Consumers Willingness-to-pay for Security in E-commerce Payment Systems

Abstract

For accessing Internet shopping mall websites, online banking websites, and e-government websites, due to the Digital Signature Act of Korea, which was in force from 1999 to March 2015, South Korean consumers had to use a two-sided digital authentication mechanism (TSDAM) to prove their identities. Although the use of TSDAM in e-commerce is not required anymore, today, lots of e-commerce payment systems are still based on TSDAM. This raises the question how consumers perceive this security feature of e-commerce systems. To answer this question, we estimated consumers willingness-to-pay for different e-commerce attributes by using a conjoint analysis method. In detail, we investigated the stated preferences of individuals with respect to ease-of-use, compatibility, TSDAM, and additional security mechanisms (e.g., confidentiality, none-replay) of e-commerce payment services. The results show that only compatibility and additional security mechanisms are significant attributes for Korean Internet users. Korean consumers are not willing to pay for TSDAM despite its widespread use. The implications of these research results are twofold: First, poorly designed e-commerce security regulation frameworks can be perceived by consumers as insufficient, consequently limiting the success of e-commerce. Second, consumers are willing to pay for security mechanisms, if the security mechanism (e.g., confidentiality) helps protecting their e-commerce transactions.