Jimmy Tseng

Working Title:

The Institutional Governance of Secure Electronic Transactions

Abstract:

This research started from an interest in explaining technical and institutional change in the Visa/MasterCard Secure Electronic Transactions (SET) system for secure credit card payments over the Internet. The SET case is interesting because it already contains the mechanism to enforce (payment) contracts across multiple jurisdictions necessary for electronic commerce.
With the use of public key cryptography technologies in SET, a corresponding set of changes in the institutional arrangements and working practices is inevitable. The case study shows evidence of changing institutional arrangements (e.g. new allocation of risk and new incentive schemes), and anticipated changes in working practices (rather than routines, since working practices is a more flexible operational concept denoting how participants actually behaved disregarding the more formal institutions). The aim of the research was to trace the changes in several areas of SET, in particular:
1. the authentication/authorisation process;
2. the evidence and dispute resolution process; and
3. enforcement and chargeback process in order to compare and contrast the explanations of technical and institutional change based on the "rational explanation" of the New Institutional Economics, and the "evolutionary explanation" of Evolutionary Economics.
The intuitive end target is an argument for the institution as the unit of analysis, that institutions play a coordinating role in technical change (i.e. people use institutions to coordinate amongst themselves concerning a future state), and that the study of changes in working practices could yield insight into the decline of "old institutions" and the development of "new institutions".