A new study of online retailers using a major e-commerce website as a third party platform suggests they place little trust in consumers’ transaction histories.

The study, “To Sell or not to Sell” published in Information Systems Journal and based on a survey of 443 sellers on the Chinese cross border website DHgate.com, challenges the view that information asymmetry in online transactions generally favours sellers.

The authors, from four universities, (King’s College, London, Hohai Business School, Kent State and Alabama universities), quote previous studies showing that online buyers tend to trust sellers on the basis of feedback mechanisms provided by third party platforms (and other factors) whereas sellers are less trusting of these sources.

Sellers’ lack of trust is put down to the fact that they often experience chargebacks with customers whose online reputations appeared to be sound.

The implications of this and their other findings, the researchers suggest, is that the current regulatory framework for e-commerce in most jurisdictions is unfair to sellers.

“Policy makers should consider adjusting the 180‐day chargeback period (during which buyers in many jurisdictions can claim a refund for a disputed transaction), which actually magnifies buyers’ fraudulent incentives,” they write, adding:

“For example, for the “item not received” chargeback claim, buyers should only be given the right for a short claim period, during which most products are delivered in normal situations. This policy could also be applied to unauthorised transactions, because credit card holders are expected to report any unauthorised payments promptly.”

Trust is likely to be particularly low on DHgate.com because unlike other third party online platforms (such as eBay), the website does not require signature confirmation of delivery in addition to proof of shipment for all purchases above $750.

The researchers built a conceptual model of relationships between sellers’ intentions to trade, their trust in buyers and perceptions of the risk of chargeback fraud, and four hypothesized determining factors: perceived effectiveness of feedback mechanism (on DHgate.com), perceived effectiveness of cross border delivery systems from China, perceived effectiveness of seller protection (ie DHgate’s seller protection programme), and perceived “national integrity” (of buyers).

The last two factors came out as strongly significant in determining sellers’ intentions to trade, whereas the first two factors were less significant.

Commenting on the results, one of the co-authors, Professor Stuart Barnes of Kings’ Business School said:

“With vast numbers of small and medium enterprises selling products and services online to buyers all over the world, chargeback fraud has become a massive problem in global e-commerce. Billions of dollars are lost every year, yet existing research has focused on the notion that buyers are subject to opportunistic sellers.”

He and his co-authors argue the research shows an urgent need to protect sellers from the fraudulent behaviour of buyers. They recommend pressuring financial institutions to reduce lengthy chargeback periods. Currently, buyers can contact their banks to exploit a credit card protection policy that allows them to reverse charges for many months if they are not satisfied with the ordered items.

Other measures they suggest to enhance sellers’ trust and reduce their perceived risk, include signature mechanisms – such as smartphone fingerprint apps, and more effective tracking of goods in transit.