Do Privacy Statements Really Work? The Effect of Privacy Statements and Fair Information Practices on Trust and Perceived Risk in E-Commerce

Companies today collect, store and process enormous amounts of information in order to identify, gain, and maintain customers. Electronic commerce and advances in database and communication technology allow business to collect and analyze more personal information with greater ease and efficiency than ever before. This has resulted in increased privacy concerns and a lack of trust among consumers. These concerns have prompted the FCC to call for the use of Fair Information Practices in electronic commerce. Many firms have added privacy statements, formal declarations of privacy and security policy, to their e-commerce web sites in an attempt to reduce privacy concerns by increasing consumer trust in the firm and reducing the perceived risk associated with e-commerce transactions. This article describes an experiment designed to determine the efficacy of that strategy.