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Internet Security And Consumer Confidence

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Information technology is one of the technologies which have had a great impact on our economical, political and social life. Information technology has transformed our life in various ways right from our homes, our work place, and our business life. Information technology has penetrated to all the important sectors in our life. Information and communication technology (ICT) has not only changed our pattern of communication but it has also changed our life.  Since the development of personal computers in 1970s and the discovery of internet in 1980s, the world was ushered into a new era of information technology.  This accelerated the process of globalization and integrated the world economic systems.  More than ever in the world, every country became open to the scrutiny of the world. Information technology has ushered the world to a new world order.

One of the way in which information technology has changed the world is through e-commerce.  Since the 1990s, e-commerce has grown tremendously but not at the precedent rate. Although many people understand the benefits of e-commerce, there are many factors which have hindered their adoption of e-commerce service. E-commerce security remains the greatest impediment in adoption of e-commerce services despite the regulations which have been instituted by the government.  [1]E-commerce security is a great factor eroding consumer confidence on e-commerce services.

This paper will look into the issue of e-commerce security and how it affects consumer confidence. The paper will also review some government regulations which have been put in place in order to deal with issues of e-commerce security.

Online security and consumer confidence

Within less than three decades since it was invented, ICT and indeed the internet has become an important medium for communication and commerce.  ICT has had a great impact in the business sector in various ways from process, storage and retrieving of data to actual business process like industrial application.  ICT has helped in the development of the modern media which has played a critical role in business advertisements, selling of produce and communication with consumers.  [2]However it was the developed of the World Wide Web which ushered organizations into a new business ear where they could not only communicate with their consumers but they could also sell products.

Therefore it was the development of the World Wide Web that enabled the development of e-commerce.  The web space or the web page became the most important business tool.  The web page became the center of communication between the organization and its consumers. Through the web page, organization could display their inventory and guide consumers on how they could order these products and the mode of delivery.  This means that the web page became the virtual shop for many organizations which adopted e-commerce.  This reduced the physical space that was needed for organizations to display their products.

The development of web page did not only revolutionize organizations selling goods but it was more beneficial for organizations which offered service like banking organizations and others.  [3]Unlike goods which had to be delivered physical, organizations offering services found the webpage more beneficial since it was more convenient to these organizations.  It was also easy and it saves both the organization and its customer a lot of time.

The internet is the world’s fastest growing market place and has seen an enormous increase in globalization of products and services.  It is projected that worldwide, there are more than 1.35 billion people using the internet regularly.  According to the theory of diffusion of innovations, internet shopping or internet transaction is an innovative way compared to the traditional shopping. E-commerce as a model of shopping is an aftermath of development of the internet.

[4]However the whole issue on development of e-commerce has been faced by one huge set back. The level of consumer confidence on internet transactions is the great hindrance to adoption of the internet commerce.  In many countries in the world, the rate of adoption has been greatly hampered by low consumer confidence. Although there are various multifaceted factors involved in e-commerce security, privacy of personal information, safer of international trade and lack of cohesive payment system remains the most pressing issues.

[5]Consumers have become wary of the internet transaction owing to a number of factors.  Many people especially the older generation find it hard to trust their hard earned saving through internet transaction.  While the increasing number of online frauds have contributed to consumer response, research shows that many people don’t trust transacting their money unless in person to person transaction.

According to the theory of diffusion of innovation, the introduction of a new innovation is evaluated on the bases of rate of adoption of the innovation. This theory focuses on five constructs which are used to expanding the rate of adoption including compatibility, trialibiltiy, observability, and the complexity of the innovation. However a number of studies later developed a new construct of evaluation based on the perceived risk from the new innovation.  Therefore the same a mode has bee used to explain the rate of adoption of internet commerce.

 First based on the perceived benefits, internet commerce is viewed beneficial to both the consumers and the business organization. As we highlighted earlier, both are going to save a lot of time used in the conventional business process. At the same time there is a high perceived ease with the use of the technology although there are some issues when it comes to the education level of the society and the ease in use of ICT which also slows down the rate of adoption. However the   perceived risk is the most important factor that slows the rate of adoption of e-commerce.

[6]The relative advantage and the ease of use of the internet been eroded by the perceive risk in the system.   For some customers who have been cheated online, they find internet incompatible with their life and in return they may influence others due to lack of familiarity with eth use of the internet.  However it has been shown that the triability construct plays a major role in reducing the rate of adoption. [7]Once consumers tries e-commerce and get disappointed at their first trial, it becomes difficult for them to try later.  [8]Others just observe the experience of other members of the society assess the benefits of the internet and the perceived risk before they decide to adopt it.

 [9]It has been argued that a large number of individuals using this construct finally fear using e-commerce after observing just one complaint from the members of the society. All these construct are important in raising or lowering consumer confidence on the system.

With the perceived risk high, most consumers have been assessing the efforts of the government in order to reduce the level of risk especially when it comes to protection of private information. [10]More consumers are likely to embrace e-commerce if the perceived benefits are high or can be considered effective to mitigate the risks faced in e-commerce.

According to one of the recent studies that exposed consumer confidence in online shopping, 76 percent of Australians who were interviewed agreed that government regulations were more likely to make online shopping safer.  The same study which had been conducted 18 months ago showed that it was only 66 percent who agreed that online shopping was becoming safer. However in the two studies, 61 percent of those interviewed said that they were taking greater care when doing their online shopping. This percentage argued that the privacy of personal information was the most important factor which hindered their adoption of internet shopping.

[11]These studies also found out that most online shoppers believed that the onus of for protecting them lies in the hands of the firms which provide online shopping sites. While government regulations may be important in ensuring the legality of safety measures taken, a large percentage of online shoppers in Australia believe that it is the firms where they shop from that should be held liable for the safety of their information. Financial institution like banks which offer e-banking services should be held more accountable for the safety of their clients. However 58 percent of those interviewed also believe that it is important to carry out thorough education to educated consumers on safe practices.

The role of the government

Laying down an ICT infrastructure can be more costly but the repercussions of unregulated ICT infrastructure can end up being more costly. Consumer confidence on ICT is one of the key factors that determine show the society benefits from the costly ICT infrastructure. There are many instances in the world where eth ICT infrastructure has become redundant since there is no one using it.  [12]Therefore government regulations to ensure the safety of consumers in e-commerce are very critical. Consumer confidence is the largest barrier in the adoption of e-commerce and it is also the most difficult barrier to surmount.

Government regulations and swift actions on isolated cases which breach consumer confidence can help in dissipating consumer reservations regarding online shopping ending up with more people shopping online.  Government regulations have however not done enough to deter internet crime. According to a 2005 study, unauthorized access to privileged information in insiders made up of 19% of the internet crimes while breach of proprietary of confidential information made up 18% of the total crimes. If anything, these statistics reveal that the government ought to do a lot in order to restore consumer confidence

[13]There have been several legislations which have been instituted both common wealth and state legislations which aims at censoring online transactions.

[14]The Electronic Transaction Act 1999 was enacted in order to facilitate online transaction. [15]This act was enacted with the objective recognize the importance of ICT driven economy in Australia.  It was to ensure smooth facilitation of electronic transaction and to promote the confidence of the business and the community on the use of electronic transaction.  The act also provides a way in which the business and the community to carry out electronic dealings with the government.

This law draws a lot from the 1996 United Nations’ Commission on International Trade Law (UNCITRAL) model law on Electronic commerce. According to this law, no information should be denied its legal effect, validity of fail to be enforced on assumption that it was taken in form of data message from an electronic device. The Electronic Transaction Act 1999 which as amended in 2001 aims at enforcing legality of data message or writing or signature.  This law mandates that every data message should be taken as writing as long as it can be referred in the future.

Therefore the 1996 United Nations’ Commission on International Trade Law (UNCITRAL) model law and the Electronic Transaction Act 2000 laid foundation for protection of consumer exploitation by creating validity for transaction through retention of the original writing.  [16]This is meant to raise consumer confidence to ensure that everything that has been transacted can really be retraced back. This law also crates liability for firms engaging in e-commerce by ensuring that they are liable for the transactions they carry out with consumers.

[17]The Spam Act 2003 is another important legislation which has been enacted in order to protect consumers from commercial messages that are sent by the firms. [18]This act requires that  there has to be consent from the receive before sending the message unless the message contain the name  of the sender, contain factual information only, is authorize by the government or a registered political party, or comes from an education institution where it is sent to the parent. Violation of this act comes with heavy fines of $2,200 for individuals and $11,000 for organizations. Research has found that more commercial messages received by consumers have an effect in their buying decision making process hence the need for regulations. Like the  above two laws, this act also protects the consumers and raises their  confidence that those firms which are sending commercial messages to them are real and identified by the government since they have to include  their identity in the message.

[19]The acts have been amended to supplement the provision of The Privacy Act 1998 which ensures protection of individual private information including individual identification numbers. Such private information like personal identification numbers is very sensitive and without assurance of protection of this private information, individuals are less likely to trust an online transaction where they are going to give their private information.

Despite the presence of these laws and many others which have been enacted in individual states, consumer confidence on internet transaction remains a crucial factor that determines how individual are going to use these services.  [20]The more consumers feel protected by the government laws, the more they are likely to adopt e-commerce.  It is also important to note that individual must also feel that the law holds firms liable for any breach of private information that is given during an online transaction.

Both the consumers and firms are aware of the benefits that they are likely to gain from e-commerce. A consumer understands that time that will be saved by doing shopping online or by enquiring bank details and transactions online. However, so long as consumers feel that the security of their information is not guaranteed, they will continue to shun e-commerce.  It is the work of the individual consumers and the government to ensure that there privacy and confidentiality of information is guaranteed. Government regulations are important in laying foundations under which consumer security will be restored. It is only when the internet scams are reduced that consumer confidence will be raised.


Since the advancement of the information technology especially with the invention on internet in 1980s, e-commerce has turned to a rapidly growing market place. More and more firms are turning to e-commerce as an efficient way to reach more customers from different parts of the world, especially those firms dealing with service of good that can be digitized. However consumer confidence on e-commerce transaction resulting from the security of online transactions is a major factor hindering the growth of e-commerce.  Individual confidence on e-commerce is important for the overall growth of the industry. However history of internet scams makes it difficult for consumers to give their private information since they are not assured of its security. In order to restore consumer confidence, the government has come with various legislation which aims are protecting consumers from breach of their private information and to hold e-commerce firms liable for the private information that they receive from consumers. However consumer confidence on online transaction remains a major hindrance to the growth of the industry despite these measures.


Arias, L 2007, Internet law – Cyber crime statistics in Australia, Global Legal Network, March 2007

CRM, 2008, Study reveals that data breaches undermine consumer confidence in E-commerce, Retrieved 18th December 2008 from http://www.crm2day.com/content/t6_librarynews_1.php?news_id=122934

Electronic Frontiers Australia, 2006a, Privacy and surveillance, Retrieved 18th December 2008 from http://www.efa.org.au/privacy/

Electronic Frontiers Australia, 2006b, Internet censorship laws in Australia, Retrieved 18th December 2008 from http://www.efa.org.au/Issues/Censor/cens1.html

Germain, M 2008, Can e-mail authentication kill spam? Retrieved 18th December 2008 from http://www.ecommercetimes.com/story/Can-E-Mail-Authentication-Kill-Spam-61732.html

Government of Australia, 2008, Privacy in Australia, Retrieved 18th December 2008 from http://www.privacy.gov.au/publications/pia.html

Howarth, F 2007, Security issue dampening consumer confidence, IT analysis, October 2007

Martha, L 2008, Internet law – Australia spam laws, Global Legal Network, May 2008

Muncaster, P 2008, Low consumer confidence impacting e-commerce, Retrieved 18th December 2008 from http://www.computing.co.uk/itweek/news/2184024/low-consumer-confidence

Srivastra, A 2007, Is internet security a major issue with respect to the slow acceptance rate to digital signatures? Monash University,

[1]Howarth, F 2007, Security issue dampening consumer confidence,

[2] Srivastra, A 2007, Is internet security a major issue with respect to the slow acceptance rate to digital signatures?

[3] Muncaster, P 2008, Low consumer confidence impacting e-commerce,

[4] Howarth, F 2007, Security issue dampening consumer confidence

[5] CRM, 2008, Study reveals that data breaches undermine consumer confidence in E-commerce

[6] Muncaster, P 2008, Low consumer confidence impacting e-commerce,

[7] Srivastra, A 2007, Is internet security a major issue with respect to the slow acceptance rate to digital signatures?

[8] Arias, L 2007, Internet law – Cyber crime statistics in Australia

[9] Howarth, F 2007, Security issue dampening consumer confidence

[10] Howarth, F 2007, Security issue dampening consumer confidence

[11] CRM, 2008, Study reveals that data breaches undermine consumer confidence in E-commerce

[12] Martha, L 2008, Internet law – Australia spam laws, Global Legal Network,

[13] Germain, M 2008, Can e-mail authentication kill spam?

[14] Electronic Frontiers Australia, 2006b, Internet censorship laws in Australia,

[15] Electronic Frontiers Australia, 2006a, Privacy and surveillance

[16] Electronic Frontiers Australia, 2006b, Internet censorship laws in Australia,

[17] Electronic Frontiers Australia, 2006a, Privacy and surveillance

[18] Martha, L 2008, Internet law – Australia spam laws, Global Legal Network,

[19] Government of Australia, 2008, Privacy in Australia

[20]Germain, M 2008, Can e-mail authentication kill spam?

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