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Abstract

The growth of electronic commerce (EC) may be impeded because payment systems (PS) designed for offline commerce have been adapted for online use, but without all of the information contained in physical meetings among transaction parties. Resulting problems add costs to transactions and affect profitability for EC transactions. New PS have been developed and are in various stages of implementation and rollout, but none have been widely adopted by users. Here we identify eleven generic PS features and nine of transaction characteristics, the interaction of which is expected to affect the cost of completing online transactions. We use a review of literature, as well as focused group and individual interviews, to develop 35 propositions for how interactions between PS features and transaction characteristics affect transaction costs. Finally, we propose a research agenda to determine the importance of each proposition, the functional form of its impact on cost, and to design effective sets of PS for online transactions.

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