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Would You Pay for Green Banking?

A willingness-to-pay analysis for sustainable banking products using conjoint methods.

Problem definition

Due to their central role as intermediaries between capital surplus and capital deficit units, banks in particular have an outstanding role to play in the transformation toward a sustainable economic and social structure. For this reason, regulators have been working for some time on a readjustment of the incentive system for financial market players. However, the question of whether bank customers are generally willing to support this development and prefer banking products that integrate sustainability attributes over traditional product variants in terms of an increased willingness to pay is still open and largely unexplored.

Research objective

The research project addresses the aforementioned problem by means of a comprehensive and representative willingness-to-pay analysis: is there a general willingness to pay for sustainable attributes in banking products? The planned study will focus specifically on private customers and identify possible differences in willingness to pay based on various socio-economic characteristics (e.g. differentiation by gender, age, income class).

Research design and methodology

The study is conducted using conjoint analysis. Advantages of this method are:

  1. Respondents are confronted with a hypothetical choice situation that approximates a real choice situation as closely as possible. This provides a high degree of external validity
  2. Conclusions about the significance of individual attributes in relation to willingness to pay are determined statistically and thus indirectly. A higher internal validity is thus possible, as it is not jeopardized by bias effects of direct surveys.

Together with experts from the banking sector, product configurations (attributes and their composition in product vignettes) are developed. Based on this, a digital questionnaire is created, which is distributed by a market research institute to a representative sample (for Germany, by age, gender and region; at least N=1000). This makes it possible to make reliable statements about the willingness to pay with regard to sustainable banking products. The large representative sample also allows segmentation to highlight effects of demographic variables through multiple regression analyses.

Expected benefits / social relevance

The transformation towards a more sustainability-oriented economic and social structure, which is already taking place today, is an urgent and challenging change development for the coming decades. At the same time, despite a variety of regulatory efforts, this can only succeed if there is sufficient awareness among the population of the need for this transformation. Due to their special role as intermediaries, banks and savings banks have an essential role to play here. In this respect, the expected benefits and social relevance of the project result from initial insights into the question of whether and, in particular, in which strata of the population, in their role as bank customers, there is a willingness to make an individual contribution to the success of the sustainable transformation.

The project is funded by the Foundation for Science

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