Consumer Perceptions of Online Transaction Security - A Cognitive Explanation of the Origins of Perception

An important impediment to the success of business to consumer ecommerce is the consumer perception regarding the riskiness of the online channel. A widely held perception among consumers is that financial transactions on the Internet are inherently more risky and not secure. Interestingly enough, most security experts would view Internet transaction as, in fact, more secure than traditional transactions. The persistence of this misperception is therefore, quite surprising. In this research, we focus on consumers’ perceptions of online risks. We suggest that the consumer risk perceptions also arise from some well-known cognitive biases that decision-makers (consumers) are typically subject to. Taking an information processing view of customer decision making, we provide a subset of cognitive biases, which affect consumer judgments in information acquisition, alternative valuation and learning from evidence. Theoretical and limited experimental evidence is provided.