Estimating the Willingness to Pay for Online Banking Services by SMEs Engaged in International Trade

The objective of this dissertation is to determine the important attributes of online banking services for SMEs as well as the value of the services to them. Of particular interest are the attributes relevant to SMEs engaged in international trade. A choice experiment method is used to value the attributes of online banking services namely travel time saved, waiting time saved, unlimited 24/7 accessibility, and a high level of security. The data were collected through face to face nterviews of 400 SMEs financial managers/owners from the Free Trade Zones of the United Arab Emirates (UAE). Using mixed logit estimation models, the results of this research show that 24/7 accessibility to banking services and a high level of security are highly valued by these enterprises. If these attributes are missing over 93 percent of the value of the service to the SME owners are lost. On average the WTP for high-quality service is $451.07 and vary from $163.31 per month for those firms not involved in international trade to $736.26 per month for those SMEs who export in excess of 25 percent of what they produce. Another method which is used to estimate the WTP is CVM. An interval regression model is used to identify company characteristics affecting WTP. The results indicate an average WTP for online banking of $518.50 per month. Firms engaging in international trade value these services at least 10% more than those with only domestic operations. Other variables that significantly affect WTP include the number of employees and the transportation cost of using traditional branch banking. Keywords: Online banking services, willingness to pay, choice experiments, mixed logit model, contingent valuation method, interval regression.