Ebusiness in an Environment of Trust

Research has shown that computer mediated situations delay trust building, render it more fragile and increase the probability of defection, or cheating (Olson & Olson, 2000; Bos, Olson, Gergle, Olson & Wright, 2002). Traditional methods of ascertaining trust, such as body language, the handshake, tone of voice and general demeanour are lost online (Shneiderman, 2000, Clarke, 2002). It is therefore hardly surprising that lack of trust has been identified as a key reason for the slow uptake of ebusiness. Ebusinesses need to identify strategies whereby they can engender the same trust through the channels available to them: internal policy, web site interface and customer care. Central to the discussion of ‘Ebusiness in an Environment of Trust’ are definitions of both trust and ebusiness.

Trust is a concept which occurs in many disciplines. Several definitions have been proposed for this concept, including those which state that trust is variously: a level of subjective probability (Abdul-Rahman & Hailes, 2000); an expectation based on commonly shared norms (Shneiderman, 2000); a belief in trustworthiness (Sultan, Urban, Shankar & Bart, 2002); and, reliance (Clarke, 2002).

Trust also has many attributes including that it is: a significant indicator of consumer action (Sultan et al, 2002); limited in scope, related to particular purpose, contextual, conditional and fragile (Clarke, 2002); not reducible to information (Rutter, 2001); accruable, explicit and contractual (Shneiderman, 2000). In addition, the costs and benefits of trust are assessed moment by moment and trust is higher when there is less at stake (Olson & Olson, 2000).

Different analytical fields see trust in different ways: psychologists see trust as personal trait; sociologists see it as social structure; and, economists see it as an economic choice mechanism (McKnight & Chervany, 2002).

Several authors have independently identified three sub-types of trust which are useful to use when assessing ebusiness. The McKnight & Chervany (2002) nomenclature will be used for this essay and is: interpersonal; institutional; and, dispositional.

Dispositional trust is that which is shown to others generally and is independent of party and context. Its origins are in psychology (McKnight & Chervany, 2002). Interpersonal trust is trust in the seller, or the ‘expectation that the word or promise of the seller can be relied upon and the seller will not take advantage of the consumer’s vulnerability’ (Chong et al, 2003), agent and context specific (Abdul-Rahman & Hailes, 2000) and has origins in social psychology (McKnight & Chervany, 2002). Institutional trust is trust in the web itself, or the ‘belief that the intermediary will protect users, provide a safe, secure and stable environment, and offer problem-free transactions’ (Chong et al, 2003), with origins in sociology (McKnight & Chervany, 2002).

Ebusiness is similar to ecommerce, enough so that there are three accepted alternative definitions of their relationships: ecommerce has some degree of overlap with ebusiness; ecommerce is broadly equivalent to ebusiness; ecommerce is a subset of ebusiness. For the purpose of this essay the following definition will be used: ‘Ebusiness is all forms of electronic dealing among natural and legal persons, including ecommerce, egovernment, epublishing and electronic services delivery.’ (Clarke, 2002b)

According to Joines, Scherer & Scheufele (2003), ebusiness has higher ‘customer intimacy’ offering a personalised advertising experience and a combination of mass and personal communication. Rutter (2001) on the other hand claims that the ecommerce experience stops being ‘shopping’ and is reduced to buying things; the geographical, temporal, tactile and social experiences of shopping being lost.

In the post-traditional society the winning of trust is constantly necessary as both our perception of risk and our exposure to actual risk is higher than before (Rutter, 2001). In addition the Internet, and hence ebusiness, are relatively new concepts, where the potential cost of making a wrong decision may be drastically higher than the cost of not proffering trust. Issues of trust in traditional ‘bricks and mortar’ businesses are much less severe than ecommerce-related trust issues. Buying online provides little or no opportunity to verify the quality of goods or the company itself. Ebusiness cannot depend on physical proximity, handshakes, body signals, eye contact, tonal intonations, common legal jurisdiction or even, in many cases, a definable jurisdiction (Clarke, 2002; Shneiderman, 2000).

Studies have shown that online media, per se, are trust inhibiting. Face-to-face interaction engenders the greatest trust, followed by telephone, text chat and email. The more interactive the media is, the better it is at promoting trust. Media where response was immediate had highest trust levels among subjects. However, test subjects meeting face to face before playing a social dilemma game via email the following day, played the game with as much cooperation and trust as those who discussed things face to face during the game. The study also found that when participants exchanged personal information, they co-operated more (Olson & Olsen, 2000).

These findings were supported by another similar study, where again, cooperation occurred most quickly with richer social situations. This study also found that mediated trust was initially inhibited, as voice-only communication strips away visual cues and video somewhat masks body language, but that the inhibition faded over time. They also found that the sense of social distance between participants reduced pressure to conform and that computer mediated conditions were more vulnerable to loss of trust (Bos et al, 2002).

In novel situations, people rely on their general disposition to trust (McKnight & Chervany, 2002), however general disposition to trust may not be enough to encourage the consumer to participate in the transaction where the following occur:

The risk is significant

To the consumer, the internet can be considered significantly risky, potentially involving: credit card fraud; incorrect and defective goods; inconsistent and fraudulent seller behaviour; personal data sold; identity theft; tracking of activity; and, insecure transactions; (Chong et al, 2003; Daughtrey, 2001; Wang et al, 1998 cited by Joines et al, 2003; Rutter, 2001).

Time exposure occurs

When the consumer pays now, and receives the goods later, problems can include delayed delivery, no delivery and over-inflated shipping costs (Chong et al, 2003).

Knowledge asymmetries

These occur when both parties do not have the same information, such as: inadequate contingency planning; poor customer service; false advertising; misleading information; fake sellers and items; inaccurate review records; unscrupulous behaviour; seller cancellation (Daughtrey, 2001; Chong et al, 2003; Ba & Whinston, 2003).

Culture is collectivistic

Cultural differences affect the formation of trust. Chong et al (2003) found differences in the way trust was conceptualised and formed between Japanese and US subjects. However, Olson and Olsen (2000) claim that Americans and Japanese have more dispositional trust than the Chinese and the French. Americans have low uncertainty-avoidance and are individualistic (more likely to trust), while the Chinese have high uncertainty-avoidance and are collectivistic (less likely to trust) (Chong et al, 2003). This reiterates the findings of Bin, Chen and Sun (2003) who identified the Chinese culture of cash based payment, order-online/pay-offline, where few Chinese people trust the internet for business.

The industry category has a low associated trust level

Trust levels are different across ebusiness industry categories. Trust is higher for financial services and computers, less so for community and etailer, and less again for travel, portals, sports and automotive categories (Sultan et al, 2002).

Where general disposition to trust is weak, generation of interpersonal trust and/or institutional trust in the consumer may be needed to induce participation.

The creation of trust as intangible asset is a key requirement for creating and sustaining long term customer relationships in ebusiness. If a supplier cannot be trusted at an acceptable level to the customer, they will not engage in any transactions. Failure to inculcate trust in customers may lead to loss of business and/or diminished reputation. Having indicated that there are significant barriers to online trust, we now need to look at solutions to this problem. These are several ways this can be accomplished, both formally and informally.

Most formal trust mechanisms are examples of institutional trust. Formal trust mechanisms include:

Legal mechanisms

The majority of risk can be managed through the use of warranties, guarantees, insurance and recourse procedures. The consumer should be informed that the amount of misappropriation potentially done by the company is limited through law and officially sanctioned regulation. The existence of return policies show commitment to the consumer and should outline how they will be recompensed for delays, etc. (Rutter, 2001).

Security and privacy protocols

Security and privacy issues are less of a barrier now than before. In 1998 approximately 80% of Internet users are either somewhat or very concerned about security of the internet (Rutter, 2001) however, more recently, in 2002, Sultan et al concluded ‘over 80% of explained variance in trust is due to web factors other than privacy and security’. Nonetheless, prominently displayed security and privacy policies make 60% of consumers feel more confident (Daughtrey, 2001) and Joines et al (2003) reported that respondents with the highest levels of transaction security concerns were significantly less likely to shop online.

Certification and meta-branding

Certification is also available through the use of digital and inspection certificates. (Daughtrey, 2001; Ba & Whinston, 2003; Clarke, 2002). Meta-brands are a form of branding and accreditation involving seals of approval with companies like TRUSTe, VeriSign and TrustUK. (Clarke, 2002b; Rutter, 2001).

Most informal trust mechanisms are examples of interpersonal trust. Informal trust mechanisms include:

Direct relationships and experience

A direct relationship can consist of multiple prior transactions between the seller and the consumer. A direct experience can be prior exposure through a vicarious experience or a single prior transaction experience with either the market-space, the seller, or the product. (Clarke, 2002b; Clarke, 2002)

Online community

Community enforcement may consist of a feedback forum, which may be effective if the community is informed.  A sense of community also helps engender trust and may be fostered by site stickiness including reviews, overviews, hints and tips, buying advice and general relationship building (Rutter, 2001).

Referred trust

Referred trust (word of mouth), in a general form is company reputation. It is context dependant and subjective in that the referee’s situation and motivation should be considered (Abdul-Rahman & Hailes, 2000). The seller’s reputation for being reliable, consistent and fair will undoubtedly influence the level of trust in the consumer, whereas known occurrences of opportunistic behaviour on the part of the seller will, no doubt, damage reputation. Referred trust is a form of interpersonal trust. Referred trust may, in an institutionalised form, be accreditation (Clarke, 2002b) as mentioned in meta-branding above.

Branding

Brands themselves are signifiers of trustworthiness. ‘We may choose to buy a certain brand because we have found it to be trustworthy in the past.’ (Abdul-Rahman & Hailes, 2000).

The problem with the global market is that many trading partnerships are one off, making it an obvious ‘Prisoner’s Dilemma’ where cheating may be profitable in a single business transaction (Ba & Whinston, 2003). For example, on eBay from February to June, 1999, 89% of buyer-seller pairs conducted just one transaction (Resnick & Zekhauser, 2002 cited by Chong et al, 2003). This makes it difficult to overcome the initial trust inhibition as there is little opportunity to build up trust, and in situations where trust does develop, being computer mediated, it is therefore more vulnerable. The trust type developed in this context is dispositional, tending towards interpersonal. Where interpersonal trust can be developed more quickly, or supported by institutional trust, trust should be greater and less fragile.

E-marketplaces may be compromised by the finding that a company’s web site has generally greater intrinsic trust than a third party web site (Sultan et al, 2002); however, recent developments may allow e-marketplaces, through the use of ontologies, to offer a solution to the ‘prisoners dilemma’ situation that is the internet. An ontology is ‘a set of concepts, such as things, events and relations, that are specified in some way, to create an agreed upon vocabulary for exchanging information’ (Singh, Iyar & Salam, 2003).  In simple terms, they are histories of transactions influenced by the experiences of other buyers and suppliers in terms of reliability and trustworthiness. That e-marketplaces can store ontologies of interactions means that they can create institutional trust to supplement interpersonal trust. Ontologies are essentially a formal interpretation of the feedback forums available on C2C sites, such as eBay.

Little explicit mention of trust has occurred in the literature on ecommerce models despite its obvious significance, as shown above, however it is often implied. Kinder (2002) outlines Molina’s ‘diamond of alignment’ as a model of ecommerce. It does not explicitly state that trust is essential for this business model, but it is implied in several key areas.

1. ‘Constituents’ perceptions, goals, actions and resources’ could well include the documentation of trust policies and standards including consumer identification policies and a trust performance measurement system, marketing and education of trust issues internally and commitment from management.
2. ‘Nature and maturity of technology’ would include the establishment of security protocols and the use of digital signatures, cryptography and public and private keys.
3. ‘Governance’ includes use of trusted third parties, ontologies, meta-branding, guarantees and insurance and not least, legal boundaries and mediation services.
4. ‘Target constituents perceptions and pursuits’ is the actual facilitation of consumer trust and privacy, necessitating explicit trust cues in the web interface design and access to information and choice.
5. Of the ‘nature of target problem’ there are several including the facelessness of the internet, the mediated nature of ecommerce, the relative newness of the technology and the internet / ebusiness concept and the imbuement of trust in the consumer.
6. ‘Interacting technologies’ taken in a broad sense includes use of multi-channel trust building and branding.

Lee (2001) also mentions trust as necessary for increasing the switching costs of customers, but makes no mention of the trust strategy that needs to be in place before customers become customers. In the ‘five steps to ecommerce success’, Lee does not explicitly mention trust issues, however the final two, reengineer the corporation and the website, and re-invent customer service are both conducive to trust building once done in a way outlined in 2.2 Trust Building Methods (above) or Figure 2, below.

Amit and Zott (2001) also mention switching costs, in the form of ‘Lock-in’ and although they do mention trust building in the form of branding, customisation, personalisation, virtual communities and transaction safety and reliability, they also, in fact, encourage activities which may actually reduce trust where customer permission has not been given, such as direct advertising and target emails. In addition, methods for encouraging reluctant or wary consumers are not considered.

Razi, Tarn and Siddiqui (2004) identify several implicit trust issues in their reasons for DotCom failures such as inadequate customer service, slow delivery, cumbersome and complex website, security concerns and, explicitly, low customer confidence and lack of customer loyalty. In contrast, DotCom successes had navigable websites, legible privacy policies, outstanding customer service and delivery schedules. This supports the trust related literature and adds weight to the argument that trust issues should be explicitly considered in both new ebusiness models and ebusiness strategy.

Trust creates value by reducing uncertainties and relationship costs and by increasing likelihood of success in the form of customer satisfaction, long term orientation, cooperation, reliable expectations, internal security and increased income for supplier (Chong et al, 2003; Sultan et al, 2002; Daughtrey, 2001; Abdul-Rahman & Hailes, 2000) Trust building is not an ad-hoc procedure, rather it is a deliberate set of actions with associated costs including the development of policies, tools and training regarding policies, appraisal costs of policies including audits, testing and compliance checking and insurance. Failing to generate a sense of trust can include loss of business and diminished reputation (Daughtrey, 2001).

As has been shown, trust is key to successful ebusiness. In order to inculcate the greatest amount of trust possible, business should endeavour implement a trust strategy to: establish a level of trust sufficient for new customers to begin entering into transactions which overcomes weak general disposition to trust, and at minimum, maintain that level of trust and develop trust management policies and standards, incorporate trust cues explicitly in web site design strategies and pay attention to customers in a way that generates interpersonal and institutional trust.

This paper has identified many characteristics which both enhance and reduce trust in the consumer. It has also identified various trust-building strategies which can overcome weak dispositional trust. What still needs to be identified through future research is the best combination of characteristics to enhance trust. New models of ebusiness should also explicitly consider the key role of trust.

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