Exploring multi-faceted risk in e-payments

The factors affecting proceeding of any online payments depends on multiple factors of risk perceptions by the consumer. Exploring multi-faceted risk associated with online transactions has been of interest to researchers as these parameters of perceived risk may influence consumer’s acceptance of online and other e-services. Some previous studies have been done on multi-faceted risk in e-services. This study tries to extend this line of research by examining user’s perception on multi-faceted risk in online payment in e-commerce transactions in Indian context. Results of this study indicate users awareness and there risk perception on eleven different facets of risk in e-payment transactions and tries to prioritize these risk facets into three categories based on user perception about them.

Online e-commerce and e-services are interactive software based transactions and information systems received via Internet. These have been referred to as online shopping, online purchasing, assets information, computing resources, business processes and applications etc made available via Internet as a means of creating efficiencies and driving new revenue streams.

E-services play a very important role in business to consumer (B2C) e-commerce transactions because they provide on demand solutions to consumers thus strengthening consumer and service provider relations, improving customer satisfaction and creating transactional efficiencies (Ruyter et al., 2001).

Internet based shopping is becoming more and more popular in the consumers and has a very high growth rate as compared to retail segment. However, little is known about how customer evaluate these e-commerce services for potential adoption and what are various risk factors associated with online payments in e-commerce.

This research work tries to explore on multi facets of risk in e-payments and categorize these parameters into various categories based on user perception.


Perceived risk (PR) is commonly referred of as felt uncertainty regarding possible negative consequences of using a product or service (Featherman et al, 2003). It has previously been defined as a combination of uncertainty and seriousness of the outcome involved by Bauer, in 1967. Other common definitions include that of Peter and Ryan in 1976 according to which PR is the expectation of losses associated with a purchase and it acts as an inhibitor to purchase behaviour of the consumer.


Prior research on multi-faceted risk has identified perceived risk (PR) as a key antecedent of the behavioural intention of the consumer toward e-commerce purchase. Cunningham in 1967, classified PR as having six dimensions as below

  1. Performance
  2. Financial


  1. Safety
  2. Social
  3. Psychological

Jacoby and Kaplan in 1972, theorized PR as consisting of several independent varieties of risk after a risk resulting in a ‘‘trade-off’’ behaviour in final selection. Bellman in 1999, reported on the importance of time considerations in e-commerce and e-services and how significant predictor of final consumer behaviour it can be to on-line purchase. Their research found that consumers in a hurry with less time were more likely to purchase online in order to save time.

The current research also assumes that in current times consumers are concerned about potential risks of wasting time and efforts in online research for purchase, learning how to use, implementing and troubleshooting a new online-service, e.g. getting online payments back after failure of a transaction in the middle before it is complete. These time-conscious consumers likely to guard against the possible loss of time and are likely to discontinue with an e-transaction service that they consider as time consuming, complex in learning, having high transaction costs and risk of return of money on failure of transaction. In the current scenario safety can be described as concern for privacy of data and information security in an online transaction. Privacy risk may be particularly a salient feature for the e-payments product category as Personal data is involved loss or theft of which can result in financial as well as personal harm to the consumer.

In another research Ming-Chi Lee in 2009 suggested that most of scholars claim customers PR is a kind of a multi-dimensional construct having following six components or types of perceived risk: financial, performance, social, physical, privacy, and time-loss (Jacoby and Kaplan, 1972; Kaplan et al., 1974; Roselius, 1971).

Xin Luo et al. (2010) have applied PR in mobile banking and extended the PR construct to 8 parameters including financial, performance, psychological, privacy, physical, social, time and overall risk.

Ganesh V. et al (2003) updates that there are administrative threats in the form of risks such as data modification, password sniffing, repudiation and spoofing which are important in the current scenario of online payments so are considered in this study.

Sylvie Laforet et al (2005) in their study on Chinese consumer’s suggests that past experience with Computer/Laptop/Smartphone, new technology and past experience with banking can be important parameters in adoption of online/mobile banking same will be applicable in other e-commerce services including e-payment transactions, especially in rural India where most of the users might be using e-payment services first time directly through mobile phones.

Allen, Helen (2003), suggests the importance of policies and laws related to e-commerce and e-payments, these can be very crucial related to e-payment transactions, for example, mandating, use of PAN Card, mandatory requirement of one time password (OTP) in online payment approval etc can be very important parameters in PR, so are considered in the scope of this study.

Myung-Ja Kim et al. (2011), updates regarding transactional costs, due to other parties involved in the transaction, which may wilfully mishandle the transaction. He also focuses on opportunism risks associated with a lack of bargaining power in an online transaction, which results in consumer hesitating at the very last moment to click the final order payment button for a purchase when they confirm the transaction cost.

Kim, Changsu et al. (2010), highlight effects of customers perceptions of perceived security and perceived trust on the use of e-payment systems.

Weiner, Stuart E. in 1999, Economic Review of Federal Reserve Bank of Kansas City analysis the state of U.S. Payment System and how it is becoming more and more electronic over time with the emergence of new instruments in e-payments and as more and more users get accustomed to the e-payments, highlighting the importance of previous experience, ease of use and awareness to computer and new technology.

Allen, Helen in the Bank of England Quarterly Bulletin, 2003 report, raises policy related concern on the prospect of internet and mobile phone based new payment services

Chen, Lei-di. (2008), highlights the importance of consumer acceptance of Mobile-commerce and mobile payment services which are getting global attention, he focuses the importance of theoretical research to the field which can lead to the development of more effective m-payment devices and systems

Featherman, Mauricio S. et al. (2003), highlights the importance of multifaceted risk parameters and how negative effect of PR can result in potential losses to e-services adoption, thus highlighting the importance of research on them.

Thus it is important for online e-commerce companies operating in India to study these parameters in the Indian e-commerce industry from consumer’s perspective and prioritizing the various facets of risks and taking steps to counter these form consumers point of view.



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