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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….