Trust in E-Commerce

Topic 9

• Introduction• Trust & Risk• Strategic Thrusts• Framework of Trust

• Questions

• Conclusion• Related Web Sites

What is Trust?

Definition

“the assured reliance on the character, ability, strength, or truth of someone or something, or one in which confidence is placed”.

Trust & Risk

Web Sites

Questions

The above cartoon by Peter Steiner has been reproduced from page 61 of July 5, 1993 issue of The New Yorker, (Vol.69 (LXIX) no. 20)only for academic discussion, evaluation, research.

Quote From Jeff Sandquist.com

• On the Internet nobody knows you are a dog• Tuesday, July 27, 2004

• Fascinating how this famous cartoon from The New Yorker cartoon is proving less true as more and more folks get Weblogs. Weblogs give us an insider view of corporations and let us learn more about the individuals.

• Could the day arrive when we know for sure if you're a dog or not?

Who are you?

'Who are you?' said the Caterpillar.

This was not an encouraging opening for a conversation. Alice replied, rather shyly, 'I - I hardly know, sir, just at present - at least I know who I was when I got up this morning, but I think I must have been changed several times since then.'

—"Alice's Adventures in Wonderland", Lewis Carroll.

Trust & Risk

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

Trust in Traditional Commerce

• Identity (brick & mortar store)• Immediacy (physically touch the product)• Value (can evaluate since close at hand)• Discourse (talk to a salesman in person)• Community (words of mouth)• Privacy (pay cash)

• In the traditional setting, handshaking often symbolizes a transaction

• In the Internet context, it is not possible

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

What Consumers Look For to Evaluate Trustworthiness online

• Is the site professional?• Does the information architecture make

sense?• Is the site easy to navigate?• Is the site easy to use?• Are my questions answered?• Do other people trust this site?• Am I familiar with this company?• Are the prices reasonable?

Trust & Risk

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

Some Properties of Trust

• Trust is not associative (non-symmetric)• Trust is not transitive• Trust is always between exactly 2 parties• Trust will involve either direct trust or

recommender trust

Introduction

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

Trust and Risk

• Trust and risk are closely interrelated• Risk is defined as a consumer’s

perception of the uncertainty and adverse consequences of engaging in an activity

• When risk is present, trust is needed to make transactions possible

• Doing business on the Internet has many additional risks

Email – Best Practice

• Some of the things to consider when sending emails are discussed in this ZDNET article.

Collaboration and Trust

• Open source software is based on trust e.g. Mozilla

• Wikis• Blogs• How else can you collaborate?

Introduction

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

Four Types of Risk

• Financial (risk of losing money or paying too much)

• Functional (risk of receiving the wrong or a malfunctioning product)

• Social (risk of using a product that reflects poorly on its user)

• Physical (risk that we might be harmed by the product)

Higher consumer trust towards an Internet store will reduce the perceived risks associated with buying from that store

Introduction

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

Factors of Trust• Reputation and size are key factors• Long term reputation is far more than short-

term product quality movements• Reputation and size provide assurances• Assurances help to increase trust, particularly

when parties have not interacted before and do not have first hand knowledge of each other

The store’s perceived reputation is positively associated with a consumer’s trust in an Internet store

The store’s perceived size is positively associated with a consumer’s trust in an Internet store

Introduction

Strategic Thrusts

Conclusion

Web Sites

Questions

Framework

Outcomes of Trust

Higher consumer trust toward an Internet store will generate more favourable attitudes towards shopping at that store

The lower the consumer’s perceived risk associated with buying from an Internet store, the more favourable the consumer’s attitudes towards shopping at that store

Favourable attitudes towards an Internet store will increase the consumer’s willingness to purchase from that Internet store

Reduced perceived risks associated with buying from an Internet store will increase a consumer’s willingness to purchase from that Internet store

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Key Strategic Thrusts to Build a framework of trust

Five key strategic thrusts:

1. Establishing a secure e-Commerce environment

2. Building confidence in E-businesses

3. Building confidence in consumers to transact on the Internet; and

4. Educating and increasing awareness of the benefits of E-Commerce

5. Best practices for E-Commerce to increase trust

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Establishing a secure E-Commerce Environment

• People need to be confident of the identity of the person sending electronic messages, to be sure that they have not been tampered with, and that they have been kept confidential.

• Senders would want to be able to identify the recipients of the messages, to ensure that they will not land on the hands of the unauthorized.

• Secure electronic transactions can be provided through the use of encryption technologies and certification authorities.

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Establishing a secure E-Commerce Environment

Approaches• Security

– Secure Socket Layer– S-HTTP, s/MIME

• Identification– Challenge-Response System

• Authentication– Secure Electronic Transaction (SET)– Secure Electronic Payment Protocol (SEPP)– Secure Transaction Technology (STT)– PKI/Digital Certificates

• Authorization– Open Profiling Standard for Authorization and

Single Sign-On (OPS)

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Establishing a secure E-Commerce Environment

• Risk is unavoidable, but doing E-Business is perceived to have greater risks.

• Some banks impose higher transactional fees for online payments (risk premium)

• E-Merchants are required a fixed term (e.g. six month) deposit to cover possible charge backs arising from online transactions.

Approach: Risk Assessment and Profiling

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Building Confidence in

E-Business

• E-Commerce brings about new markets, more customers and global reach.

• Businesses are hesitant to exploit opportunity which can be accompanied with an increased risk of network fault, online fraud and crime.

• Businesses also worry about capital investment that might become outdated through rapid technological obsolescence.

Approach: Introducing E-Commerce Insurance & Underwriters

Introduction

• When a credit card fraud occurs, the e-business will lose its good, be charged for the costs and have to pay the issuing bank a charge-back fee

• Online consumers also face the risk that they may not receive the goods, the goods that arrived are not what they had ordered or the goods are damaged upon receipt and even DOA (dead on arrival).

Approach: Escrow Services

Trust & Risk

Building Confidence in

E-Business

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Building Confidence in

E-Business

• There will be potential e-disputes when doing business online, thus there is a need for an alternative dispute resolution process to allow businesses and consumers to have access to an independent and efficient way of resolving complaints.

Approach: Alternative Dispute Resolution (ADR) Mechanisms

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Building User Confidence in E-Commerce Transactions

• For consumers to transact on the Internet, they must have trust that the site keeps information private and offers a secure site for them to purchase products

• Consumers fear the risk of financial losses due to theft or fraudulent use of credit cards, or orders that disappear and products that never arrive.

Approach: Trust Marks

Introduction

• Verisign has developed and is promoting a set of principles and criteria (On-Line Privacy, Security, Business Practices and Transaction Integrity, Availability, WebTrust for Certification Authorities)

• Independent auditing can provide assurance services to evaluate and test whether a particular E-Commerce site meets these principles and criteria

• The WebTrust seal of assurance can be displayed on the E-Commerce site if it meets these principles and criteria

• Example site: eBay, Commonwealth Bank

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Building User Confidence in EC Transactions - WebTrust

Introduction

• http://www.eBay.com.au• http://www.anz.com.au• http://www.ozrural.com• http://www.paypal.com.au

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Introduction

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Building User Confidence in EC Transactions - BBBOnline

• Reliability Seal Program– Makes a commitment to high levels of ethical

business practices and customer satisfaction. – Has been in business for more than a year. – Has a satisfactory record with the Better

Business Bureau. – Commits to work with its customers and the

Better Business Bureau to resolve disputes that might arise.

• Privacy Seal Program– The BBBOnLine Privacy program was

developed specifically to help business web sites address this key concern of online shoppers.

• Example site: Dell Computer

Introduction

• See Dell• BBonline• Trust e• Verisign• See Nikon bonded information

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Introduction

Deals with privacy concerns of users. Its goal is to provide:

• Online consumers with control over their personal information

• Internet publishers with a standardized, cost-effective solution for both satisfying the business model of their site and addressing consumers’ anxiety over sharing personal information online

• TRUSTe seal will take users directly to a company’s privacy statement

• Example site: MSN

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Building User Confidence in EC Transactions - TRUSTe

Introduction

Program Principles:• Adopting and implementing a privacy policy

that factors in the goals of the individual web site as well as consumer anxiety over sharing personal information online

• Posting notice and disclosure of collection and use practices regarding personally identifiable information via a posted privacy statement

• Giving users choice and consent over how their personal information is used and shared

• Putting data security and quality, and access measures in place to safeguard, update and correct personally identifiable information

Building User Confidence in EC Transactions - TRUSTe

Introduction

Minimum requirements of the TRUSTe privacy statement:

• What personal information is being gathered• Who is collecting the information• How the information will b used• With whom the info will be shared with• The choices available to users regarding

collection, use, and distribution of their info• The security procedures in place to protect

personal info from loss misuse, or alternation• How users can update or correct

inaccuracies in their pertinent info

Trust & Risk

Conclusion

Web Sites

Questions

Building User Confidence in EC Transactions - TRUSTe

Introduction

TRUSTe Oversight:• Initial and Periodic Review

– Review website for adherence to the TRUSTe principles, privacy statement requirements and trustmark usage.

• Seeding– TRUSTe submits unique user information and

monitor results for any wrongdoing

• Online Community Monitoring– The ability of the community at-large to report

violations by establishing online Watchdog reporting form for users. Licensee privacy statement must also display the TRUSTe “click to verify seal” which links to a verification page located on TRUSTe’s secure server.

Trust & Risk

Web Sites

Framework

Building User Confidence in EC Transactions - TRUSTe

Introduction

TRUTEe Resolution Process• Request users to contact website directly

before filing a report with TRUSTe• If there is no satisfactory response, TRUSTe

steps in as the liaison between the consumer and website to resolve the issue.

• If the website is in violation and is verified by TRUSTe’s official auditors, TRUSTe will advise and guide the licensee on the steps to remedy the problem

• If no action taken, then it will result in revocation of the TRUSTe trustmark

Trust & Risk

Web Sites

Questions

Building User Confidence in EC Transactions - TRUSTe

Introduction

Issues• Narrow Focus

– Web only, what about e-mail and other channels?

• Potential conflict of interest– Depends on corporate sponsors

which are also users of TRUSTe

• Self violation– Allowed a third party –

thecounter.com – to track visitors to its web site through a collection of personally identifiable information

Web Sites

Framework

Building User Confidence in EC Transactions - TRUSTe

Introduction

The ease with which personal information can be disseminated with the proliferation of IT has raised privacy concerns worldwide.

Approaches: Addressing privacy concerns- Policy for Cookies should be made known to the users- Policies regarding any practices that involve

using record of user accesses for statistics generation and/or debugging, should also made known to the users- Platform for Privacy Preferences Project (P3P)

Trust & Risk

Questions

Framework

Building User Confidence in E-Commerce Transactions

Introduction

P3P (W3C’s Platform for Privacy Preferences Project): A framework for informed Internet interactions. The goal of P3P is to enable Internet sites to express their privacy practices and users to exercise preferences over those practices

Approach: Each Internet site has a proposal for privacy policies. If a proposal matches the user’s preference via WWW user-agents, then accept. Otherwise, reject. Sites can use P3P to increase the level of confidence

Trust & Risk

Web Sites

Building User Confidence in E-Commerce Transactions

Introduction

Approaches: The government introduces initiatives to help educate and increase awareness of E-Commerce for the businesses and consumers.

1. Encouraging the fostering of an e-lifestyle amongst the people

2. Creating E-Commerce awareness through seminars targeting at businesses

3. Publicly awarding businesses that adopted E-Commerce successfully

Trust & Risk

Conclusion

Profile

Educating and Increasing Awareness of the Benefits of E-

Commerce

Introduction

• Seals of Approval: Re-assure the consumers that security has been established

• Brand: The E-Merchant’s promise to deliver specific attributes and its credibility based on reputation & consumers’ previous experience

• Navigation: Ease of finding what the consumers want

• Fulfillment: Clearly indicates how orders will be processed, and provides information on how to seek recourse if there are problems

• Presentation: Design attributes that exhibit quality and professionalism

• Technology: State of the art even it is expensive and difficult to use

Trust & Risk

Conclusion

Web Sites

Questions

Framework

Best Practices for E-Businesses to Increase Trust

Introduction

Trust & Risk

Strategic Thrusts

Conclusion

Web Sites

Questions

Putting all the key strategic thrusts together

To build a framework of trust

Gartner Article (Lost Sales)

Introduction

Trust & Risk

Strategic Thrusts

Conclusion

Web Sites

Questions

An Online Trust Framework

(Simple Model)

Introduction

Technology Dimension– Security, Authentication,

Identification, Authorization– Non-repudiation– Confidentiality of Transactions

• Tools– PKI/Digital Certificates– Challenge Response – SSL, S/MIME– SET, SEPP, STT, OPS

Key Strategic Thrust: To establish a secure E-Commerce Environment

Trust & Risk

Strategic Thrusts

Conclusion

Web Sites

Questions

A Framework of Online Trust

Introduction

Market Place Dimension– Privacy Services (e.g. P3P)– Alternative Dispute Resolution (ADR) Mechanisms– E-Commerce Insurance & Underwriters– Escrow Services– Credit Bureau Services– Alternative Dispute Resolution (ADR) Mechanisms– Trust Marks

Key Strategic Thrusts: – To build confidence in EC– To build user confidence in EC Transactions– Best Practices

Strategic Thrusts

Conclusion

Web Sites

A Framework of Online Trust

Introduction

Market Participant Dimension– Risk Assessment & Profiling– Fostering e-commerce lifestyle, e-commerce

seminars for consumers, etc. – Brand, Effective Navigation, Fulfillment &

Presentation

Key Strategic Thrusts: – To establish a secure E-Commerce Environment, – To build confidence in EC– To build user confidence in EC Transactions– To educate and Increasing Awareness of the

Benefits of E-Commerce– Best practices

Conclusion

Web Sites

A Framework of Online Trust

Introduction

Consistent Legal Framework is important– Country specific but EC is global– Conflicting views create confusion and friction in the

E-Commerce

A sound global legal framework plays a vital role in restoring confidence in the mind of customers.

Approach: United Nation’s Committee on International Trade and Law (UNCITRAL) should take initiative to find a global acceptable solution for the legal framework

Web Sites

Questions

A Legal Framework

Introduction

Trust & Risk

Strategic Thrusts

Conclusion

Web Sites

Questions

A detailed Online Trust Framework

Web 2.0 – YOU as the new dimension

Going beyond commerce, who do you trust?

Consider this map

Next week….