Measuring consumer literacy about online fraud: effects on perceived financial risk and trust in online sellers

Purpose This study aims to develop and validate a scale to measure consumer literacy about online fraud (CLOF). While prior research has linked general education and financial literacy to fraud victimization, specific knowledge about online fraud remains underexplored. The CLOF scale addresses this gap by capturing consumers' awareness of fraud-related practices and protective behaviors. The study also examines the relationships between CLOF and perceived financial risk, trust in online sellers, and online buying intensity. Design/methodology/approach Following established scale development procedures, we conducted focus groups, item generation, Q-sort validation, and pilot testing. The CLOF scale was tested across three studies in the USA, Sweden, and the UK using exploratory and confirmatory factor analyses. Reliability and validity were assessed through Cronbach's alpha, composite reliability, AVE, and discriminant validity. Structural equation modeling (SEM) was used to test the hypotheses. Findings The CLOF scale comprises six dimensions (i.e. Knowledge about identity theft; Verification of the legitimacy of companies; Knowledge of how to report fraud; Checking red flags that prevent being a victim of online scams; Knowledge and use of tools that protect against scams; and Reading terms and conditions as a protection practice). The results also show that CLOF is negatively associated with perceived financial risk and positively associated with trust in online sellers. Originality/value Existing scales do not capture literacy about online fraud effectively, with inconsistent literacy–fraud relationships reported in the literature. Hence, there is an urgent need for effective measurement and associated behavior in this context. This research introduces the first validated scale specifically designed to measure consumer literacy about online fraud. The scale offers practical utility for scholars, policymakers, and practitioners aiming to enhance fraud prevention and consumer confidence in e-commerce.