Tim Fort: E-Commerce Must Build Trust to Survive
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Business leaders can create working environments where trustworthy behavior is practiced, reinforced and rewarded. Trust is an important buzzword in e-commerce circles, but finding ways to build trust in an online environment is a major challenge for Internet businesses, according to Timothy L. Fort, Bank One Corporation Assistant Professor of Business Administration. "Now that the Internet has become a widely accepted means for conducting business on a global scale, companies are seeking ways to encourage people to trust e-commerce," says Fort, whose research and teaching focus on business ethics.
Governments also are concerned about building trust online. Instilling confidence in Internet transactions is a central goal of the European Union’s e-commerce policy and the World Trade Organization and is being considered by the U.S. Congress.
Yet recurring concerns, such as the invasion of privacy, theft of intellectual property and confidential records, and the incidence of fraud in auction sales, indicate something is not quite right with the current e-commerce scenario. "The underlying problem," says Fort, "is that we do not have adequate infrastructure in place to ensure businesses and consumers they can trust the Internet.
Paradoxically, most brick-and-mortar businesses have known for years that building trust is crucial for attracting and retaining a loyal customer base. Internet companies have an even greater reason to build trust, because they lack the person-to-person contact that validates their non-cyberspace competitors. Without trust, Internet customers may be reluctant to divulge personal information or use credit cards for purchases. Without trust, corporations may be hesitant to transmit sensitive legal contracts and confidential records or to participate in online bidding. Without trust, musicians, authors and artists may be unwilling to create and share new works.
"E-commerce will thrive, however, if users have a stable, reliable, secure means of transacting business over the Internet and are protected from fraud and exploitation," says Fort. "Without those valuable assurances, e-commerce will struggle to make any gains at all." First, the Internet is so new that many businesses have been concerned primarily with figuring out how it works, what it can do and where they fit in. Mind-boggling technological challenges have tended to overshadow traditional business models and best practices.
Second, a number of cyber-savvy online companies have made the most of the situation by attempting to turn a fast buck and get out. As established companies have been asked to invest heavily in e-commerce ventures, and have launched e-commerce operations themselves, the issues of sustainable business practices has become more important. Third, corporations, consumers and governments have realized they cannot relegate questions of trust and justice in e-commerce or the global business environment to the established legal system and existing ethical customs simply because there is no preordained judge or jury in cyberspace.
The main question is what kind of system will be set up to provide an Internet infrastructure that protects individual, property and contract rights, and who will do it. "The fix-it operation will be led by a combination of national and local government leaders," says Fort, "but business leaders must be heavily involved as well, not just out of their own self-interest but for the common good.
"Basically, business leaders must build three different kinds of trust: hard trust, real trust and good trust," says Fort. Hard trust means ensuring e-commerce users are dealing with the people they want to deal with. Real trust means ensuring the people e-commerce users are dealing with are reliable. Good trust means instilling confidence that the people e-commerce users are dealing with have the users’ best interests in mind, as well as their own.
Hard trust can be established by setting borders, enabling e-commerce users to know who they are dealing with and to protect their assets. "In the old days, ranchers set borders by stringing barbed wire around their grazing lands and branding their cattle," says Fort. "The modern-day equivalent is installing public key encryption (PKE) technology."
PKE provides each user with a private key, essentially a software program that encrypts information transmitted over the Internet. The user can authorize a specified person to access and decode the transmitted information. Verisign and other online security providers have developed this technology for commercial use. Fort believes PKI is promising, but somewhat limited. First, it is relatively new and not perfected.
Second, in order for PKE to work, a trusted third party, or certification authority, is needed to issue both private and public keys for users who want to conduct secure Internet transactions. This process can be slow and cumbersome in an Internet age when speed is paramount. Finally, once PKE is in place, there are no assurances it will successfully repel hacker attacks.
Real trust can be gained only if an online product or service provider is able to prove its reliability. "If an Internet business wants to ensure repeated use of its Web site," says Fort, "it must deliver products on a timely basis, provide accurate information and respect the privacy of customers." By necessity, the Internet infrastructure must include warranties that guarantee quality, consumer-protection laws that punish offenders and consensus in the business community that infractions will not be tolerated. "E-commerce and globalization make trustworthy business affairs a combination of economic savvy, obedience to the law and ethically responsible behavior," says Fort.
Good trust hinges on whether Internet businesses understand their self-interest is enhanced by the well-being of their customers. "Philosophically, the self is composed of more than just economic desires," says Fort. "The real paradox of good trust is that it has the greatest economic value when the reason for the trust does not depend upon economics."
Individuals do not learn how to be trustworthy on their own, however, They learn trustworthy behavior from the people with whom they live and work. Therefore, says Fort, if business leaders want their sales and purchasing agents, managers and technical staff to deal with customers truthfully and honestly, then those employees must work in an environment where such virtues are practiced, reinforced and rewarded every day.
Fort acknowledges building trust in e-commerce will not be an easy job and will not happen overnight. "Fostering trustworthy behavior on the Internet requires not only encryption technology and laws that reinforce economic goodwill and reputation, but also workplaces where all managers and employees understand that practicing integrity and upholding virtues are the way to do business," says Fort.
For more information, e-mail timfort@umich.edu.