Credit risk management system on e-Commerce: case based reasoning approach

ABSTRACT

This paper addresses the cost imposed on the e-Commerce market when retailer and customer possess an information advantage over credit companies; in short, we examine the transaction cost on the default and the fraud. When retailers and customers differ significantly in terms of their riskiness, and credit companies cannot, or are not permitted to assess these differences, credit companies will attempt to charge all retailers and customers the same premiums for equivalent coverage; unless mechanisms can be designed to allow retailers and customers to signal accurately and credibly their private assessments of their own riskiness, lowrisk retailers and customers will consider that they are being overcharged and many will drop out of the market. As information asymmetries increase, more retailers determine that they are being overcharged, increasing the loss of e-commerce market. This paper discusses minimizing the loss of e-commerce market in the presence of extremely different credit risk profiles by Case Based Reasoning approach and XBRL based financial data.

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INDEX TERMS

Keywords:
XBRL, case-based reasoning, credit risk, e-commerce