding real world techniques for building trust. D. Harrison McKnight, Vivek Choudhury and Charles Kacmar s Model (2002) 13 McKnight et al. s model (Fig 1) identifies 2 key factors driving a user s trust in the web vendor: institutional/structural factors and vendor specific factors. The institutional/structural factors relates to the user s perceived risk of using the web for e-commerce in general. The vendor specific factor refers to the user s perception of the vendor characteristics. It is broken down to two components: the perceived vendor reputation and perceived site quality. The user s trust in the vendor is broken down into two 10 Ibid 11 Nasser Nassiri (2008). Increasing Trust through the use of 3D e-commerce environment. Retrieved May 25, 2011, from Proceedings of the 2008 ACM symposium on Applied computing (SAC '08) 12 Ibid 13 Nour Mohammed Yaghoubi, Razieh Yekkeh Khani, Mohammad Javad Esmaeali (2011). Trust Models in E- Business; An analytical approach. Retrieved June 3, 2011, from Interdisciplinary Journal of Contemporary Research in Business. 4

5 stages: trusting belief in the vendor and trusting intentions. Trusting belief is the belief that the webvendor has the capability and the intention to consistently deliver the produc t as promised and safeguard user information. Trusting belief is expected leads to trusting intention which is the willingness to depend on the vendor for a product or service which exposes the user to the risk of misbehaviour by the vendor. The user s trust in the vendor ultimately leads to trusting behaviour in the form of intention t o follow vendor advice, share personal information with web vendor or purchase from the web vendor. So under McKnight s model, the user must trust e-commerce in general and the web vendor in particular before forming the intention to rely on the web vendor for a particular product or service. Fig 1 The McKnight et al. model is a very comprehensive model that has most of the framework we need to understand real world techniques web vendors can use to build and maintain customer trust. In particular, the McKnight model identifies that the user needs to trust both the web-vendor and the e-commerce environment in general which is common among many e-commerce trust models. The McKnight model also breaks down the trust in vendor into two logical stages: trusting belief and trusting intention which is useful in studying factors that influence each stage. Other models studied in this paper add additional factors to consider and also identify additional components of some key factors. Kaplan & Nieschwietz s Model (2003) Ibid 5

6 Kaplan & Nieschwietz s model (Fig 2) focus on a particular vendor-specific factor that can affect trust in the vendor: third party assurance. This model is of particular interest in this paper as it directly relates to the role that chartered accountants can play as third party assurance providers. Fig 2 In Kaplan & Nieschwietz s model, the seal, which is the visible representation of third party assurance, is the driver of trust. The seal has two characteristics: the subject matter on which the assurance is given and characteristics of the assurance provider. The subject matter on which the assurance is given can include privacy, security, business practices and transaction integrity. These subject matters are all relevant for a user s decision to trust a web vendor. The assurance provider characteristics include factors that are relevant to both users and vendors: objectivity, integrity, experience, expertise and technical knowledge and also confidentiality which may be more relevant for the vendor. The seal (and its subject matter and provider characteristics) then drives user trust in the web-vendor. Trust, similar to trusting belief in McKnight s model, is defined to include belief in predictability, dependability, faith and overall trust in the vendor. Trust in the vendor ultimately leads in trusting behaviour such as willingness to purchase. Ritu Lohtia, Daniel C. Bello and Constance Elise Porter s Model (2009) 15 Ritu et al. s model (Fig 3) focuses on the vendor specific characteristic of cultural sensitivity. The model is based on study of the experience of American vendors in Japan. The model proposes several reasons why a vendor that demonstrates cultural sensitivity may engender trust. The cultural sensitivity is hypothesized to indicate to users that the vendor has a long term orientation, has the intention to build a relationship and invest in the local market. This will in turn indicate to users that the vendor has benevolent intentions towards the user. Ritu et al. s also recognizes an alternative approach to attaining customer trust through demonstration of competence (superior products, distribution and after sale service). 15 Ibid 6

7 Fig 3 Jari Salo and Heikki Karjaluoto s moel (2007) 16 The model proposed by Salo et al. (Fig 4) hypothesizes that the drivers of trust can be divided into two groups: the central route and the peripheral route. The user decides on which route to take based on the elaboration-likelihood model (ELM), which states that the amount of analysis put into a decision is based on the user s motivation (the importance of the decision on the user) and the user s ability (experience and knowledge that may enable the user to make an informed decision). If the decision is important and the user has the ability to analyze the decision thoroughly, then the central route is taken. The user will analyze information that relate to the vendor specifically such as information that would indicate vendor ability, benevolence and integrity. If the decision is not important or the user does not have the ability to analyze the decision thoroughly, then the user will make the decision based on factors that do not directly relate to the vendor (the user s own disposition to trust, situational normality and structural assurance) and superficial factors relating to the vendor (vendor reputation and website quality). Based on the above factors, the user forms a trusting belief of the vendor on whether the vendor is can be relied on. For specific transactions, the trusting belief is combined with the perceived risk of the transaction to determine whether the user will rely on vendor. 16 Ibid 7

8 Fig 4 A.F. Salam, Lakshimi Iyer, Prashant Palvia and Rahul Singh s Model (2005) 17 A.F. Salam s model (Fig 5, Fig 6) is another comprehensive model of the trust in e-commerce that encompasses many of the models in academic literature. A. F. Salam s model breaks down the factors affecting the intention to use vendor website into two components: Internet usage beliefs and trusting beliefs. In this model, Internet usage beliefs refer to the perceived usefulness and ease-of-use of the vendor site. Trusting belief is defined similar to other models. A. F. Salam s model recognizes that there are external factors that can drive the Internet usage beliefs and the trusting beliefs. The main external driver for Internet usage beliefs is the user s prior experience using the Internet which will influence the user s perception of the usefulness and ease-of-use of the site. The main external drivers for trusting belief are: user s disposition to trust, prior experience in Internet exchange relationships, communications affecting Internet exchange relationships and Institution-based trust. A. F. Salam s model also recognizes that the user s decision to trust or distrust the vendor will lead to formation of a relationship between the user and the vendor. 17 A.F. Salam, Lakshimi Iyer, Prashant Palvia and Rahul Singh (2005). Trust in E-commerce. Retrieved June 3, 2011, from Communications of the ACM. 8

9 Fig 5 Fig 6 9

10 Synthesis of Research models After examining the various models of e-commerce trust in literature, this paper combines the relevant features into a single model (Fig 7) which we can use to understand and assess real world techniques for building trust. In our model for e-commerce trust, the three drivers of trust are institutional factors, vendor characteristics and user disposition to trust. The three drivers determine whether the user forms a general trusting belief in the vendor. The user s trusting belief combined with situational context of a transaction determines whether the user forms trusting intention. The Trusting intention ultimately leads to trusting behaviour. Fig 7 Institutional factors The institutional factors refer to general conditions of e-commerce as perceived by the user. Institutional factors include both security and reliability of the Internet infrastructure and any laws and regulations that may protect consumers in online transactions. Vendor characteristics Vendor characteristics refer to the user s perception of the web vendor in particular. Vendor characteristics can be broken down into the quality of vendor website and user perception of characteristics that may indicate the competence, benevolence, honesty and predictability of the vendor. One vendor characteristic of particular interest for this paper is third party assurance. Other vendor characteristics include: the security features employed by the vendor, the web vendor s published privacy and security policy and business practices, the web-vendors reputation and the web vendor s perceived sensitivity to the user s culture. User disposition to trust 10

11 User disposition to trust refers to the user s general disposition to trust others. There are two components: the user s faith in humanity and the user s belief that trusting others will generally result in better results. General trusting belief General trusting belief refers to the user s belief that the vendor is trustworthy. User s belief of trustworthiness can be broken down into user belief that the vendor is competent (capable of delivering the product and safeguard the user s information), has benevolent intentions towards the user (take the users interest into consideration) and has integrity/honesty (the vendor is transparent and behaves according to customer expectations). Situational context The situational context refers to the situational factors relating to the particular transaction the user is considering. One important factor is the potential risk and reward associated with engaging in the online transaction. Trusting intention Trusting intention refers to the user s intention to engage in the transaction which will expose the user to risk of misbehaviour by the web vendor. Trusting intention can include intention to follow the vendor advice, share information with the vendor or purchase from the vendor. Techniques for Establishing and Maintaining Trust In this section, the paper looks at various techniques web vendors use to engender trust from customers. Then it discusses the roles chartered accountants may play in the trust-building process. Trust assuring arguments Trust assuring arguments are statement of a claim and its support statement used in an Internet store to address trust-related concerns. 18 Trust assuring arguments can come from the web vendor such as privacy policies and claims made on the quality and delivery time of the product. Trust assuring arguments can also come from third parties such as web seals. The use of trust assuring arguments fits into our synthesized model of trust as a vendor characteristic. 18 Dongmin Kim, Izak Benbast (2009). Trust-Assuring Arguments in B2C E commerce: Impact of Content. Source, and Price on Trust. Retrieved May 20, 2011, from Journal of Management Information Systems 11

12 An experiment by Dongmin Kim et al. (2010) studied the impact of content and source of the trustassuring arguments 19. The content refers to whether the trust assuring argument followed the Toulmin model of argumentation, and the source refers to whether the trust assuring argument was provided by a third party 20. Toulmin model of argumentation is based on Toulmin s study of arguments made in law courts 21. Toulmin s study showed that arguments were more persuasive if the content is structured as claim, data and backing 22. Dongmin Kim et al. performed the experiment using University students who were instructed to compare several fictitious online watch stores that contained trust assuring arguments and evaluate the vendor s trustworthiness and whether they intend to purchase from the vendor 23. As expected, arguments that come from third parties have greater influence on trust than first party arguments 24. Arguments that follow the Toulmin model also have greater influence on trust than arguments that do not 25. When the characteristics are combined, third party trust assuring arguments that follow the Toulmin model have the strongest influence on trust 26. On the other hand, first party trust assuring arguments that do not follow the Toulmin model have the lowest influence on trust 27. A novel aspect of the study is the introduction of the price of the product as a factor in the trust decision making. Based on the Elaboration Likelihood Model (ELM), it is expected that customers will investigate the evidence presented by the vendor in greater detail if the transaction is of high value 28. Dongmin Kim expects that the impact of whether the argument follows the Toulmin model will increase as customers examine the argument closely 29. Conversely, the impact of whether the argument is from a third party will decrease as the customer examine the argument closely and make their decision based on the content rather than the source of the argument 30. The results of the experiment confirmed Dongmin Kim s expectations 31. This study is relevant to chartered accountants looking to provide assurance online. The results suggest that the third party assurance provided by chartered accountants can boost customer trust, especially for low value transactions. However, the benefit diminishes as the value of the transaction increases as the 19 Ibid 20 Ibid 21 Ibid 22 Ibid 23 Ibid 24 Ibid 25 Ibid 26 Ibid 27 Ibid 28 Ibid 29 Ibid 30 Ibid 31 Ibid 12

13 customer will rely more on their own investigation of evidence presented by the vendor to make the decision. Payment Systems Most online retail transactions are done with electronic payments. Consumer perception of electronic payment methods is an important part of the institutional/structural driver of trust. In a study by Riccardo Mangiarcina, the following electronic and non-electronic payment systems were studied: prepaid and regular credit card, e-wallets, online bank transfer, cash on delivery, loan and payment by post 32. While 90% of e-commerce in Italy is done with electronic payment systems such as credit cards (65%), e- Wallets (16%) and bank transfers (9%) 33. Riccardo s research showed that a large number of Italian consumers (52%) limit their shopping online because of their concerns about using their credit card online 34. Riccardo s research shows that there are some interesting disconnect between the true security of electronic payment systems and the users perceptions. In 2008, 5.9 billion of online retail transaction was carried out in Italy with total loss due to fraud of 12 million in both 2008 and So online fraud represented 0.2% of total online transactions, which is negligible in Riccardo s opinion, and it is decreasing as a percentage of total transactions. Furthermore, most of the credit card frauds are unrelated to online shopping. The three most common frauds are credit card data stolen in an offline transaction, credit card data stolen through online phishing, or credit card information guessed by a computer algorithm 36. Nonetheless, many consumers perceive online credit card transactions as unsafe since it is done over the unfamiliar medium of the Internet and requires disclosure of sensitive personal and credit information 37. Prepaid credit cards and e-wallets both offer additional protection to consumers compared to credit cards and are perceived as more secure than credit cards. Pre-paid credit cards have a limited balance. Therefore, if the information is stolen, the customer s losses are limited to the balance on the card. E- Wallets allow consumers to engage in online transactions without disclosing sensitive credit card and personal information. Some E-Wallet providers such as PayPal and Alipay provide additional protection to consumers against fraudulent vendors in the form of refunds if the goods are not delivered as promised in a timely fashion 38. This is a security feature that traditional payment methods do not provide. Despite the strong security features built into these electronic payment platforms, many users still perceive these 32 Riccardo Mangiaracina, Alessandro Perego (2009). Payment systems in the B2C e-commerce: are they a barrier for the online customer? Retrieved May 20, 2011, from Journal of Internet Banking and Commerce 33 Ibid 34 Ibid 35 Ibid 36 Ibid 37 Ibid 38 Ibid 13

14 electronic payment methods as less safe than traditional methods such as bank transfers, cash on delivery and payment by post 39. However, despite the perception of being less secure, the convenience and flexibility of these electronic payment methods have made them the predominant method of payment for online retail transactions 40. There are two important conclusions to draw from this research: 1) consumer perception of security can differ significantly from actual security and it can be the greatest hurdle for businesses to overcome, and 2) while consumers value security in online transactions the rewards of shopping online such as convenience, greater selection and lower cost can override the security concerns. Reputation/Branding User s familiarity with a vendor s brand both in the offline and online context can greatly improve the user s trust in the vendor 41. Research has shown that as consumers interact with a vendor, the positive and negative qualities of a vendor become associated with the brand in the consumer s memory 42. So when a consumer sees a familiar brand, the associated qualities are recalled and influence the consumer s decision 43. Therefore a web vendor with a strong brand can much more easily build trust with consumers 44. Brand and reputation can be built through repeated interactions with consumers and advertising 45. Research by Lowry et al. (2008) showed that unknown web vendors can accelerate the trust building process by forming entering brand alliances with well known brands 46. In a branding alliance between a well known brand and a relatively unknown brand, the consumer s perception of the unknown brand is strongly influenced by the consumer s perception of the well known brand 47. On the other hand, the consumer s perception of the well known brand is relatively unaffected by the association unless the unknown brand engages in bad behaviour 48. Therefore, relatively unknown web vendors that can demonstrate itself to be trustworthy to an established brand partner can quickly establish consumer perception of trustworthiness by making alliances with well known brands. Third party assurance 39 Ibid 40 Ibid 41 Paul Benjamin Lowry, Anthony Vance, Greg Moody, Bryan Beckman and Aaron Read (2008). Explaining and Predicting the Impact of Branding Alliances and Web Site Quality on Initial Consumer Trust of E-Commerce Web Sites. Retrieved June 3, 2011 from Journal of Management of Information Systems 42 Ibid 43 Ibid 44 Ibid 45 Ibid 46 Ibid 47 Ibid 48 Ibid 14

15 Third party assurance can be an important contributor to consumer trust, especially for small-medium sized transactions where the consumer is unlikely to invest enough time and resources to personally investigate the vendor. Third party assurance is a vendor characteristic. Some common forms of third party assurance include: Hacker tested seal 49 A hacker tested seal indicates that the vendor site meets the security standards set by the payment card industry and the site has been tested for common weaknesses exploited by hackers. Getting a hacker tested seal indicates the vendor has a high level of security and technical competence. Research by Gerald et al. showed that Hacker tested seals positively influenced consumers perception of security which in turn contributes to trust 50. Gerald et al. identified the ease of forging a hacker tested seal as a weakness of the hacker tested seal. TSL and SSL 51 Transport Layer Security (TSL) and its predecessor Secure Socket Layer (SSL) are essential for the transmission of sensitive information over the Internet. TSL and SSL greatly reduce the risk of the communication between a vendor and a consumer being intercepted, read or tempered with. This is an essential vendor characteristic that indicates to consumers that the vendor has the technical competence to safeguard the consumer s information. Without TSL or SSL, consumers should not perform online transactions with the vendor. Enhanced SSL 52 An enhanced SSL adds an additional security feature to TSL and SSL. The certificate authority which is involved in the SSL/TSL framework matches the vendor identity with the webpage and indicates that the webpage is genuinely from the web vendor with a green address bar. This feature only offers limited additional security and is often missed by consumers. As a result, consumers were found to be not strongly influenced by it. Web-trust Web-trust is a joint effort by the CICA and AICPA to provide a standard for CAs and CPAs to provide assurance services to online businesses covering the subject matter: privacy, security, business practices 49 Gerald V. Post, Suzanne B. Walchli (2010). Consumer Perception of Website Security Attributes. Retrieved May 25, 2011 from Journal of Information Privacy and Security 50 Ibid 51 Ibid 52 Ibid 15

16 and transaction integrity, availability, confidentiality and non-repudiation 53. Web-trust sought to leverage chartered accountants existing expertise and reputation as assurance providers and extend it to e- commerce. Most other third party assurance providers were either self-reporting (eg. Truste and BBBOnline) or guarantee providers (WebAssurance.com) 54. Web-trust hoped to differentiate itself by providing an accountant s professional opinion on the operations of the web vendor. However, by 2004 (6 years after the introduction of WebTrust), only 41 webpages displayed the WebTrust seal. Several challenges prevented the wide adoption of Web-trust. Consumers responded more positively to well-known retail brands than chartered accountants in making consumer decisions 55. Consumers, vendors and some accounting practitioners did not perceive accountants to have the competence to evaluate web security and privacy issues 56. The negative media coverage of the accounting profession in the wake of Arthur Andersen s collapse tarnished chartered accountants reputation in the eyes of consumers 57. Furthermore, many vendors feel that once they have established a good brand and reputation, they can build trust with customers based on their reputation alone and without the help of third party assurance 58. Conclusion Based on our analysis of real world techniques for building trust online and academic models for e- commerce trust, we can see that the process of building trust is a complex process with three key drivers (structural/institutional characteristics, vendor characteristics and user disposition to trust). Web vendors employ many techniques to increase consumer trust mostly through vendor characteristics such as third party assurance. Chartered accountants can play a role in the process as third party assurance providers. However, this role diminishes in importance as the vendor builds up its own reputation or if the vendor is able to leverage a well known brand. There are also many alternative sources of third party assurance that may be perceived as more important, competent or trustworthy by consumers or more cost-effective by vendors. As a result, chartered accountants should recognize that the role they can play in e- commerce trust may be limited. 53 CICA. (n.d.). Trust Services. Retrieved June 3, 2011, from 54 Michael Barrett, & Yves Gendron. (2006). WebTrust and the "commercialistic auditor" :The unrealized vision of developing auditor trustworthiness in cyberspace. Accounting, Auditing & Accountability Journal, 19(5), Retrieved June 3, 2011, from ABI/INFORM Global. 55 Ibid 56 Ibid 57 Ibid 58 Ibid 16

17 Annotated Bibliography Author Title of Article Periodical/Website Vol./No./Edition Year published Dongmin Kim, Vol. 26, No. 3, Winter Izak Benbast , Trust-Assuring Arguments in B2C E commerce: Impact of Content, Source, and Price on Trust Journal of Management Information Systems Pages Date accessed Location, database, website, link pp May 20, 2011 Annotation Trust: willingness to be vulnerable (Mayer et al.) Kim and Benbasat: one way to increase customer trust is to provide trust-assuring arguments - statements of a claim and its supporting statements used in an Internet store to address trust-related concerns Content of argument arguments that conform to Toulmin model (claim, data, backing) is more likely to increase trust Source of argument third party source (such as public accountants or consumer groups) more likely to increase trust than self-proclaimed arguments Trusting intention intention to be vulnerable; eg. making a purchase, signing up for services Trusting believe leads to trusting intention. Trusting belief is about the trustworthiness of the store: ability, benevolence, integrity, predictability, fairness and attractiveness. Initial trust trust in an unfamiliar trustee before having meaningful information about trustworthiness of the store. So before first purch ase. Likelihood of elaboration (ELM): the amount of effort put into scrutinizing a piece of information. When high effort, will be more influe nced by content; when low effort, will be more influenced by source and other heuristic cues. Two factors affecting ELM -> motivation and ability to process the information. Results showed that strong content and third party source increased trusting belief of user. The impact of content increased with price; the impact of source decreased with price.

18 Author Title of Article Periodical/Website Vol./No./Edition Year published Daniel W. Manchala E-Commerce Trust Metrics and Models Pages Date accessed Location, database, website, link May 20, 2011 ftp:// re/inteco/ss02/material/ pdf Annotation The trust is mutual, the vendor needs to trust that the customer will pay and not return the goods; the customer needs to trust that the vendor will deliver the goods and not misuse his credit card and personal information. Transaction cost higher cost means the buyer and seller are both more careful when the transaction cost is high Transaction history vendors can use customers transaction history to determine whether to trust customer Indemnity third party guarantees against loss Spending pattern checking for significant changes to spending pattern could protect against fraud. Verification the vendor may want to verify the customer and ability to pay; may verify a random sample if the process is costly and the customer is trustworthy. The buyer usually cannot verify the product before transaction complete, may rely on third party. Authorization may give away limited rights Model based on Boolean relationships Based on multiple relevant variables (customer history, size of tansaction), decide whether to verify Model based on fuzzy logic based on multiple relevant variables (customer history, size of transaction) decide on the level and frequency of verification Transaction process models: AAP Authenticate, authorize and payment; for when both sides wants to verify the trustworthiness of hte other ATV Authorize, pay or authenticate if trust violated PF- Pay first then authorize, no authenticate; for when buyer wants to protect privacy Stolen token or password: Trusted intermediaries can detect stolen token or password such as a stolen password by analyzing past buying pattern and detecting any abnormal changes The trusted intermediary can delay the delivery of decryption key until the customer provides further authentication After the issue is resolved, the customer is issued a new token and the customer and vendor are compensated for damages according to the agreement 18

19 Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published Keng Siau and Zixing Shen Communications of ACM Vol. 46, No May 20, 2011 Building Customer Trust in Mobile Commerce Annotation Trust is a state involving confident positive expectations about another s motives with respect to oneself in situations entailing risks ; 3 characteristics trustee and trustor reliant on each other for mutual benefit, uncertainty and risk, trustor has faith in the trustee s honesty and benevolence Trust has 3 components - Competence vendor s skill, expertise and operational abilities - Predictability from familiarity, vendor s consistent behaviour - Goodwill from vendor s honesty and benevolence E-commerce trust development cycle - Initial trust formation: information gathering -> 1 st transaction based on reward attraction - Continuous trust development: evaluation on satisfaction, which can lead to drop out due to distrust or firm customer loyalty based on experience from repeated transactions Factors affecting trust: - Security and privacy controls, integrity and competence, third party recognition and legal framework, brand Reward attraction based on customer need, motivation, capacity and willingness Additional challenge for mobile commerce: need to convince consumers to trust in the security and reliability of mobile technology (devices and network) for e-commerce purposes Elements of initial trust formation for mobile vendors: - Familiarity, reputation, information quality, third party recognition, attractive awards Elements of continuous trust development: - Site quality, competence, integrity, disclose privacy policy, security controls, open communications, community building, external auditing 19

20 Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published Riccardo Mangiaracina, Alessandro Perego Journal of Internet Banking and Commerce Vol. 14, No May 20, 2011 Payment systems in the B2C e- commerce: are they a barrier for the online customer? Annotation 90% of the value of B2C e-commerce in 2008 in Italy was done using electronic payments But trust in epayment is low: 52% of Italians internet users are afraid of using credit card online. Diffusion of a payment system is much more correlated with suitability for e-commerce than security From the very beginning the potential of the Internet to transform the way of shopping products and services has been widely recognized in that the Internet was supposed to reduce communication costs, to facilitate the interaction between customer and seller, to offer access to a global market and last, but not least, to allow lower entry market costs than other conventional commerce channels (Garret S., Skevington P., 1999). Rapid growth, but still low penetration approx 1% of total retail sales in Italy -> potential not exploited Comparison of online shopper/total web user between Italy, UK, France and Germany and annual purchasing value per shop user. Italy is the lowest, UK is the highest Payment methods: - Credit card and prepaid credit card; pre-paid credit card limit loss to balance on the card - Online bank transfer - E-wallet can contain credit card data or be refilled with bank transfers. Can use userid and password to make online transactions or if the vendor does not accept e-wallet, some e-wallet can generate 1 use credit cards (security is good) - Cash on delivery; payment is managed by express courier - Customer requests a loan from a bank or credit society; once the loan is approved, the customer prints, signs and sends the documents back; when the merchant receives the cash from the bank, the order fulfilment starts - Postal order: the customer goes to the post office to make the postal order to the merchant; once the merchant rece ives the money, the delivery process starts 20

21 Statistics on the diffusion of payment method for each industry; and also for % of Italian consumers surveyed agreed with the statement Do you shop a limited number of items on the Internet because you are afraid of using the credit card online? 26% strongly agree, 26% agree. This percentage is declining but slowly Customer rating for trustworthiness of payment method: - Standard credit card, Pre-paid credit card, Bank transfer -> low because entirely online and required disclosure of personal information - ewallet > medium because entirely online but does not require disclosure of personal information - Loan -> medium because managed online but has a few paper documents - Cash on delivery and postal order -> high since entirely offline Perception does not reflect reality: actual fraud is negligeable 12 million euros in 2007 and All merchants of the sample confirmed that no credit card number has been stolen during an e-commerce transaction on a secure server Most common frauds (non are due to e-commerce transactions): - Credit card number stolen in offline transaction - Data of credit card or bank account stolen through online phishing - Data of credit card or bank account guessed by program that generates plausible numbers Fraud prevention systems are widely adopted by the top 100 e-commerce websites in Italy, 4 out of 5 adopt at least one of them: - 3D security which requires users to enter additional information that is not on their bank account or credi t card (2/3 merchants) - Use of the security code at the back of the card (most common 80% of merchants) - Use of E-wallets Paypal 35% of merchants, Bankpassweb 15% of merchants Performance metric for the payment systems - Application fields/flexibility o Type of product/service that can be purchased using the method o Adoption of payment tools o Amount/Plafond/Value of purchase - Cost o Merchant - bank transfer, loan and postal orders are free to merchants so high; credit cards and e-wallets charge a percentage of the transaction value; cash on delivery is quite expense for merchants so low o Customer credit card is completely free of charge so high. The bank transfer and postal order customer has to pay a low fee; loan and cash on delivery are quite expensive - Usability credit cards and e-wallets are high, bank transfer is medium; loan and postal order are low - Speed of transaction credit card and cash on delivery is high. Bank transfer is medium. Loan and postal orders are low 21

22 - Added service only loans and e-wallets do Overall score for suitability for e-commerce - Medium/High credit card and e-wallets - Medium prepaid credit cards and bank transfers - Low loans, postal orders and cash on delivery Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published DHgate.com Ecommerce Asian Business Dec May 25, 2011 Leader DHgate.com Launches Seller Guarantee Services. Newsweekly Annotation DHgate.com connects 3 million global small business entrepreneurs with 500,000 China based suppliers. Products with the 7 Day Return guarantee can be returned, for any reason, for a 100% refund within 7 days of the buyer receipt of the product. 24 hour dispatch guaranteed products are shipped within 24 hours of the order s payment confirmation Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published American Express Health & Beauty Close - Up Nov 2010 May 25, 2011 American Express to Purchase Acertify to Increase Fraud Prevention Services Annotation Acertify provides extra level of assurance on transactions over any payment network; American Express acquired Acertify to provide additional transaction assurance to vendors using its services. 22

23 Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published Sinclaire, J., Simon, J. & Wilkes, R. International Business Research Vol. 3 No May 25, 2011 A Prediction Model for Initial Trust Formation in Electronic Commerce. Annotation Trust in the Internet Infrastructure perceived technical competence, perceived system performance and user understanding of the system or medium. There is evidence of a link between positive perception about the trust worthiness of the internet and internet purchase intentions. Website characteristics third party guarantors provide assurance of authentication or a brand image or reputation. There is evidence of positive effect of TTPs on purchasing likelihood. Social influence The results of this experiment indicate trust in the Internet infrastructure, the presence of Web site features of institutional trust, and susceptibility to the social influence of media are positively related to willingness to provide personal information online in the context of initial trust formation. Additionally, significant differences in online information-giving behavior were observed between ethnic groups. Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published Gerald V. Post, Suzanne B. Walchli Journal of Information Privacy and Security Vol. 6, No May 25, 2011 Consumer Perception of Website Security Attributes Annotation If users were more confident with credit card and personal information over the internet, the internet population shopping would increase to 73%. Q2 2010, online sales represents 3.8% of total retail sales in the US. Website features to increase perceived security for users 1) Hacker tested symbol 2) Enhanced SSL certificate -> vendor pay extra for the certificate authority to match their name to the site which is indicated with a green address 23

24 bar Logos and seals are only effective if users receive education about them. Furthermore, the impact on users depend on user s p rior experience: - More experienced and confident users tend to be less affected by seals; new users tend to be more affected. Users that are highly involved and low anxiety are less affected than users that are low involvement and high anxiety. Users in high risk environments tend to rely more on seals. Factors affecting purchase intention Vendor knowledge how well know is the vendor; prior experience and press. Generally increase likelihood unless bad press or past experience Security perception perceived security of the site; trust in vendor In this research, regression model for security perception and intention to purchase Security perception model based on vendor knowledge, security attributes, and service attributes (ease of use and support) Intention to purchase model based on security perception, vendor knowledge, service attributes and user attributes Third party payment processors are perceived to provide additional security and potential intervention in case of disputes Hacker tested logo more effective than enhanced SSL certificate in increasing trust Experienced customers look for a security certificate, but enhanced SSL does not increase consumer confidence Prior knowledge of vendor is the most important factor Generic security logos do not influence consumers but hacker-tested logos for compliance with payment card industry does influence consumers Ease of use increase perceived security 3 rd party check-out with a well known vendor such as Amazon, Paypal or Google increase confidence Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published Nasser Nassiri Increasing Trust Proceedings of the 2008 May 25, 2011 through the use of 3D e- commerce environment 2008 ACM symposium on Applied computing (SAC '08) Annotation 3D e-commerce: the customers navigate through a 3d representation of the store; the vendor representatives use avatars to interact with customers; Allow multiple channels: voice, touch and gestures Socializing likely increase trust 3D e-commerce allow bargaining 3D e-commerce can allow touch; author claim touch is important to building trust -> father touch kid 24

25 Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published A.F. Salam, Trust in E- Communications of Vol. 48, No June 3, 2011 Lakshimi Iyer, Prashant Palvia and Rahul Singh commerce the ACM Annotation Technical security reliable encryption and authentication; digital certificate (etrust, WebTrust, ecard and Smartcard) Technical security is well established; but there is perceived risk which reduces online sales Theoretical framework Theory of reasoned action external factors, beliefs and behaviour Technology acceptance model acceptance and diffusion of technology in business Relationahl dependence - different types of relationships The authors divide up factors/beliefs that affect behaviour as 1) Usage a. Perceived usefulness b. Perceived ase of use 2) Trust a. Belief in benevolence b. Belief in integrity 25

26 c. Belief in competence d. Belief in predictability 26

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28 Author Title of Article Periodical/Website Vol./No./Edition Year Pages Date accessed Location, database, website, link published Alireza Pourshahid, Thomas Tran ACM 2007 June 3, 2011 Modeling Trust in E-Commerce: An Approach Based on User Requirements Annotation Survey by ISAC shows that security is still the greatest concern by far Trust is a critical success factor Challenge: the uncertainty regarding product quality and the ability of the vendor to stay anonymous User requirement notation introduced by International Telecommunication Union Standardization Sector functional (behavioural) and non-functional (availability, scalability and cost) requirements 1) Goal Requirement Language: used to illustrate the soft and hard goals of an entity 2) Use Case Map: used to illustrate the process Trust different perspectives 1) Psychology individual and social; expectation and context; factors that reduce risk should increase trust 2) Social trust in group and between groups 3) Trust as a way to reduce complexity by relying on someone else 4) Hard-trust: security; soft-trust: comfort and caring 5) Centralized trust model: a central entity calculate trust values for each entity, suitable for closed systems such as an online auction site; decentralized trust model: each entity calculate the trust value of entities it encounters, suitable for open systems. 6) Ability to rely on third party business services provided over the web Deutsch (1962), a trust process is: The individual is confronted with an ambiguous path, a path that can lead to an event perceived to be beneficial (Va+) or to and event perceived to be harmful (Va-). The occurrence of Va+ or Va- is contingent on the behavior of another person and the strength of Va- is greater than the strength of Va+. If the individual chooses to take the ambiguous path, he makes a trusting choice; if he chooses not to take the path, he makes a distrustful choice. Some other definitions of trust can give us a better 28

29 Common element in the definition of trust: 1) Trustor and trustee 2) Trustor would like to rely on trustee for a function or service 3) Trustor decides whether to trust or distrust 4) The behaviour of the trustee determines positive or negative outcome Trust Use Case map Trust Goal - Soft and hard goals - Different users may have different goals or assign different weights to the goals 29