When do online shoppers appreciate security enhancement efforts? Effects of financial risk and security level on evaluations of customer authentication

As the popularity of online shopping grows, concerns about identity theft and fraud are increasing. While stronger customer authentication procedures may provide greater protection and thus benefit customers and retailers, security is often traded off against convenience. To provide insight into this security-convenience trade-off in customer authentication, we experimentally investigated how levels of authentication security and financial risk factors affect perception and evaluation of authentication systems in two contexts: security questions (Experiment 1) and card security codes (Experiment 2). Experiment 1, which examined the effects of security level and product price as a financial risk factor, showed that authentication procedures based on higher-level security tended to be perceived as significantly less convenient and more frustrating. Interestingly, participants rated the higher-level security system (i.e., asking more demanding challenge questions) as less convenient and more frustrating when the amount involved in the transactions was higher. Experiment 2, which introduced consumer liability for fraudulent activities as an additional financial risk factor, showed that participants gave more positive ratings of the higher-level security system under full liability than under zero liability. Taken together, the present research suggests that patterns of security-convenience trade-offs reflecting consumers’ perception and appreciation of authentication technologies may vary depending on the characteristics of financial risk factors involved in the transaction process.

► We examined how security level and financial risk affect evaluation of authentication systems.
► The high-level security authentication received more negative evaluation for high-priced items.
► The high-level security authentication received more positive evaluation under full liability.
► Our research shows that financial risk may moderate the effects of authentication security.