The role of risk in e-retailers’ adoption of payment methods: evidence for transition economies
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We use logit analysis to exploit a self-collected dataset on the payment and delivery options offered by the vast majority of B2C websites in five Central Asian transition economies. Specifically, we conduct a supply-side test of (elements of) the Transaction Context Model, which highlights the role of perceived risk. Our results confirm that e-retailers in sectors with higher average transaction values are more likely to adopt ‘pay in advance’ instruments—such as debit cards—that have a lower payment risk for the seller. We also find that merchants who offer higher-risk delivery options are more prone to also adopt higher-risk payment instruments (such as credit cards). Our control variables also yield interesting results. In particular, in line with the network externalities theory, we find evidence that the offline penetration of a payment instrument positively affects online merchant adoption.
KeywordsOnline payment methods Transaction context Risk Delivery methods B2C e-commerce Transition economies
We are indebted to two anonymous referees for very detailed and helpful suggestions, and to our colleague Malaika Brengman for comments and help in scoring the sectors on transaction size. We also thank Dominique Steenbeek of MasterCard Worldwide (for providing us with information on merchant fees in Central Asia) and several contacts at Kazkommertsbank of Kazakhstan, Central Bank of Kyrgyzstan, National Bank and VneshEconom Bank of Turkmenistan, as well as Hamkor Bank and Asaka Bank of Uzbekistan (for information on local payment methods). An earlier version of this paper was presented at the joint European Central Bank/Banque de France conference on “Retail payments at a crossroads: economics, strategies, and future policies”, Paris, October 11–21, 2013. We thank the conference participants and especially our discussant, Nicole Jonker.
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