The role of trust in financial sector development

In any economic environment where decisions are decentralized, agents consider the risk that others might unfairly exploit informational asymmetries to their own disadvantage. Incomplete results, especially, lies at the heart of financial transactions in which agents trade real claims for promises of future real claims. Agents thus need to invest considerable resources to assess the trustworthiness of others with whom they know they can interact only under conditions of limited and asymmetrically distributed information. Thinking of finance as the complex of institutions and instruments needed to reduce the cost of trading promises among anonymous individuals who do not fully trust each other, the author analyzes how incomplete trust shapes the transaction costs in trading assets, and how it affects resource allocation and pricing decisions from rational, forward-looking agents. His analysis leads to core propositions about the role of finance and financial efficiency in economic development. He recommends areas of financial sector reform in emerging economies aimed at improving the financial system's efficiency in dealing with incomplete trust. Among other things, the public sector can improve trust in finance by improving financial infrastructure, including legal systems, financial regulation, and security in payment and trading systems. But fundamental improvements in financial efficiency may best be gained by eliciting good conduct through market forces.Payment Systems&Infrastructure,Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism,Decentralization,Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism,Banks&Banking Reform,Insurance&Risk Mitigation

The case for cloud service trustmarks and assurance-as-a-service

Cloud computing represents a significant economic opportunity for Europe. However, this growth is threatened by adoption barriers largely related to trust. This position paper examines trust and confidence issues in cloud computing and advances a case for addressing them through the implementation of a novel trustmark scheme for cloud service providers. The proposed trustmark would be both active and dynamic featuring multi-modal information about the performance of the underlying cloud service. The trustmarks would be informed by live performance data from the cloud service provider, or ideally an independent third-party accountability and assurance service that would communicate up-to-date information relating to service performance and dependability. By combining assurance measures with a remediation scheme, cloud service providers could both signal dependability to customers and the wider marketplace and provide customers, auditors and regulators with a mechanism for determining accountability in the event of failure or non-compliance. As a result, the trustmarks would convey to consumers of cloud services and other stakeholders that strong assurance and accountability measures are in place for the service in question and thereby address trust and confidence issues in cloud computing

Does Pain Result in Gain? Assessing Cloud Service Certifications\u27 Effectiveness

Cloud service certifications (CSCs) gain increasing attention in practice as a measure against the prevailing uncertainties of cloud computing, but demand efforts for passing audit requirements. However, research findings on certifications\u27 effectiveness are inconclusive. This research-in-progress paper develops a research model to evaluate CSCs\u27 effects on two certification outcomes suggested by trust theory and signaling theory - trust and price premiums - while also accounting for trust in certification authority, reputation, personal relevance of using cloud services and self-provided assurance statements. Compared to extant research on certifications, which primarily focuses on privacy and security in e-commerce, CSCs address a novel product category and provide assurances beyond privacy and security, such as availability and interoperability. Furthermore, by investigating price premiums, we focus on a widely neglected certification outcome. Thus, we expect our model to contribute to a deeper understanding of the contextual conditions under which certifications are effective signals and trust-assurances

Assuring E-Commerce Business Activities

Trust is imperative for conducting online transactions. To reduce online risks and foster trust, assurance service providers, such as TRUSTe, BBBonline, and WebTrust, audit online businesses to assure their compliance with principles and criteria for e-commerce business activities. Of these assurance service providers, WebTrust offers the most comprehensive services, including programs for business to consumer and business to business transactions, certification authorities (CA) and service providers. WebTrust jointly developed by the American Institute of Certified Public Accountants (AICPA) and the Canadian Institute of Chartered Accountants (CICA) offers best practices and a framework of measurable controls for electronic businesses, and thus, fosters online trust and confidence that are critical to the success of electronic commerce. As e-commerce matures, WebTrust will play an increasingly important role in CA-based e-commerce as well as in the applications service provider industry

Critique of Architectures for Long-Term Digital Preservation

Evolving technology and fading human memory threaten the long-term intelligibility of many kinds of documents. Furthermore, some records are susceptible to improper alterations that make them untrustworthy. Trusted Digital Repositories (TDRs) and Trustworthy Digital Objects (TDOs) seem to be the only broadly applicable digital preservation methodologies proposed. We argue that the TDR approach has shortfalls as a method for long-term digital preservation of sensitive information. Comparison of TDR and TDO methodologies suggests differentiating near-term preservation measures from what is needed for the long term. TDO methodology addresses these needs, providing for making digital documents durably intelligible. It uses EDP standards for a few file formats and XML structures for text documents. For other information formats, intelligibility is assured by using a virtual computer. To protect sensitive information—content whose inappropriate alteration might mislead its readers, the integrity and authenticity of each TDO is made testable by embedded public-key cryptographic message digests and signatures. Key authenticity is protected recursively in a social hierarchy. The proper focus for long-term preservation technology is signed packages that each combine a record collection with its metadata and that also bind context—Trustworthy Digital Objects.