Impact of perceived security on consumer trust in online banking

Abstract

Consumer trust has been recognised as a critical component of the electronic banking industry. Factors that affect trust and its development vary from traditional banking services because of the uncertain nature of the online environment. Extensive efforts in identifying factors that affect trust have shown security to play an important role in its development. Every step in the online banking activities of users are secured by one of more security mechanisms. Analysing the role of these mechanisms in developing a user’s perception of security and the impact of this perception on trust provides a pathway to study the role of security in trust development. The objective in this study is to identify the relationship that exists between trust and security. On analysing prior research, the components of trust and security are identified and these form the basis in defining the nature of the relationship between the two constructs. A model of this relationship is hypothesised based on the theory and empirical results obtained by researchers. This model shows that security for a user exists as a perception and this perception is positively affected by the presence of different security mechanisms. The dimension of trust that is affected by security is institution based trust. Increase in the perception of security is shown to play a positive role in developing this component of trust. These relationships define the connection between trust and security in the e-banking industry. A survey conducted at the AUT campus provided both reliable and valid data that could further be analysed using confirmatory factor analysis. The results of this analysis show that there is a significant impact of security mechanisms on a user’s perception of security Privacy, authentication, authorization and availability mechanisms are found to contribute the most to the development of their individual perception components and in turn the overall perception of security. This indicated that awareness levels in users regarding security mechanisms of banking websites are high. Thus, these mechanisms play an important and significant role in developing perception of security. Examining the relationship between perception of security and trust it was noted that perceived security did not have a significant impact on trust. This result shows that the while indicators of security mechanisms had a high impact on perception of security, the perception that they develop does not play a significant role in developing trust. Studying all the individual components of perceived security, it was observed that the perception of privacy did have a significant positive impact on trust. Thus, developing this component of perception would assist the consumer trust building effort for online banking.

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