Payment Systems in the B2c eCommerce: Are They a Barrier for the Online Customer?

The B2c eCommerce is still far from realizing its full potential, despite its considerable growth in all the most important markets (USA, UK, France, Germany, Italy, etc.) in the last ten years. Several hurdles have to be overcome by both the customers and the merchants. One of the most cited is the lack of trust in the electronic payment. This is particularly so for the Italian market where customers have shown a strong reluctance in using the online shopping channel. The study presented in this paper seeks to understand if the payment systems can be considered as a barrier for the B2c eCommerce diffusion. More in detail the objectives of the paper are two-fold: • to give a detailed picture of the payment systems used to shop online and of the main related issues both from the merchant and the consumer side; • to build an explanatory theory to justify the current and future diffusion of the various payment systems that takes into account the factors influencing their suitability for the B2c eCommerce. The analysis is mainly based on case studies among the most important (top100) Italian eCommerce merchants which have been carried out as part of the B2c Observatory of the School of Management of Politecnico di Milano. The latter has studied the online sales in Italy since 2000 and has activated a research stream focused on the payment systems supporting the B2c eCommerce transactions. The 90% of the value of the B2c eCommerce transactions in 2008 in Italy has been supported by electronic Payments (credit cards,65%, eWallets,16%, and bank transfer,9%), but the trust building in the ePayment is low: 52% of the Italian Internet Users is afraid of using the credit card online. Despite the low trust, the security of the credit cards supporting the B2c eCommerce transactions is very high: the online frauds in Italy represent about 0,2% of the value of the online transactions in 2008 and, moreover, most of the frauds take place offline. Fraud prevention systems are widely adopted among the top 100 eCommerce websites: 4 out of 5 adopt at least one of them. The main driver affecting the diffusion of the different payment systems is their suitability to the online channel and not the trust of the users. We clustered the main payment systems according to all the main factors affecting their suitability to support the B2c eCommerce transactions. The most appropriate systems for the B2c eCommerce (we called them “eCommerce Best fitting” – credit cards and eWallets), are also the most diffused ones. They are followed by the bank transfer (defined as an “eCommerce Appropriate” system) and by all the other systems (loan, cash on delivery, postal order) that have been called “eCommerce only if necessary”. Trust does not seem to be the critical factor driving the diffusion of the payment systems. The correlation of the diffusion with trust is negligible with respect to the one with suitability. Despite their high trust, cash on delivery and postal orders are not very diffused, while the credit cards, despite their low trust, are the most diffused payment system.