And what role can chartered accountants play

How Web Vendors Build Trust

• Importance of E-commerce trust• Theoretical framework for E-commerce

trust• Real world techniques for building trust

online

Agenda

Importance of E-commerce• Current Size:

– Online retail: 46 billion USD in the U.S. in Q1 2011

– E-commerce: 62.7 billion CDN in Canada in 2007

• Projected growth (Forrester Research): – 10% per year in U.S. and Europe; – $279 billion in US and €134 billion in Europe by

2015• Driver of change: reduced communication

cost, access to global market, long tail effect

Importance of E-Commerce

• Trust the vendor has the ability and intention to:– deliver the product/service and – Safeguard customer information

• E-commerce would increase if trust is improved– Pew Internet and American Life Project (2008): If

users more confident sending sensitive information, online shopping would increase from 66% to 73%

– ISO & Agent (2009): 43.5% of non-internet shoppers cite security as main reason

Importance of Trust in E-commerce

• Customer’s unfamiliarity with E-commerce• Low cost for setting up fradulent e-

commerce sites• Prevalence of phoney websites of

reputable businesses• Complexity of the Internet and security

solutions• Lack of face to face interactions• Inability to inspect product before

purchasing

Challenges for E-commerce trust

• D. Harrison McKnight, Vivek Choudhury and Charles Kacmar’s Model (2008)

• A.F. Salam, Lakshimi Iyer, Prashant Palvia and Rahul Singh’s Model (2005)

• Jari Salo and Heikki Karjaluoto’s Model (2007)

• Kaplan & Nieschwietz’s Model (2003)• Ritu Lohtia, Daniel C. Bello and Constance

Elise Porter’s Model (2009)

Academic Models for E-commerce Trust

McKnight et al.’s Model (2002)

A.F. Salam et al.’s Model (2005)

Jari Salo et al.’s Model (2007)

Kaplan et al.’s Model (2003)

Ritu Lohtia et al.’s Model (2009)

• Trust Assuring Arguments• Payment Systems• Reputation/Branding• Third Party Assurance

Real world techniques for building trust

• “Statement of a claim and its support statement used in an Internet store to address trust-related concerns”

• Content: Persuasiveness (Toulmin model of argumentation)

• Source: Third party or first party• Elaboration Likelihood Model (ELM): As

price go up, content becomes more important, source becomes less important

Trust Assuring Arguments

• Payment methods: – prepaid and regular credit card, – e-wallets, – online bank transfer, – cash on delivery and payment by post

• Perceived vs. actual security– Low incidences of credit card fraud:0.2% of e-

commerce and decreasing– Additional security of prepaid credit card & e-wallet– Still perceived as less safe

• Convenience and flexibility override security

Payment Systems

• Offline and online brand• Significant driver of trust

• Building brand/reputation– Repeated positive interaction with customers– Marketing and promotion– Brand alliance

Brand/Reputation

• TSL and SSL and Enhanced SSL• Hacker-Tested seal• Web Trust

Third Party Assurance

• AICPA and CICA• Security, privacy, business practices, transaction

integrity, availability, confidentiality and non-repudiation

• Assurance not monitoring or guarantee• Low penetration: 41 websites in 2004 (6 years

after launch)• Challenges:

– Weak consumer response to CA brand– Perceived and actual competence– Accounting scandals– Vendor only need third party assurance before

establishing own brand

Web Trust

• E-commerce trust important in driving business success

• 3 Main drivers of e-commerce trust: – Institutional characteristics– Vendor characteristics– User disposition to trust

• 3rd party assurance is a vendor characteristic• Web-trust is a form of 3rd party assurance

Overall, accountants have a limited role in e-commerce trust

Conclusions