The value of online banking to small and medium-sized enterprises: evidence from firms operating in the uae free trade zones

ABSTRACT

This study estimates the willingness to pay of small and medium-sized enterprises (SMEs) for a business online banking services. The estimation utilizes a contingent valuation method employing data from 400 SMEs in the United Arab Emirates free zones. 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 number of employees and the transportation cost of using traditional branch banking.

KEYWORDS:

• Contingent valuation method
• interval regression model
• willingness to pay
• business online banking

JEL CLASSIFICATION:

• C13
• F10
• G21

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Non-use value refers to the value of the good that will be used in the future, not in the present.

² The online banking system described corresponds to the CashPro system designed for SMEs by Bank of America. It is a highly secure and convenient system.

³ Value of cost was converted into USD at an average rate of 3.67 Emirati dirham/USD (October 2014).

⁴ The constant-only model is often used as the base model.

⁵ The degrees of freedom is equal to the difference between numbers of parameters in the two models.