How people select their payment methods in online auctions? An exploration of eBay transactions

Online payments are a critical issue in electronic markets. This research investigates online payment choices using probit model based on the survey data we collected from eBay users. We discuss payment choices between the trader partners based on risk, convenience and cost dimensions. Then, we analyze how product attributes, traders' characteristics and payment attributes affect the payment choice. Our findings suggest that product attributes, especially uncertainties associated with the product quality, appear to have stronger effect in affecting payment choices than traders' characteristics. We also find that a seller's reputation rating does not have a significant effect on actual payment choices, but affects the payment options offered by a seller.