The Model of Trust Factors in Paying through the Internet ( Dissertation )

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

2. 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

3. 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.

4. The Problem (externalfactors) • 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

5. 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).

6. 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.

7. 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 isconfidence 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

8. Research Model

9. 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 e-mails 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)

10. Results (goodness-of-fit) • Estimation of the model resulted in a good overall fit • for consumers: • 2 = 732.269, df = 474, p < .001; RMSEA = .049, P = .628; CFI = .988; NFI = .967; NNFI/TLI = .986; IFI = .988 • for merchants • 2 = 610.148, 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

11. 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 (R2) 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

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

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

14. Findings • 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

15. 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

16. 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

17. 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

18. 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

19. Questions ?