The Model of Trust Factors in Paying through the Internet (Dissertation) Franc Bračun, PhD Merkur Day 2004 Friday, 22nd October

The Context of Research An exchange of consumer’s money for the merchant’s goods or services An electronic payment A critical factor supporting innovative processes in electronic commerce Becoming increasingly important in the context of B2C e- commerce Research is needed to gain a better understanding of the behavior of online consumers in the context of B2C e-payments

The Problem (behavioral beliefs) Perceived usefulness and perceived ease of use (advanced by Davis and his colleagues - TAM) have been identified as key factors explaining and predicting a consumer’s intention to use the Internet as a medium for purchase The role of trust in reducing perception of risks and the influence of risk and trust on adoption of e- services Conceptualizations of the effect of trust and risk on behavioral intentions tend to be inconclusive.

The Problem (external factors) In the context of TAM all other factors not explicitly included in the model are posited to be completely mediated by perceived usefulness and perceived ease of use Recent studies found evidence of a direct relationship between trust and behavioral intention Trust and perceived risk are not defined as a set of beliefs about one’s own actions (e.g., engaging in a transaction with the other party) and the outcomes of this behavior A set of specific beliefs about the intentions and behavior of the other party A direct influence of trust and perceived risk on one’s behavioral intentions is, from a TRA and TAM perspective, a surprising finding. Additional explanatory variables are needed to explain the effect of risk and trust on behavioral intentions

An Additional Explanatory Variable One of the possible variables – confidence Confidence is the individual’s assumption that the outcome he desires, rather than the outcome he fears, will occur An outcome expectation is “a judgment of the likely consequences [one’s own] behavior will produce” (Bandura 1986, p. 391).

Utilitarian and Adversative Consequences of Using the Internet Utilitarian (positive) consequences (e.g, perceived usefulness) of technology use – Increased effectiveness – Efficiency – Convenience Undesirable consequences are the adverse effects of using the technology such as the loss of important data or money In regulating their behavior, people adopt courses of action that are likely to produce desirable outcomes and generally discard those that can lead to undesirable outcomes User acceptance intention can be influenced by beliefs about the adversative consequences of using new technologies.

Confidence toward … In the context of uncertain environment users tend to use or not use new technologies primarily to the extent they expect it will not result in adverse consequences This expectation is confidence toward using new technologies. Confidence toward using new technologies is defined here as the extent to which users expect that using new technologies in conducting transactions will not result in adverse consequences This definition reflects an aspect of expectancy – that is, confidence is an expectation of a nonnegative outcome of engaging in an interaction characterized by uncertainty

Research Model

Research Methodology A cross-sectional field study via a questionnaire Prior to administering a large-scale survey, both instruments have been refined by a pretest and pilot tested Out of 1,889 s sent to the Internet users, 232 of responses were adequate. A total of 346 questionnaires was sent via postal mail to company managers in charge of accounting or finance. The final sample of 132 (a response rate of 38.2%) responses was used in the analysis. The research model was tested using covariance-based Structural Equation Modeling (SEM)

Results (goodness-of-fit) Estimation of the model resulted in a good overall fit – for consumers:  2 = , df = 474, p <.001; RMSEA =.049, P =.628; CFI =.988; NFI =.967; NNFI/TLI =.986; IFI =.988 – for merchants  2 = , df = 474, p <.001; RMSEA =.047, P =.680; CFI =.986; NFI =.941; NNFI/TLI =.983; IFI =.986 It can be concluded that the model obtained adequate degrees of fit for both samples

Results (the Measurement Model) Composite reliability of the measures included in the model is supported; ranging from.81 to.96, and exceeding minimum value of.60. Convergent validity is also supported; all loadings are highly statistically significant (p <.01) and the factor regression coefficients (R 2 ) exceed the recommended value.50 Discriminant validity is supported; the square root of the AVE of each construct is larger than its correlations with the other constructs

Results (the Structural Model for Consumer Sample) Covariance-based Structural Equation Modeling Results for Consumer Sample

Results (cont.) Covariance-based Structural Equation Modeling Results for Merchant Sample

The first observation is that confidence reveals a significant and strong relationship with willingness to transact confidence  willingness Results revel complex interrelationship among trust, perceived risk and confidence; trust  perceived risk  confidence Findings

Implications for Theory and Research This study introduces a new variable that predicts willingness – i.e., the notion of confidence toward performing payments via the Internet (a variety of an outcome expectation) The present study reformulated the meaning of trust by explicitly introducing different types of trust according to different bases of expectations

Implications for Theory and Research (cont.) Another important implication of this study is the causal relationship between trust and perceived risk The examination of structural influences on causal links: – ‘party trust  behavioral uncertainty  confidence’ – ‘trust propensity  environmental uncertainty’ – ‘party trust  perceived security  behavioral uncertainty’ is a promising field of future research

Implications for Practice Managers responsible for implementing new technologies must design Web sites to communicate trustworthiness through the Web interface Managers should make thoughtful choices about which trust-mark seal and/or logo to use The implementation of technical security measures on its own does not diminish concerns regarding security of electronic payment transactions

Limitations of the Study The present study is of a cross-sectional nature and since no experimental research has been conducted, no definite conclusions can be drawn concerning the causality of the relationships in the conceptual model Study data have been collected from consumers and merchants using a questionnaire survey administered in Slovenia It is possible to identify additional factors that influence willingness to transact; for example, one could integrate the model proposed in the present study in TAM Future research could examine the differences between experienced and novice consumers as well as the difference between experienced and novice on-line merchants The study focused on Internet payments

Questions ?