The Role of Risk in E-Retailers’ Adoption of Payment Methods: Evidence for Transition Economies

Abstract

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 5 Central Asian transition economies. Specifically, we conduct a supply-side test of the Transaction Context Model, which highlights the role of perceived risk. Our results confirm that higher product risk increases the probability that e-retailers adopt lower-risk, ‘pay now’ instruments (such as debit cards). Moreover, merchants who offer higher-risk delivery options are also more prone to adopt higher-risk payment instruments (such as credit cards). Our control variables also yield interesting results. Pure plays are more likely to adopt online payment methods and less likely to adopt offline alternatives. Sites that target international markets are also more likely to adopt online payment methods, but do not shun (local) offline substitutes. Finally, we find partial evidence that the offline penetration of a payment instrument positively affects its online adoption.