The role of institution-based trust in initial

trust formation between E-commerce buyers

and sellers in the Nigerian
E-commerce environment

Abiola B Omoniyi
 Abstract
E-commerce has been largely very successful and participation requires one to engage with whom
they have little or no prior interaction, this requires trust.
The role of trust in E-commerce has been researched and written about extensively, however, most
of the literature has focused mainly on developed economies and as such data and survey samples
have been taken mostly from these economies. This study intends to contribute to filling that gap by
researching key institutional safeguards that encourage initial trust formation between online
consumers and vendors and testing them within the Nigerian online environment.

Drawing from Institution based trust literature an integrated model of institutional trust was
developed. Nine institutional mechanisms influencing customer trust in e-commerce relationships
were identified. They are perceived feedback, perceptions of credit card guarantees, perceptions of
security, perceptions of monitoring, perceptions of legal bonds, perceptions of insurance,
perceptions of accreditation, perceptions of escrow services and perceptions of third party payment
services.

Nine Hypotheses were drawn based on the institutional mechanisms identified and their validity in
the Nigerian online environment and an empirical study was carried out to test them. Two Nigerian
banks were selected as case study debit Card issuers and data for the study was collected in Nigeria
by means of survey questionnaires and semi-structured interviews of the a senior banking officers in
each of the case study Debit card issuers (Nigerian Banks).

All hypotheses were confirmed. It was found that all the institutional mechanisms identified by the
study influence Nigerian online users' decisions to trust in an e-commerce relationship.

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 Acknowledgements
I would like to thank all those who assisted in the writing of this dissertation, with special thanks
to my supervisor for his guidance.

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 Table of contents
Abstract.............................................................................................................
Acknowledgements..........................................................................................
1.0 Introduction................................................................................................
1.1 Background....................................................................................
1.2 E-commerce in Nigeria..................................................................
1.3 Trust and e-commerce.....................................................................
1.4 Research question and objectives...................................................
2.0 Literature review........................................................................................
2.1 What is trust?..................................................................................
2.2 Importance of trust to e-commerce................................................
2.3 Effects of trust on e-commerce.....................................................
2.4 Initial trust framework..................................................................
2.4.1 Trust antecedents........................................................................
2.4.2 Components of trust...................................................................
2.4.1 Trusting beliefs...........................................................................
2.4.2 Trusting intentions.....................................................................
2.5 Institution-based trust and institutional mechanisms..................
2.5.1 Institution-based trust ..............................................................
2.5.2 Institutional mechanisms..........................................................
3.0 Conceptual Framework...........................................................................
3.1.1 Perceived effectiveness of monitoring.....................................
3.1.2 Perceived protection offered by legal
safeguards or legal bonds................................................................
3.1.3 Perceived effectiveness of escrow services
and/or third party payment solutions..................................................
3.1.4 Perceived effectiveness of credit card guarantees....................
3.1.5 Perceptions of feedback............................................................
3.1.6 Perceptions of accreditation and security measures ................
3.1.7 Perceptions of Effectiveness of insurance...............................
4.0 Methodology...........................................................................................
4.1 Research Paradigm......................................................................
4.2 Research Methods.......................................................................

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 4.2.1 Case Study................................................................................
4.2.1.1 Case 1 - Guaranty Trust Bank ..............................................
4.2.1.2 Case 2 - Equitorial Trust Bank ............................................
4.2.2 Survey......................................................................................
4.2.2.1 Interviews.............................................................................
4.2.2.2 Questionnaires........................................................................
4.2.2.2.1 Questionnaire Preparation...................................................
4.2.2.2.2 Questionnaire Structure...........................................................
4.2.2.2.3 Questionnaire Distribution..................................................
4.3 Research data..................................................................................
5.0 Findings....................................................................................................
5.1 Findings from questionnaires...........................................................
5.2 Gender frequency.................................................................................
5.3 Age frequency.......................................................................................
5.4 Online purchase....................................................................................
5.5 Mode of online payments......................................................................
5.6 Institutional safeguards.........................................................................
6.0 Discussion ........................................................................................................
6.1 Summary of results.................................................................................
6.2 Implications and recommendations on results........................................
6.2.1 Perceived Feedback...............................................................................
6.2.2 Debit/credit card guarantees..................................................................
6.2.3 Perceptions of accreditation and security measures .............................
6.2.4 Perceived effectiveness of monitoring..................................................
6.2.5 Perceived protection offered by legal safeguards or legal bonds..........
6.2.6 Perceived effectiveness of third party services like
escrow services, third party payment solutions and insurance.........................
6.3 Research Limitations..................................................................................
6.4 Suggestions for future research..................................................................
7.0 Conclusion..............................................................................................................
References.......................................................................................................................
Appendix 1...........................................................................................................................
Appendix 2...........................................................................................................................

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 List of tables and figures
Figures
Figure 1.0 Institution-based trust. Conceptual framework and research hypotheses..................
Figure 2.0 Institutional mechanism conceptual framework..................................................
Figure 3.0 Gender frequency....................................................................................................
Figure 4.0 Age frequency.........................................................................................................
Figure 5.0 Percentage of respondents who have made online purchases on Nigerian
websites......................................................................................................................................
Figure 6.0 Frequency of reasons for not making online purchases........................................
Figure 7.0 Frequency of particular online payment mode usages........................................
Figure 8.0 Frequency of respondent ratings of institutional safeguards........................................
Figure 9.0 Frequency of respondent ratings of institutional safeguards, ratings piled.....................
Figure 10.0 Total frequency of respondent selections of institutional safeguards....................

Tables
Table 1.0. List of Nigerian banks and their websites ............................................................
Table 2.0 Rank of institutional mechanisms................................................................................

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 1.0 Introduction
1.1 Background
Forrester (2009) reports that in spite of the economic downturn, non travel related E-commerce
sales in the US continues to enjoy growth and is expected to grow by as much as 11% in 2009, this
is as web sales continue to capture brick and mortar store market share. Forrester (2006) also
reports that growth is also expected in Europe as well, as the number of European online shoppers
is expected to increase from 100 million to 174 million within the next five years, this is expected to
exceed even US online shoppers as e-commerce in Europe is expected to rise to €263 billion in the
year 2011. It is obvious that in spite of the problems that beset e-commerce like security, privacy
and fraud concerns, e-commerce has been largely very successful and shows no signs of abating.
According to Journal of Internet Commerce (2004) from June 2002 China a major emerging
economy became the third largest user of the Internet in the world following the US and Japan, and
according to Forrester (2009) this number will reach up to 275 million by 2012; greater than the
projected number of US internet users.
Forrester (2008) indicates that in spite of the economic downturn, emerging markets continues to
show significant potential for the tech industry as increased business and consumer use of the
Internet and information and communication technology drives infrastructure requirements in
emerging markets. That growth will continue and will no doubt have a positive effect on e-
commerce adoption and practice; the more people in emerging economies have access to computers
and the Internet, the more they are likely to adopt and practice e-commerce.

1.2 E-commerce in Nigeria

E-commerce is relatively new in Nigeria and as a business model is still struggling to find its feet,
however, The Financial Times (2009a) reports that there are signs that a new kind of middle class
which is characterised by significant disposable income is emerging in Nigeria; this due partly to
rapid growth in industries such as telecommunications, banking and services. The economic
downturn has also lead to a massive exodus of thousands of Nigerian professionals from the UK
and US with capital that they have accumulated in the West. This means that there currently exists
in Nigeria a large and rapidly growing customer base of technology savvy, highly educated
professionals with significant amounts of disposable income, who are used to or have been exposed
to e-commerce.
Technology wise, Nigerian telecommunication and internet connectivity has in recent times seen
rapid growth with the Telecom industry in Nigeria experiencing record growth. The NCC (Nigerian
Communication Commission) website reports that the amount of active phone lines inclusive of

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GSM, CDMA mobile and landlines increased from just over 866,782 in 2001 to a staggering
67,253,407 as at March 2009, the fastest in Africa according to The Financial Times (2009b).
Things are set to get even better as private investors are investing $245 million in an undersea cable
known as Main One to start delivering world class broadband internet to Nigeria (The Financial
Times 2009c). This will no doubt boost the country's existing internet capacity and encourage more
online activity, which will in turn encourage e-commerce adoption.
It is important, however, to note that a vibrant middle class and availability of super fast internet
connectivity may not be enough to see the widespread adoption of e-commerce Nigeria, as it has
been argued that the biggest hindrance to e-commerce is not lack of technology, inadequate security
or lack of spending power but lack of trust in e-commerce vendors. For instance, it has been argued
that an important barrier to the spread of e-commerce is that at the most basic level there is a lack of
faith or trust between” (McKnight et al. 2000a, Jarvenpaa et al. 2000) most businesses and
consumers on the Internet. Peterson et al. (1997) is of the view that the issue of transaction security
is a short-term technological problem but the real problem centres on the amount of data consumers
are prepared to share which is directly proportional to the amount of trust that the consumer has in
the vendor.

1.3 Trust and e-commerce

Trust has been identified by several authors as an important factor affecting a consumer’s adoption
and use of e-commerce (McKnight et al. 2000a; Salam et al. 2005; Teo & Liu 2007; Jarvenpaa et
al. 2000; Hoffman et al. 1999; Pavlou et al. 2003). It has indeed been argued that e-commerce is
characterized by uncertainty, anonymity, lack of control, and potential for opportunism on the part
of the web merchant (Grabner-Kräuter & Kaluscha 2003). However, trust enables customers to
overcome these perceptions of risk as well as uncertainty (McKnight et al. 2000b); and because of
this, consumer trust may be even more important in e-commerce transactions than in traditional,
real world transactions (Kim et al. 2008).

1.4 Research question and objectives

Due to the importance of trust with regards to e-commerce a lot research has gone into factors or
mechanisms that influence consumer trust in web-merchants or online stores (McKnight et al.
2000b; Salam et al. 2005; Teo & Liu 2007; Jarvenpaa et al. 2000; Hoffman et al. 1999; Pavlou et
al. 2003); and as such many views have been put forward on the mechanisms that initialize or
encourage consumer trust in web merchants or online stores. This paper will examine theories out
forward by various trust researchers on institution-based trust and its influence on initial trust

8
formation in e-commerce relationships. Theories on institutional structures will be examined and
from there hypotheses on institutional structures within the Nigerian context will be formulated
and will be tested against a sample Nigerian population. The primary justifications for this research
are listed below.
• There is currently limited research on the influence of institution-based trust to initial trust
formation in e-commerce with regards to developing countries,
• Nigeria has a population of over 135 million and it as well as other developing countries like
China and India are potentially lucrative new markets for e-commerce services,
• The creation of opportunities for further research into the role of institution-based trust in e-
commerce within the context of developing countries.
The questions that the research seeks to answer are listed below
• Do the theories on the role of institution-based trust in initial trust formation between buyers
and sellers hold true for Nigeria?
• And if so, what are the key institutional mechanisms that help to reduce customer
perceptions of risk and uncertainty in the Nigerian online environment.

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 2.0 Literature review
2.1 What is trust?
According to McKnight & Chervany (1996), with regards to trust research a major source of
concern to many scholars and researchers is the lack of consensus regarding its nature and
definition. There is, however, near universal consensus on its importance and positive effects to
interpersonal relationships and this has led to trust being studied in many social science research
disciplines which in turn has lead to different scholars having considerably divergent views
regarding the nature and true definition of trust. Consequently, there now exists a broad spectrum of
definitions that tend to be narrow and based on the authors particular academic discipline.
McKnight & Chervany (1996) confirm the multiple views on trust, they argue that economists see
trust as a rational choice mechanism, sociologists see trust as structural in nature, psychologists see
it as a personal attribute, while social psychologists say that trust is an interpersonal phenomenon.
Because of the sheer volume of research on trust, it has been very difficult to define; for example,
McKnight & Chervany (1996) in their study on trust summarized numerous ways in which trust has
been defined from sixty research literature out of which eighteen were from management or
communication, nineteen from sociology, economics or political science, and twenty-three from
psychology or social psychology, and though the definitions showed similarities they were
distinctly different from each other.
However, for the purpose of this study we will adopt the definition proposed by Meyer et al. (1995)
which is the one most frequently cited definitions of trust (Rousseau et al. 1998).
Trust can be defined as the “willingness to be vulnerable to the actions of another person or group
of people (Meyer et al. 1995: 712) or the “willingness to take risk in a relationship” (Schoorman et
al. 2007: 646). This is based the optimistic expectations that the rights of the trusting party will be
protected in the relationship. This definition is particularly pertinent for relationships where the
trusting party has no control over the trusted party but nevertheless has to depend on them (Gefen
2002).

2.2 Importance of trust to e-commerce

It is widely believed that one of the main barriers of customer adoption and use of e-commerce is
the lack of customer trust or faith in the web merchant with whom they are doing business with and
that trust is critical to the success of e-commerce (McKnight & Chervany 1996, 2002, Pavlou &
Gefen 2004, Gefen 2000, Jarvenpaa & Tractinsky 1999; Hoffman et al.
1999, Mayer et al. 1995, Schoorman et al. 2007).
The lack of consumer trust in online vendors can be attributed to the ease with which customer

10
information can be collected, stored and used with or without the customers knowledge, and the fact
that online customers believe they are constantly exposed to possible opportunistic behaviour by
online merchants like masquerading, unauthorized use of personal information or in extreme cases,
credit card fraud (Gefen 2000, McKnight 2002); moreover, the question of the legal jurisdiction of a
vendor is cited as well as an issue that can make if difficult for customers to trust web vendors
(Gefen 2002).
Generally speaking the nature of the e-commerce environment which is characterised by the
impersonal nature of the online environment, use of communication technology rather than physical
face to face interaction, and the newness and uncertainty of the transaction medium (Pavlou 2002)
makes for low degrees of customer trust in e-commerce as a whole.
Low levels of customer trust prevents online customers from making purchases from online
vendors, in some cases even stopping customers from “window shopping” at vendor websites, and
this is understandable since a customer would hardly be expected to do business with whom they do
not trust, and as such building trust is of major importance to online vendors (Gefen 2002).

2.3 Effects of trust on e-commerce

Trust helps online customers overcome perceptions of risk and insecurity (McKnight & Chervany
1996), it makes customers comfortable with supplying sensitive personal information (Ramaswani
et al. 1997; Gefen 2002), making online purchases (Gefen 2002) and accepting advice (McKnight
2002) from trusted web vendors, trust also helps customers build favourable expectations of the
trusted web vendor (Gefen 2000) and makes customers willing to be vulnerable to them (Mayer et
al. 1995, 2007)
Trust as a massive effect on e-commerce and according to McKnight et al. (2002) web vendors
need to work to overcome customers’ perceptions of insecurity, uncertainty and risk both in their
own web sites and in the Internet environment as whole. Understanding the nature of and the factors
that build customer trust is therefore of paramount importance to both internet researchers and web
practitioners.

2.4 Initial trust framework

In order to present a general overview of trust and its antecedents in e-commerce, this study will
adopt the initial trust framework proposed by McKnight et al. (1998) which describes the elements
involved in initial trust formation. Initial trust formation is trust that is formed between parties in
the absence of any prior meeting or interaction. This framework has been adopted because the
conditions for initial trust are very characteristic of e-commerce relationships in which trust has to

11
be formed without any prior interaction between a customer and a web vendor.
2.4.1 Trust antecedents
In their initial trust framework McKnight et al. (1998) propose that three types of trust are actively
in involved in the development of initial trust; they are as follows:
1.) Dispositional trust, which is the tendency to be willing to be dependent on others.
Disposition to trust has two components: (a) faith in humanity which is essentially
assumptions that others are usually upright, well-meaning and dependable, and (b) trusting
stance which is an assumption that she/he will achieve better outcomes by dealing with
people as though they are well-meaning and reliable.
2.) Institution-based trust, which is the belief that necessary third party structures are in place to
enable success in a given situation. Two types of institution-based trust have been identified
in the model. They include (a) situational normality, which is defined as the belief that
success is likely to be the case because the situation is normal, and (b) structural assurances,
which is defined as the belief that success is likely to be the case because such conditions as
promises, laws and guarantees are present and in place. This study will focus on institution-
based trust later in this literature.
3.) Cognitive trust, which is the trust that is based on impulsive, instinctive cues or first
impressions instead of personal interaction. There are two types of cognitive trust namely (a)
categorization processes and (b) illusions of control. Categorization processes which has to
do with the making of assumptions about the category or reputation of a trusted party, is
further split into three types which are (1) unit grouping, which means for the trusting party
to put the other party in the same category as him or herself (2) reputation categorization
which means to give a second party attributes based on information about the person and
(3) stereotyping which means to place a second party in a general category of people.
Illusions of control refers to the tendency of people in uncertain situations to try and assure
themselves that a situation is under their personal and full control by taking small actions.

2.4.2 Components of trust

In the model above trust is composed of two components which are trusting beliefs and trusting
intentions. The components very instrumental to the development of trust and need to be explained
in detail.

2.4.1 Trusting beliefs

Trusting beliefs refers to the beliefs or perceptions that a customer needs to develop towards a

12
trusted party or in the case of e-commerce a web vendor in order to develop trusting intentions.
Several trust researchers agree that trusting beliefs are essential to customers developing trust
intentions and is composed of beliefs about the ability, integrity, and benevolence of the trusted
party (Mayer et al. 1995; Schoorman 2007; Gefen 2002; Jarvenpaa et al. 1998; Salam et al. 2005;
McKnight et al. 2002).
Perceived ability refers to beliefs about the skills and competence of the trusted party (Gefen 2002)
or in the case of e-commerce the belief in the perceived competence of the web vendor's product
design and quality, delivery and customer service among other things. Examples of companies and
websites which have favourable perceptions of ability are Apple, Hp and Microsoft which are
generally believed by the vast majority of customers to produce and deliver high quality innovative
products; and websites like eBay and Amazon which are generally perceived to stock and sell
quality products which are delivered on time as due. Web vendors must strive to create perceptions
of quality, dependability and competence with regards to their services in order to gain customer
trust.
Integrity is the belief that a trusted party conforms to generally accepted rules of conduct (Gefen
2002) or in the case of e-commerce the perception of a customer that a web vendor is honest and
keeps promises; promises such as the protection and only authorized use of customer financial and
personal information, promises to deliver goods on time, promises to refund customers for bad
products, or promises of accepting liability in the event of fraud on credit cards.
Perceptions of benevolence refers to the perception or belief that the trusted party apart from
wanting to make money from the business transaction wants to do the trusting party good (Gefen
2002). When we apply that to e-commerce, perceptions of benevolence takes the form of the
perception that the web vendor apart from wanting to make a profit from the transactions with the
customer also wants to do the customer good. The obvious advantage of this is because it pays the
web vendor to build goodwill and a relationship with the customer in which the customer feels like
his interest is at the web vendors’ heart. An example of this is the rewarding of customers with deals
or vouchers by a specific web site or vendor.
Schoorman et al. (2007) has suggested further research into affective responses and emotions as
additional trusting beliefs while Salam et al. (2005) lists predictability as well but because there is
appears to be a consensus regarding the validity of the first 3 components of trust listed above
(ability, integrity, and benevolence) in the literature that was studied, only they will be adopted for
this study.
Each trusting belief is essential to the build up of trusting intentions, as the negative perceptions of
any of the beliefs is likely to discourage a customer from transacting with the would be trusted
party; for instance, if the web vendor is found to be incompetent, breaks promises or lies to
13
customers, most customers are unlikely to want to do businesses with the web vendor.

2.4.2 Trusting intentions

Trusting intentions refers to the willingness of the customer to depend on or make himself
vulnerable to the trusted party (McKnight et al. 2002); or in other words the intentions of customer
to transact business with a trusted party. Trusting intentions is a direct result of a customer’s
development of trusting belief towards a trusted party or web vendor, trusting intentions allows a
customer to take a leap of faith and make himself vulnerable to the trusted party irrespective of the
perceived risk associated with transacting with the trusted party.

2.5 Institution-based trust and institutional mechanisms

It was necessary to explore the initial trust framework above to have an overview of the role
institution-based trust plays in the build up of initial trust. The study will focus on institution-based
trust and institutional mechanisms in online environments.

2.5.1 Institution-based trust

Institution-based trust, which has been defined as the belief with which members of an organisation
determine that favourable conditions (institutional mechanisms) are in place that are conducive to
transaction success (McKnight & Chervany 2002) or as “a situational belief about structures”
(Pavlou 2002: 221), has been found to be very important in initial trust build-up in environments
where the parties have had no previous interactions.
Zucker (1986) confirms this by highlighting institution-based trust as the most important method of
trust creation in business environments where buyers and sellers come from different backgrounds
and locations and have no prior business dealings or interactions. This shows that institution-based
trust is very instrumental to initial trust build up in online e-commerce environments like online
market places or retail websites because in these environments, customers often have to deal with
web vendors or sites with whom they have had no previous interactions.
Because of the strategic importance of institution-based trust to e-commerce, it is the core focus of
this paper.

2.5.2 Institutional mechanisms

Pavlou (2002) defines institutional mechanisms as mechanisms that are created by third parties to
create conditions that are conducive to transaction success. Their function is to create an
institutional context which a customer can trust in; this is called institutional-based trust production.

14
Zucker (1986) refers to institution-based trust production as the use of formal mechanisms
(institutional mechanisms) to provide trust that does not rely on personal traits or prior history of
exchange between two or more parties. This is very key to trust in e-commerce, for example,
according to Grabner-Kräuter & Kaluscha (2003) institutional mechanism are very essential to e-
commerce as they help to promote trust among trading partners and encourage consumer
confidence in conducting on-line business transactions. Further more Pavlou (2002) explains that
institution-based trust functions by reducing the perception of risk associated with online business
transactions thereby promoting initial trust build-up in e-commerce relationships. Pavlou & Gefen
(2004) argues that though institutional mechanisms may be “strong” (have legal backing e.g.
escrows and credit card guarantees) or weak or market driven (have no legal backing such as
website reputation). The effectiveness of institutional mechanisms lies rather in the customer
perceived effectiveness of the mechanism, even more so than the actual effectiveness or legally
binding nature of the institutional mechanism itself. This is because if a customer trusts and believes
in the effectiveness of an institutional mechanisms in facilitating a successful transaction within an
environment, she/he will likely be willing to take the plunge and transact online in that environment
regardless of the legal nature of the institutional mechanisms in place.

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 3.0 Conceptual Framework
As can be seen in Figure 2, Pavlou (2002) offered a framework identifying key institutional
mechanisms available in B2B marketplaces. He proposed that the mechanisms are antecedents of
two dimensions of interorganizational trust which are credibility and benevolence which in turn
lead to three trust outcomes: satisfaction, reduction of perceived risk and continuity of online
relationships.
The five institutional mechanisms that were identified in his study were perceived monitoring,
perceived accreditation, perceived legal bonds, perceived feedback and perceived cooperative
norms. However, because the framework was created specifically for online B2B marketplaces, for
the purpose of this study perceived cooperative norms was ignored and the remaining mechanisms
were adopted because they are more general, can exist independent of any online community and
have equivalent mechanisms within the Nigerian e-commerce context.

Fig 1.0 Institution-based trust. Conceptual framework and research hypotheses by Pavlou (2002)

Additional institutions mechanisms like perceived credit card guarantees, perceived escrow services
and perceived feedback mechanism that were identified by Pavlou & Gefen (2004) as institutional
mechanism present in online auction market places, and others like perceived insurance (endsleigh-
business.co.uk), perceived third party payment solutions (paypal.com) and perceptions of security
(Chellappa & Pavlou 2002) which have been identified by other researchers were adopted as well to
16
develop the framework in Figure 3.0

perceived perceived
monitoring legal bonds

perceived perceived
accreditation feedback

perceived perceived
security insurance
Intention to
perceived perceived credit Institutional mechanisms transact on a Nigerian
escrow card guarantees positive influence e-commerce website
services

perceived third
party payment
solutions

Institutional Context

Institution-based trust cues

Fig 2.0 Institutional mechanism conceptual framework.

As can seen in Figure 3 the framework proposes that the following institutional mechanisms:
perceived monitoring, perceived accreditation, perceived legal bonds, perceived feedback,
perceived credit card guarantees, perceived escrow services, perceived insurance, perceived third
party payment solutions and perceptions of security all contribute to create an institutional context,
which is fundamental to the creation of institution-based trust in an e-commerce environment. In
other words and more specifically, institutional mechanisms positively influence Nigerian online
customers to trust Nigerian e-commerce websites.

3.1.1 Perceived effectiveness of monitoring

According to Pavlou (2002) monitoring refers to activities taken by the management of an system to
ensure that all transactions within the system are done within the confines of an agreed set of rules
or agreements; and the aim of monitoring is to ensure that all transactions within that system as
conducted within already established standards for quality, delivery and performance. Within the
context of e-commerce, monitoring could take the form of the scrutiny of all transactions done
within an online market place and sanctioning of erring individuals for any wrong doing by the
third parties that manage the market place. Examples of such market places are eBay and

17
Whogobuy (Nigerian online market place) which are both online auctioning sites where C2C
commerce is done between customers who might have no previous transaction history.
Monitoring as an institutional mechanism achieves two purposes. The first is the promotion of
responsible behaviour from sellers because the more sellers perceive transactions are being
monitored the less they are likely to behave in ways that would attract sanctions. The second is the
increase of the customers’ trust of the system or the market place because the more the customers
feel the transactions are being monitored the more they would feel assured of the safety of
transacting within that market place. Pavlou (2002) in his study was able to show the positive
influences of perceived monitoring on a sample of eBay customers. We will go a step further by
testing if the positive effects of perceived monitoring holds true for Nigerian web consumers as
well; hence, this becomes our first hypotheses: (H1) Nigerian online customers’ perceptions of the
presence of monitoring positively influence their intention to transact online.

3.1.2 Perceived protection offered by legal safeguards or legal bonds

Pavlou (2002: 222) defines legal bonds as “lawful contracts that govern economic activity” and
perceived legal bonds as the extent to which online customers believe that all transactions are
covered by legally binding contracts that are bound by predetermined laws or with regards to e-
commerce the extent to which a customer believes that all transactions taking place on a website is
bound by the laws of the land. According to Pavlou (2002) perceived legal bonds are widely
considered as institutional mechanisms because they may provide incentives for web vendors to
avoid opportunistic behaviour or behaviour that may be detrimental to customers if the legal cost of
such may far out weigh the gains of such behaviour; thus, perceived legal safeguards are likely to
engender feelings of comfort and reduce the impressions of risk in a system or web vendor if they
believe that they are protected by legal bonds or legal safeguards. Pavlou (2002) in his study was
able to show the positive influences of perceived legal safeguards on a sample of eBay customers.
We will go a step further by testing if the positive effects of perceived legal safeguards holds true
for Nigerian web consumers as well; hence, this becomes our second hypotheses: (H2) Nigerian
online customers’ perceptions of the presence of legal safeguards protecting them positively
influence their intention to transact online.

3.1.3 Perceived effectiveness of escrow services and/or third party payment

solutions.
Escrow services such as www.escrow.com have been defined by Pavlou and Gefen (2004) as third
party services in which payments are authorized by the third parties only after a buyers receives and

18
approves goods that were purchased from a seller. They further also define the perceived
effectiveness of escrow services as the extent to which customers believe that their transactions are
indeed guaranteed according to their expectations of the escrow service.
Third party payment services like PayPal are companies that ensure the privacy on online customers
by removing the need to provide sensitive customers information like bank or credit card details to
make online transactions. The information is provided only once to PayPal and subsequent online
payments can be made by PayPal on the customer's behalf.
Escrow and third party payment solutions are valid institutional mechanisms because the perception
of their effectiveness can solve many uncertainty issues for customers and encourage them to
engage in online transactions. For instance, customers’ perception of risk in a transaction is likely to
reduce if they feel that their money can always be returned to them upon their not being satisfied
with the goods they have bought from an unknown seller or web vendor or if they feel that their
personal bank details are not exposed to the unknown seller.
Escrow services promote the provision of quality goods by the web vendor or seller. This is because
the better the quality goods the web vendor supplies to customers the less the customers are likely
to reject her/his goods and thereby cancel the transaction which automatically translates to better
business from the web vendor.
Escrow services and third party payment solution increase of the customer’s trust of the system or
the market place because the more the customer perceives that third party payment solutions protect
his/her sensitive data and/or escrow services effectively offer a safety net in the event of their being
unsatisfied with goods or services supplied the more they would feel assured of the safety of
transacting with a web vendor. Hence the third and fourth hypothesis.
(H3) Nigerian online customers’ perceptions of the effectiveness of escrow services positively
influence their intention to transact online.
(H4) Nigerian online customers’ perceptions of the effectiveness of third party payment solutions
positively influence their intention to transact online.

3.1.4 Perceived effectiveness of credit card guarantees

According to Pavlou & Gefen (2004) credit card guarantees are institutional mechanisms that
safeguards transactions by providing some protection to the buyer or card owner.
In recent years credit cards have become the most common means of making online payments and
most credit providers like Visa and Master Card offer guarantees to customers in the form of total
liability for fraud to the customer's credit card. It has to be noted though that it is not a straight
forward process and making claims can become a very stressful and complex process, and also
customers are not protected from all types of seller opportunistic behaviour (Pavlou & Gefen 2004);
19
nevertheless, the effectiveness of credit card guarantees lies in the customer perception of the
protection offered by it.
There are several online payment options available to customers in Nigeria but the mode of
payment typically in use is debit cards. Interview sessions that were conducted in the course of this
study with technical staff (see appendix for interview questions) of the case study debit card issuers
(Guarantee Trust Bank, Equitorial Trust Bank) and a review of their websites
(http://www.gtbplc.com, http://www.equitorialtrustbank.com) revealed that the banks/debit card
issuers accept no liability for fraudulent activities on customer debit cards as long as they are able to
prove its not their fault. This means the are no real guarantees whatsoever for Nigerian debit card
users, they are essentially on their own. Also a review of the website of Interswitch
(http://www.interswitchng.com) the major switching company in Nigeria which provides e-payment
portals on Nigerian websites shows the same thing. However, adopting the proposal of Pavlou &
Gefen (2004) that effectiveness of credit card guarantees lies in the perception of customers in the
protection offered by credit guarantees rather than the actual protection offered. I hypothesize,
similarly to this study, that even if there is no protection offered to Nigerian debit card users, (H5)
Nigerian online customers’ perceptions of the presence of credit card guarantees positively affect
their intention to transact online.

3.1.5 Perceptions of feedback

It has been argued that reputation is a major factor that builds customer trust in web vendors
(McKnight et al. 2002, 2000a, Jarvenpaa et al. 2000) as well as customer willingness to make
purchases from the web vendors. According to Jarvenpaa et al. (2000) this is as a result of the fact
the customer perceptions of risk reduce when a customer encounter a familiar or large brand.
Reputable brands tend to be trusted easily due to a reputation which they might have built over the
years, smaller web vendors recognize this fact and try to build transference based trust by
associating themselves with already trusted brands (McKnight et al. 2000a).
However, as is often the case in online transactions, it is not always possible to deal with or know
all reputable companies. Feedback systems are institutional mechanisms that solve the reputation
problem by rating web vendors or sellers. For example, in online market places like eBay and
Amazon, feedback systems take the form of rating systems which rates the integrity of a seller
based on the amount of positive reviews he/she has gotten over several transactions within that
environment and in the wider internet community. In turn, feedback systems take the form of
websites like Kelkoo.com, Ciao.com or pricerunner.com which compare prices of goods from
different online web vendors while rating the web vendors as based on the reviews the web vendors
have gotten.
20
(H6) Nigerian online customers’ perceptions of feedback on web vendors affect their intention to
transact online with the web vendor.

3.1.6 Perceptions of accreditation and security measures

Chellappa & Pavlou (2002) argue that security and privacy have always been major concerns of
online customers. According to them several studies show that a large percentage of survey
respondents show willingness to transact on the web, if their security and privacy concerns are
adequately addressed. This indicates that the future of e-commerce depends on mitigating
information security threats and improving customer security perceptions which in turn build trust
in the web vendor in particular and e-commerce in general. They further argue that though factors
like “brand names” and “store reputation” may encourage customer trust, the comfort of face to face
physical interaction is not present in web interactions hence the need to build trust via addressing
customer security and privacy concerns.

They discovered that visible signs of accreditation like SSL certificates from third parties like
Verisign greatly influenced customers to be more at ease with their privacy concerns and visible
mechanisms of security on the website like a padlock image at the web address bar (encryption) or
an https instead of http on the website URL (encryption) greatly influenced positively customers
decisions to transact on a website on an online market place.

We therefore hypothesize that (H7) Nigerian online customers’ perceptions of presence of website
security measures positively affect their intention to transact on the web vendor website.

(H8) Nigerian online customers’ perceptions of accreditation positively affect their intention to
transact on the web vendor website.

3.1.7 Perceptions of Effectiveness of insurance

Online insurance cover comes in all forms and sizes. For example, many credit card companies
offer payment protection insurance plans on credit cards, others like Endsleigh Business Insurance
Services offer insurance protection from privacy or security beaches and fraud to e-commerce
website and users.
This study proposes that customer perception that an e-commerce website is insured or that the
credit/debit card being used for the online transaction is insured is likely to make the customer feel
more at ease with transacting online and thus builds up trust in the e-commerce.
(H9) Nigerian online customers’ perceptions of insurance positively affect their intention to
transact on the web vendor website.
21
 4.0 Methodology
In order to confirm or refute the hypotheses created earlier in this research, the positivist paradigm
was adopted and triangulation which is the use of a combination of different methodologies within a
paradigm was employed; for example, the use of questionnaires, case studies and interviews.
Due to the fact that data is not readily accessible in Nigeria and in order to get as representative a
sample as possible for this study, a two weeks study in Nigeria was conducted. Two Nigerian banks
were identified as debit card issuers and served as case study debit card issuers for this study,
interviews were carried on a technical staff for each bank and questionnaires were handed out to
random working class professionals. In the following sections we discuss the techniques used and
rationale behind their use.

4.1 Research Paradigm

A research paradigm has been defined as a framework guiding how research should be done based
on the philosophy of people and their assumptions of the world and nature of knowledge (Collis &
Hussey 2009); in other words, a paradigm is a universally adopted way of solving and researching
problems.
There are two major opposing research paradigms namely positivism and interpretivism.
Positivism originated from the social sciences is based on the assumption that social reality is not
affected by the act of investigating it. Its research processes are deductive in nature and tries to
provide explanatory theories to explain social phenomena, meanwhile interpretivism came about as
an answer to the short comings of positivism and is based on the assumption that social reality is
inherent in our minds and therefore is affected by attempts to research it. Its research processes are
inductive in nature, so while positivism focuses on the measure of social phenomena, interpretivism
is more focused on interpretive understanding the complexities inherent in social phenomena (Collis
& Hussey 2009).
Positivism was adopted as a paradigm for this study, because this study seeks to deduce if
perceptions of effectiveness of institutional safeguards within an online environment have a positive
effect on the initial trust levels of online customers in Nigeria, this goal is consistent with the nature
of positivism and as such was positivism was found to be more suitable.

4.2 Research Methods

Research methods have been described as a technique for collecting, compiling and/or analysing
data (Collis & Hussey 2009). The methods that are used to collect data are largely dependent on the
nature of the subject being studied. For the purpose of this study since we were capturing and
22
analysing user perceptions of a large group of people (the Nigerian population), so it was necessary
to employ the use of questionnaires to capture the perceptions of a small sample. It was also
necessary to select and study two case debit card issuers as there are twenty five in Nigeria
presently and it would have been infeasible to study all. Finally it was necessary to interview staff
of the two case debit card issuers to get an understanding the protection debit card issuers offer their
debit card users. The methods used in this study are explained in more detail below.

4.2.1 Case Study

The case study has been defined as a methodology that is used to study a single phenomenon or
case in its natural setting by employing the use of methods to obtain in-depth knowledge about the
phenomenon or case (Collis & Hussey 2009). The case could take the form of a business, a group,
persons, and so on.
The objective of the use of case studies is to be able to generalize on a population based on the in-
depth study of a sample which in the use of case studies takes the form of a case.
Case studies are traditionally refereed to as being interpretive in nature due to the fact that its results
tend to be qualitative. However, it has been argued that methodologies are not strictly limited to
paradigms and depending on their use could be adaptable for use under any paradigm (Collis &
Hussey 2009, p. 74); hence, their use under a positivistic paradigm.
In Nigeria debit cards payments are a commonly used method to make online purchases and for the
purpose of this study it was necessary to investigate the debit cards in use in Nigeria and the
organisations that issue and administer them, banks are responsible for this role in Nigeria.
There are presently 25 banks in Nigeria and they are listed in table 1.0

No. Banks: Website

1 Access Bank Plc www.accessbankplc.com

2 Afribank Nigeria Plc www.afribank.com
3 Diamond Bank Plc www.diamondbank.com
4 Ecobank Nigeria Plc www.ecobank.com
5 Equitorial Trust Bank Plc www.equitorialtrustbank.com
6 First City Monument Bank plc www.firstcitygroup.com
7 Fidelity Bank Plc www.fidelitybankplc.com
8 First Bank Plc www.firstbanknigeria.com
9 First Inland Bank Plc www.firstinlandbankplc.net
10 Guaranty Trust Bank Plc www.gtbplc.com
11 IBTC-Chartered Bank Plc www.ibtc.com
12 Intercontinental Bank Plc www.intercontinentalbankplc.com
13 Nigerian International Bank Plc www.citigroup.com/citigroup/global/nga.htm
14 Oceanic Bank International Plc www.oceanicbanknigeria.com
15 Bank PHB Plc www.platinumbanklimited.com/live
16 Skye Bank Plc www.skyebankng.com/
17 Spring Bank Plc www.springbank-plc.org/
18 Stanbic Bank Plc www.stanbic.com.ng
19 Standard Chartered Bank Nigeria Plc www.standardchartered.com/ng/cib/1_af_nigeria_main.html

23
20 Sterling Bank Plc www.sterlingbankng.com
21 UBA Plc www.ubagroup.com
22 Union Bank Nigeria Plc www.unionbankng.com
23 Unity Bank Plc
24 WEMA Bank Plc www.wemabank.com
25 Zenith International Bank Plc www.zenithbank.com

Table 1.0. List of Nigerian banks and their websites (http://www.cenbank.org).

Two debit card issuing banks were selected as case studies for this study namely Guarantee Trust
Bank and Equitorial Trust Bank. This is due to the fact that the author was able to get access to the
staff and information with regards to debit card issuance, administration and guarantees. The
information gotten from interviews with the bank staff and visits to the bank websites enabled an in-
depth understanding of the banks' e-business arms, which issue and administer debit cards; they also
deal with complaints and resolve customer issues.

4.2.1.1 Case 1 - Guaranty Trust Bank

Guaranty Trust Bank plc was incorporated in July 1990 and was licensed as a Commercial Bank in
August 1990 and commenced operation in February 1991 (http://www.gtbank.com/).
Guaranty Trust Bank plc operates from 156 branches in Nigeria with several bank and non-bank
subsidiaries spread across Anglophone West Africa and the United Kingdom
In 2006, the Bank launched GTConnect, a fully interactive service contact centre that allows
customers conduct 90 percent of banking transactions using a telephone from anywhere in the world
(http://www.gtbank.com/).
The Bank’s other innovative products and solutions include e-branches, where customers can
perform transactions electronically with no human interface; Drive Through Banking, a service
which enables customers withdraw funds and make enquires from the comfort of their cars as well
as GTBank on wheels, a fully mobile banking branch.
The Bank also offers debit and credit card services, and keeps customers abreast of transactions on
their accounts through GeNS, its SMS and electronic transaction notification system
(http://www.gtbank.com/)
In 2007 the bank was awarded the “Most Respected Company in Nigeria” in a survey by
PricewaterhouseCoopers and BusinessDay, The Bank also won the “Best ICT Support Bank of the
Year” award at the 2009 National ICT Merit Awards and also adjudged "The Best Bank in Nigeria"
at the 2009 Euromoney Awards for Excellence (http://www.gtbank.com/).

4.2.1.2 Case 2 - Equitorial Trust Bank

24
Equitorial Trust Bank Limited was incorporated on January 30, 1990 and licensed as a commercial
bank on February 7, 1990. They commenced business on March 1, 1990 and currently have 70
branches in Nigeria (http://www.equitorialtrustbank.com).

4.2.2 Survey
Surveys have been defined as a methodology designed to collect data from a sample in order to
generalize the results of analysis of the data to a population (Collis & Hussey 2009). They are
traditionally seen as positivistic in nature due to the fact that the results are usually quantitative.
However, surveys can take several forms, for example, online and physical questionnaires,
telephone or face to face interviews and the results can be quantitative or qualitative.
In this study the use of physical questionnaires and face to face interviews were employed.

4.2.2.1 Interviews
Interviews are a methodology of in which information is extracting by means of questions.
According to Collis & Hussey (2009) under an interpretive paradigm interviews are mainly
concerned with exploring data on attitudes, feelings and understandings and will be unstructured,
meanwhile in a positivist study, interviews will be structured and planned in advance with a view to
getting data about a phenomenon from the interviewee. All Interviews can take the form of
telephone, face to face or video conferences between groups or individuals.
Interviews were used on the case study banks because they offer an effective way to get information
on the inner workings of the cases. Consequently, the staff from the e-business departments for both
the banks were chosen to be interviewed because the e-business departments are concerned with the
administration of debit cards, they also handle customer complaints and fix customer issues.
In this study face to face interviews were carried out in the bank premises of the two case study
banks. An e-business department Senior Banking officer was interviewed in each bank and each
interview session lasted approximately an hour. Both interviewees asked their names not to be
mentioned in this study. The interview sessions were semi structured in nature and responses were
taken down with the use of a pen and notepad. At the core of the questions was to find out what
types of guarantees are given to debit card users and if accepted liability in the case of fraud or theft
on the debit card, see appendix 2 for the interview questions.

4.2.2.2 Questionnaires
A questionnaire is a structured set of questions that is asked to a subset of a population in order to
extract data for analysis and generalization about that population.
25
For this study questionnaires were designed to extract information with regards to perceived
Nigerian online institutional safeguards and their effect on Nigerian online user trust of web
vendors.

4.2.2.2.1 Questionnaire Preparation

The questionnaire was prepared in two steps. Initially a pool of 50 items was generated, the items
were reviewed and then edited; and a preliminary questionnaire was created. The preliminary
questionnaires were then distributed among a test group of 20 respondents to check if they would
generate the required responses, after which a secondary review and editing was done to create the
final questionnaire.

4.2.2.2.2 Questionnaire Structure

The questionnaire consists of 5 sections. The first extracts the respondent biodata; it asked for the
basic independent variables such as age and gender. The format of the section is multiple choice for
the gender question and open for the age question. The second section is concerned with confirming
that the respondent has actually made purchases online on a Nigerian website. Respondents had to
select any of the pre-populated e-commerce websites and/or enter one or two used by them as well
as indicate the frequency of purchases on the websites; the format is intensity rating scale. The third
section is concerned with respondents who have not made online purchases to capture the reason for
not making so. It has a set of opinions for the respondents to choose from with the opportunity to
add new ones; the format is multiple-choice opinion. The fourth section is concerned with capturing
the debit cards mostly used in online transactions by the respondents. It is already pre-populated
with the case study bank debit cards with the option to enter another debit card; the format is
multiple choice with the option to enter a new choice. The final section is concerned with capturing
the effect of Nigerian real and perceived institutional safeguards on the respondents. It consists of
several institutional safeguards, with the option to select the level of influence of a safeguard on the
trust level of the respondents; the format for this section is intensity rating scale.

4.2.2.2.3 Questionnaire Distribution

The questionnaires were physically distributed at offices in Lagos, Nigeria and professionals were
mainly targeted. The questionnaires were given to managers and asked to be distributed among their
staff, it was also distributed at random offices to professional staff in person. In total 200
questionnaires were administered. Respondents were convinced to fill questionnaires with the
incentive that their responses would be part of a study of Nigerian online user perceptions in a
26
foreign University.

4.3 Research data

For this study we adopt the position of Collis & Hussey (2009) who say that under any paradigm,
data can be quantitative (data is in numeric form) or qualitative (data is in a nominal form such as
words, images, and so on). This is quite unlike several researchers like Bryman & Bell (2003) who
use the words quantitative and qualitative at the paradigm level.
This study contains both quantitative data (from the results of questionnaire surveys) and qualitative
data (from the results of interviews carried out) this is known as data triangulation. It uses of
multiple sources or types of data in the study of a phenomenon (Collis & Hussey 2009) offering
varying perspectives on the phenomenon in question.

5.0 Findings
5.1 Findings from questionnaires
A total of 200 questionnaires were distributed at offices all over Lagos, out of which 142 were filled
and returned making the response rate 71%. Professionals were mainly targeted and the
questionnaires were distributed and filled within the space of two weeks.

27
5.2 Gender frequency
As can be seen by the chart below 61% of the questionnaires were filled by men, while women
filled the remaining 39%. This is interesting as it may suggest that there are more males working in
professional roles at offices in Nigeria than females, however this is subject to further research and
verification.

Fig 3.0 Gender frequency

5.3 Age frequency

As can be seen in the chart below. the respondent ages have been grouped into seven categories and
it was found that the majority of respondents fall between the ages of 26 to 30, closely followed by
the 21 to 25 and 31 to 35 age bracket, this would indicate that majority of respondents are young
professionals.

28
 50 and above

46 to 50

41 to 45

36 to 40

31 to 35 Frequency

26 to 30

21 to 25

0 to 20

0 5 10 15 20 25 30 35 40 45 50

Fig 4.0 Age frequency

5.4 Online purchase

As can be seen on figure 6.0, 64% of the respondents indicated they had never made a purchase on
a Nigerian website before.

Fig 5.0 Percentage of respondents who have made online purchases on Nigerian websites.

29
 Other reasons

I don't trust Nigerian Websites enough

Frequency of
reason
I don't know how to make payments online

I never had the need to

0 10 20 30 40 50 60

Fig 6.0 Frequency of reasons for not making online purchases.

As can be seen in figure 7.0 the majority of respondents (46%) that had not purchased goods online
on a Nigerian website before indicated that they had never had the need to, 41% indicated that they
don't trust Nigerian websites enough, while 7% said they do not know how to make purchases
online. A few other reasons such as a general distrust of all websites online and security concerns
were just 6% of the results.

5.5 Mode of online payments

30
As can be seen in figure 8.0 below, a total of 71% of the respondent indicated that they make use of
this study case bank debit cards to make online payments on Nigerian websites, 64% use Guarantee
Trust Bank debit cards, while only 9% make use of Equitorial Trust Bank debit cards. Other debit
card issuers and their percentage frequencies are Zenith Bank with 9%, Oceanic Bank with 7%,
Diamond bank with 4%, UBA with 3%, Sterling Bank with 1%, First Bank of Nigeria with 1% and
Intercontinental Bank with 1%.

Fig 7.0 Frequency of particular online payment mode usages

5.6 Institutional safeguards

Figure 9.0 below shows the frequency of the selection of the several institutional safeguards by
respondents. The chart shows that the website reputation, monitoring of transactions, website
security features, and protection from Interswitch, the main switching company in Nigeria, have a
high influence on the build up of trust in web vendors.

31
 Website Transaction monitoring

Website Security Features

Website Certificates

Website Reputation

Third Party Payment Services

Presence of Escrow Services

Insurance

Interswitch Protection

Debit/Credit Card Guarantee

Legal Safeguards

0 5 10 15 20 25 30

High influence Intermediate influence least influence

Fig 8.0 Frequency of respondent ratings of institutional safeguards

Website Transaction monitoring

Website Security Features

Website Certificates

Website Reputation

Third Party Payment Services

Presence of Escrow Services

Insurance

Interswitch Protection

Debit/Credit Card Guarantee

Legal Safeguards

0 5 10 15 20 25 30 35 40 45

High influence Intermediate influence least influence

Fig 9.0 Frequency of respondent ratings of institutional safeguards, ratings piled.

In order to create a clearer picture, each rating was given a weighting. In order, high was weighted
at 3, intermediate at 2, and least at 1; it was then applied to the values that represent the number of
respondents that selected each of the ratings and summed up to give one value for each institutional

32
safeguard. The individual values arrived at for each safeguard is shown in figure 11.0.

Website Transaction monitoring

Website Security Features

Website Certificates

Website Reputation

Third Party Payment Services

Presence of Escrow Services Frequency

Insurance

Interswitch Protection

Debit/Credit Card Guarantee

Legal Safeguards

0 20 40 60 80 100 120

Figure 10. 0 Total frequencies of respondent selections of institutional safeguards

In the next chapter the implications of the findings above are discussed.

33
 6.0 Discussion
6.1 Summary of results
As can be seen in Table 2.0 below, based on the results of the survey conducted in this study, all the
hypotheses created in chapter 3 were confirmed within the Nigerian context but to varying degrees.

Institutional mechanism Nigerian Context %Frequency Rank

perceived feedback Website Reputation 20% 1
debit/credit card guarantees Interswitch Protection 16% 2
perceptions of security Website Security features 14% 3
credit card guarantees Protection offered by Debit/credit card 13% 4
issuer
perceptions of monitoring Website transaction monitoring/register 12% 5
perceptions of legal bonds Legal safeguards 11% 6
perceptions of insurance Insurance 5% 7
perceptions of accreditation Website Certificates 4% 8
perceptions of escrow Escrow services 3% 9
services
perceptions of third party Third party payment services 2% 10
payment services

Table 2.0 Rank of institutional mechanisms

6.2 Discussion on results

The results of the survey conducted in this study offer a snapshot of the influence of institutional
mechanisms within the Nigerian context. The implications of the survey with regards to each of the
institutional mechanism are discussed below and where necessary recommendations given. It is
important to note that the institutional mechanism below have been validated by previous research
and as such it is assumed they are valid in developed nations where samples that validated them
were gotten fro.

6.2.1 Perceived Feedback

This ranked highest in the survey and it would imply that the hypotheses which says that perceived
accreditation or reputation positively influences customers is true within the Nigerian context. It
would also imply that Nigerian online users make trusting decisions mainly based on their
34
perceptions of the reputation of the website or web vendor that they are dealing with. This has
implications for e-commerce websites. It means they need to strive to either build a strong
reputation or associate them selves with reputable brands in order to build initial customer trust,
loyalty and patronage.

6.2.2 Debit/credit card guarantees

Perceived credit card guarantees in the form of perceived protection by Interswitch (Nigeria's major
switching company) and perceived protection by debit card issuers (Nigerian banks) was found to
have the rank of 2 and 4 respectively. This made more interesting by the fact that a review of the
Interswitch website (www.interswitchng.com) and interview sessions with technical staff of 2 major
debit card issuers indicated that there were no guarantees whatsoever for customers. This is a proof
of the fact that the strength of institutional mechanism lies not in the institutional mechanisms itself
but the perception of the protection that it offers. This has implications for e-commerce trust
research, e-commerce business management and debit/credit card issuers. For e-commerce trust
researchers it could confirm the views that have been held by some researchers that with regards to
institutional mechanism perceptions are actually more important than reality, however on the other
hand another dimension would be that customers are more trusting of debit card issuers based on
the fact that debit card issuers are banks; banks tend to have strong reputations since their business
is based on trust and reputation, it is certainly an area for further study. For e-commerce
management it shows that effort needs to be put into building customer trust by implementing
payment methods that are trusted by customers. For debit card issuers, obviously the more
customers make online purchase the more income is generated possibly from usage or interest
charges. They need to encourage customers to feel less uncertainty and insecure online by creating
and making customers aware of guarantees and creating a reputation which customers can trust in.

6.2.3 Perceptions of accreditation and security measures

Perceptions of security in the form of website security features had a rank of 3, this would imply
that visible security features like https or padlock symbols make customers positively influences
customers to trust web sites who have them.
However, perceptions of accreditation of websites in the form of web certificates had a ranking of 8;
this implies that Nigerian online users are not very influenced by visual signs of accreditation from
web certificate sites like VeriSign.
This might imply that Nigerian customers are more concerned with security issues than with
privacy. It is an area that requires for more research. However, it does have implications for e-

35
commerce business management, it implies that within the Nigerian context visible signs of a
secure website are sure to make customers more comfortable with transacting with such a website
and in order to encourage online patronage and loyalty from customers efforts should be made to
make websites secure and make such efforts visible and know to the customer.

6.2.4 Perceived effectiveness of monitoring

The perceived effectiveness of monitoring had a ranking of 5 with percentage frequency of 12%.
This implies that a fair amount of Nigerian online users are influenced by the perception of
transactions on the websites being monitored. For that fact the that monitoring does not have legal
backing (it is weak), its not much of a surprise, however, one would expect that many more online
users would feel a certain sense of security knowing that web transactions are being monitored so in
the case of any wrong doing, there would be records of such an event.

6.2.5 Perceived protection offered by legal safeguards or legal bonds

The perceived effectiveness of legal bonds in the form of legal safeguards had a ranking of 6 with
percentage frequency of 11%. The underwhelming influence of legal safeguards on customer online
transactions might be due to a lack of belief in the legal system in general or more specifically
within cyber space. However, the case may be, there are implications for this with respect to the
Nigerian government constitution, it would appear that the currently existing laws are inadequate to
deal with e-commerce and even if it is, its not common knowledge. For example, during interview
sessions with staff of the two case study banks, it was found that there are no laws tailor fitted for e-
commerce or the Internet in general in Nigeria. Laws need to be put in places that are effective
within the Nigerian e-commerce context and online users need to be sensitized of these laws.

6.2.6 Perceived effectiveness of third party services like escrow services, third
party payment solutions and insurance
Based on the results of the survey, third party services like escrow services, third party payment
solutions and insurance have very little influence on customers’ perceptions. This could be
attributed to the fact that such services may be little known within the Nigerian context, the
implications of this is that customer need to be sensitized of their existence and functionality.

6.3 Recommendations
The results of this study suggest that Nigerian internet users are influenced to trust web vendors

36
based on their perceptions of protections even if in reality such protection does not exist. This has
strong implications for e-commerce in Nigeria, it means e-commerce web third parties have to work
extra hard to make customers aware of their presence and what how they protect the online
customer, for e-commerce business management it implies that they need to sensitize customers and
make them aware of the measures in place to assure their safety, for the Nigerian Government it
implies a need for laws that are more protective of customers in cyber space and massive
sensitization of these to encourage e-commerce growth.

6.3 Research Limitations

Although the data generally supports the model that has been proposed by this study it is necessary
to highlight the limitations of this study.
The two main limitations are that the sample size is smaller than has been recommended for the size
of the population that is being studied and the statistical methods used were very simple. However,
it is important to note that this study is primarily aimed at offering a snapshot of institutional
mechanisms within the Nigerian context and as a first study is meant to open up the area for further
research and with regards to that it succeeds.

6.4 Suggestions for future research.

This study draws from existing literature on trust and seeks to prove that trust mechanisms exist
within the Nigerian context and influence Nigerian online users to transact online. The aim of this
study is to open up the study of trust in e-commerce within the context of Nigeria specifically and
developing economies generally. Therefore there is need for better and more accurate research with
a larger sample size, more variables and better statistical analysis.

7.0 Conclusion
This study was able to answer the research questions posited at the first chapter in this study as it
has been able to prove that theories on the role of institution-based trust in initial trust formation
37
between buyers and sellers hold true for Nigeria. The study was also able to identify key
institutional mechanisms that influence customers to transact online with Nigerian web vendors.
It was able to raise some interesting points with regards to how the perceptions of protection are
stronger than the reality of the protection actually offered by institutional mechanism within the
Nigerian context.
The study has made recommendations that are very useful for common web users, e-commerce
management and government agencies.

References
Bryman, Alan & Bell, Emma .(2003). Business Research Methods. Oxford

38
Chellappa, R.K. & Pavlou, P.A., 2002. ‘Perceived information security, financial liability and
consumer trust in electronic commerce transactions.’ Logistics Information Management, 15(5/6),
358 - 368.
Collis, Jill and Hussey, Roger (2009) Business research: a practical guide for undergraduate and
postgraduate students. 3rd ed. Basingstoke : Palgrave Macmillan

Denise M. Rousseau et al, ‘Not so different after all: a crossdiscipline view of trust.’ Available at:
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Appendix 1
Questionnaire questions
A SURVEY OF NIGERIAN INTERNET USER PERCEPTIONS
This survey takes approximately 3 minutes. It is an integral part of research on e-commerce in Nigeria
41
conducted by a Masters Degree student at Newcastle University, UK. The survey is aimed at sampling
Nigerian internet user perceptions with regards to e-commerce in Nigeria. Please endeavour to answer all
questions as truthfully as possible. Thanks for participating.

Personal info Circle option or enter data as appropriate

Gender Male Female
Year of Birth

Have you have ever done business or made any type of payments on a Nigerian website before? If yes
what website(s) did you do this on and how often? Enter data and/or tick frequency as appropriate.
Website/company weekly monthly rarely
www.whogobuy.net
www.buyright.biz
Other:
Other:

If your answer to the first question is no, input or select 1 or more reason that applies to you.
Possible reasons Tick as appropriate
I have never had the need to
I don't know how to make payments online
I don't trust Nigerian websites enough
Other:

Which payment mode(s) below do you normally use for your online transactions on Nigerian websites?
Payment mode Tick as appropriate
Guarantee trust bank debit/credit card
Equitorial trust bank debit/credit card
Other:

Please select and/or input and tick the level of influence of 3 of the factors below that influence you to
trust a Nigerian website enough to do business or make payments on the website
Safeguard High Intermediate Least
Legal safeguards e.g. Nigerian laws protecting you
Protection offered by your debit/credit card issuer (your bank)
Protection offered by Interswitch/Etransact
Insurance
Escrow services on the Nigerian website
Third party Payment services on the Nigerian website
The website's reputation
Presence of website certificate e.g. SSL certificates like Verisign
The website's security features e.g. the website's secure page URLs
staring with HTTPS or a padlock symbol on the address bar.
Transactions on the website are monitored/registered

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Other:
Other:

43
 Appendix 2
Interview Questions
1. What is you job role?
2. What payment Cards does your company issue
3. who accepts liability in the case of fraud on the card
4. What kind of guarantees do you offer your debit card holders.
5. What kind of security measure are in place to protect the customer
6. What other products do you have in the pipeline with regards to online payment.
7. What are common complains that you get from your debit card users

44