How Web Vendors Build Trust

(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)

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.S1. 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 sales3. 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 20154

.

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” effect5. 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

http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf

2 Ibid 3

StatsCan (April 24, 2008). Internet Sales with or without online payment. Retrieved June 23, 2011, from

http://www.statcan.gc.ca/daily-quotidien/080424/dq080424a-eng.htm

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 http://www.businesswire.com/news/home/20110228005297/en/Double-Digit-Growth-Online-Retail-Western-Europe

5

Anita Elberse (August 2008). Should You Invest in the Long Tail? Retrieved June 23, 2011, from

(3)

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 Internet6. Another survey by ISO & Agent (2009) showed that 43.5% of respondents who have not shopped online indicated security as the main reason7.

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 retailer8. 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 control9. 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

(4)

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 consumers10. 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 store11. 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 purchase12. 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 t rust 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 Cha rles 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.

(5)

5

stages: trusting belief in the vendor and trusting intentions. Trusting belief is the belief that the

web-vendor 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)14

14

(6)

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 a ll 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

(7)

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

(8)

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.

(9)

9

Fig 5

(10)

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.

(11)

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

(12)

12

An experiment by Dongmin Kim et al. (2010) studied the impact of content and source of the

trust-assuring arguments19. 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 party20. Toulmin model of argumentation is based on Toulmin’s study of arguments made in law courts21. Toulmin’s study showed that arguments were more persuasive if the content is structured as claim, data and backing22.

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 vendor23. As expected, arguments that come from third parties have greater influence on trust than first party arguments24. Arguments that follow the Toulmin model also have greater influence on trust than arguments that do not25. When the

characteristics are combined, third party trust assuring arguments that follow the Toulmin model have the strongest influence on trust26. On the other hand, first party trust assuring arguments that do not follow the Toulmin model have the lowest influence on trust27.

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 value28. Dongmin Kim expects that the impact of whether the argument follows the Toulmin m odel will increase as customers examine the argument closely29. 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 argument30. The results of the experiment confirmed Dongmin Kim’s expectations31.

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

(13)

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 post32. While 90% of 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 online34.

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 200735

. 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 algorithm36. 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 information37.

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 fashion38. 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

(14)

14

electronic payment methods as less safe than traditional methods such as bank transfers, cash on

delivery and payment by post39. 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 transactions40.

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 vendor41

. 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 memory42. So when a consumer sees a familiar brand, the associated qualities are recalled and influence the consumer’s decision43

. Therefore a web vendor with a strong brand can much more easily build trust with consumers44. Brand and reputation can be built through repeated interactions with consumers and advertising45. 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 brands46.

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 brand47. 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 behaviour48. Therefore, relatively unknown web vendors that can demonstrate itself to be trustworthy t o 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

(15)

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:

Hack er tested seal49

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 s ecurity and technical competence. Research by Gerald et al. showed that Hacker tested seals positively influenced consumers’ perception of security which in turn contributes to trust50. Gerald et al. identified the ease of forging a hacker tested seal as a weakness of the hacker tested seal.

TSL and SSL51

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 SSL52

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

(16)

16

and transaction integrity, availability, confidentiality and non-repudiation53. 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 decisions55. Consumers, vendors and some accounting practitioners did not perceive accountants to have the competence to evaluate web security and privacy issues56. The negative media coverage of the accounting profession in the wake of Arthur Andersen’s collapse tarnished chartered accountants’

reputation in the eyes of consumers57. 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 assurance58.

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 http://www.webtrust.org/ 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), 631-662. Retrieved June 3, 2011, from ABI/INFORM Global.

55 Ibid 56 Ibid 57 Ibid 58 Ibid

(17)

Annotated Bibliography

Author Title of Article Periodical/Website Vol./No./Edition Year published

Pages Date accessed Location, database, website, link

Dongmin Kim,

Izak Benbast

Trust-Assuring

Arguments in

B2C

E‑commerce:

Impact of

Content,

Source, and

Price on Trust

Journal of

Management

Information

Systems

Vol. 26, No. 3,

Winter

2009–10,

pp.

175–

206. 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)

18

Author Title of Article Periodical/Website Vol./No./Edition Year

published

Daniel W.

Manchala

E-Commerce

Trust Metrics

and Models

May 20, 2011

ftp://www.tik.ee.ethz.ch/pub/leh

re/inteco/SS02/material/008329

44.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 tru st 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 cu stomer 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 verificatio n

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

(19)

19

published

Keng Siau and

Zixing Shen

Building

Customer Trust

in Mobile

Commerce

Communications of

ACM

Vol. 46, No. 4

2003

91-94

May 20, 2011

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 honest y 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:

(20)

20

published

Riccardo

Mangiaracina,

Alessandro

Perego

Payment

systems in the

B2C

e-commerce: are

they a barrier

for the online

customer?

Journal of Internet

Banking and

Commerce

Vol. 14, No. 3

2009

May 20, 2011

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

(21)

21 Statistics on the diffusion of payment method for each industry; and also for 2006 – 2008

52% 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 2009. All merchants of the samp le 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

(22)

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

DHgate.com

Ecommerce

Leader

DHgate.com

Launches Seller

Guarantee

Services.

Asian Business

Newsweekly

Dec 2010

104 May 25, 2011

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 receip t of the product.

24 hour dispatch guaranteed products are shipped within 24 hours of the order’s payment confirmation

American

Express

American

Express to

Purchase

Acertify to

Increase Fraud

Prevention

Services

Health & Beauty

Close - Up

Nov 2010

May 25, 2011

Annotation

Acertify provides extra level of assurance on transactions over any payment network;

(23)

23

published

Sinclaire, J.,

Simon, J. &

Wilkes, R.

A Prediction

Model for Initial

Trust Formation

in Electronic

Commerce.

International

Business Research

Vol. 3 No. 4

2-1-

17-27

May 25, 2011

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.

Gerald V. Post,

Suzanne B.

Walchli

Consumer

Perception of

Website

Security

Attributes

Journal of

Information Privacy

and Security

Vol. 6, No. 4

2010

May 25, 2011

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

(24)

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

Nasser Nassiri

Increasing Trust

through the use

of 3D

e-commerce

environment

Proceedings of the

2008 ACM

symposium on

Applied computing

(SAC '08)

2008

May 25, 2011

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

(25)

25

published

A.F. Salam,

Lakshimi Iyer,

Prashant Palvia

and Rahul

Singh

Trust in

E-commerce

Communications of

the ACM

Vol. 48, No. 2

2005

June 3, 2011

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

(26)

26 c. Belief in competence

(27)

(28)

28

published

Alireza

Pourshahid,

Thomas Tran

Modeling Trust

in E-Commerce:

An Approach

Based on User

Requirements

ACM

2007

June 3, 2011

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 p ath, he makes a distrustful choice. Some

other definitions of trust can give us a better

(29)

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

(30)

(31)

(32)

32

published

Nour

Mohammed

Yaghoubi,

Razieh Yekkeh

Khani,

Mohammad

Javad Esmaeali

Trust Models in

E-Business; An

analytical

approach

Interdisciplinary

Journal of

Contemporary

Research in

Business

Vol. 2 No. 9

2011

June 3, 2011

Annotation

E-commerce is not a choice; it is a competitive imperative.

e-business has brought about an increase in the quality, dynamics, and speed of access to the customers and the market. By contrast, it has

brought about a decrease in the prices, implementation time, and time duration of access to the market.

(33)

33 Kaplan et al. (2003):

(34)

34 Assurance measure has 4 measures: privacy, security, business practice and transaction integrity

Provider has 6 meastures: confidentiality, objectivity, integrity, experience, expertise and technical knowledge

Outcome has 3 measures: willingness to purchase, quality and risk

Trust has 7 measures: predictability, dependability and faith

Song et al. Actor-network theory model (2007):

(35)

35 Belanger, F. & Carter, L. Model for trust in e-government

(36)

36 Zhang Wei et al

Ritu et al. 2009 Model

Cultural sensitivity to cultural differences in foreign market increases trust; some proposed reasons are that the cultural sensitivity demonstrates

benevolence: long-term orientation, relationship building and investment in relationship.

(37)

37 Jari Salo et al. Model (2007):

1) Trusting beliefs: think trustee is dependable for specific situation

a. Benevolence, honesty, competence and predictability

2) Trusting intentions: willingness to rely on trustee

a.

potential negative consequences, dependence, feelings of security, situation-specific context, and lack of reliance on control.

3) Trusting behaviour: giving another party power over them

4) System trust

a. Structural assurance: policies and contracts

b. Situational normality: roles of trustee and trustor

5) Dispositional trust: belief in people:

(38)

38 a. assumption that people are trust worthy

b. trusting stance: belief that better results will arise if he or she rely on third party

6) Situational decision to trust

(39)

39 Mukherjee et al. Model:

1) Shared value

2) Communicaiton

(40)

40 Grudzewski et al model (2008)

(41)

(42)

(43)

43

published

Paul Benjamin

Lowry,

Anthony

Vance, Greg

Moody, Bryan

Beckman and

Aaron Read

Explaining and

Predicting the

Impact of

Branding

Alliances and

Web Site

Quality on Initial

Consumer Trust

of E-Commerce

Web Sites

Journal of

Management of

Information

Systems

Vol. 24 No. 4

2008

199-224

June 3, 2011

Annotation

Brand Association trust model

Stage 1 Brand awareness: Repeated exposure to a brand will improve the perception of the brand; people feel threatened by the unfamiliar; Advertising is

a means to repeatedly expose consumers to brand

Stage 2 Increasing trust with brand awareness and website quality:

Trust consist of trusting belief and trusting intentions; trusting beliefs lead to trusting intentions

1) Website quality -> could serve as a cue to associate with customer’s prior experience with efficient and competent sites/businesses

2) Brand -> well known brands that have positive association in the consumers’ mind will help increase trust

Stage 3 Brand alliance:

Short or long term association of two or more individual brands, products or other distinctive proprietary assets

Brand alliance is also an umbrella term for co-branding and similar techniques such as cross -promotion, joint marketing, and joint branding

If a brand is not well known (the user has limited associated memory with the brand), then the little known brand’s perceptio n can be significantly changed by association with a better known brand. However, if the brand is already well-known then brand alliance will have less impact.

Also a website with an unknown brand, if it is high quality can improve the perception of an associated well known brand University level business students are participants in the study

Results show that most important factors in trust are: Web site quality, brand image, institution -based trust, and brand awareness Author Title of Article Periodical/Website Vol./No./Edition Year

published

Jaewon Choi,

Changsoon

The Impact of

Multi-International

Journal of

(44)

44 Sohn, Hong Joo

Lee

dimensional

Trust for

Customer

Satisfaction

Management

Sciences

Annotation

Cue-based trust: based on cues such as privacy policy, site design, awards, and third party seals and approval

Experienced based trust: based on prior experience and satisfaction with prior transactions with the vendor

Trust is multi-dimensional: calculus based trust (calculated based on expected gains/loss), relationship based on repeated interactions and inst itutional

based on institutional factors.

(45)

45

published

Neveen F.

Awad and Arik

Ragowsky

Establishing

Trust in

Electronic

Commerce

Through Online

Word of Mouth:

An Examination

across genders

Journal of

Management of

Information

Systems

Vol. 24 No. 4

2008

June 3, 2011

Annotation

Survey of users focused on asynchronous online forums such as Amazon.com reviews

Trust play a more important role in intention to shop online for women than men

Online word of mouth on an online forum

-

Men are more influenced by the ability to post

-

Women are more affected by the responsiveness of other users of the forum

Milan Madic

Privacy and

Secuirty in

E-commerce

Pregledni rad

Review

Vol. XXI

2009

247-260

June 3, 2011

Annotation

E-commerce risk factors: no face-to-face communication, no opportunity to assess goods, goods may not be delivered as promised or at all. If vendor is

foreign company with no office nearby, hard to deal to resolve issues.

Online fraud

-

Non-delivery of product or services, hidden costs and fees

-

Theft of information by malicious third party; vendor collecting and selling information

Malicious software

-

Trojan Horse – malicious code hidden in other software that may try to collect sensitive information such as banking or credit card informat ion

using techniques such as key logging

(46)

46 information

-

There are ways to recognize and record keystrokes remotely because keyboards (wired and wireless) emit specific electromagnetic waves when

certain keys are struck

E-commerce trust

-

Obstacles: lack of human interaction which is key to trust; inability to see product

Security & privacy

-

In 2004, TURSTe and Taylor Nelson Sofres found 69% of US online shoppers limit their purchases due to concerns about privacy

-

European Commission found 48% of European shoppers stated security as a main concern

-

Collecting user information increases ease-of-use and personalization and allows greater monetization, however there is user distrust if consent is

asked

o Techniques for establishing privacy: privacy statements are often long and self-serving; privacy seals are good ways to build trust

o Users often have great privacy concerns yet they do willing exchange a lot of information online; may be driven by the incentive provided.

o Techniques for security: data protection, firewall, verifiable domain name, encryption.

 Limitation is that the user end may be vulnerable/compromised

 Countermeasures: fraud detection, fast recovery from fraud, smart cards, one time passwords, USB plug-ins etc.

U.S.

Department of

Commerce

Quarterly Retail

E-commerce

Sales.

2011

June 23, 2011

http://www.census.gov/retail/mr

ts/www/data/pdf/ec_current.pdf

U.S. E-commerce statistics

StatsCan

Internet Sales

with or without

online payment

2008

June 23, 2011

http://www.statcan.gc.ca/daily-

quotidien/080424/dq080424a-eng.htm

(47)

47

published