EFFECT OF AUTOMATED TELLER MACHINE (ATM) ON THE PERFORMANCE OF NIGERIAN BANKS

1.1 Introduction

Automated Teller Machine (ATM) refers to a machine that acts as a bank teller by receiving and issuing money to and from the Automated Teller Machine account holders/users. The evolution of Automated Teller Machine was not in isolation, rather as a result of the general global wave in the technological revolution (Kathleen, 2005). This came due to the need to respond to the challenge of the multiple bulk of daily complex information that arises from among others; increase in competition, increased customer demand for both service provision as well as efficiency, expansion due to the increase in demand for services etc.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

1.2 Background of Study

In today’s business world, globalization and international experience has become critically important. Banking industries can no longer get away with operating loosely connected groups of businesses that happen to be located around the world, but must strategically integrate their activities. Global competition in the banking sectors has forced management and executives to recognize that they must think differently about banking activities and management. As a global banking, the only way to succeed is to develop an effective global banking management system with personnel capable of designing and implementing transnational business strategies through the use of modern technology such as automated teller machines (ATMs).

Technology has tremendously stimulated expansion of the banking networks and range of the offered services during recent years. All banking services, such as electronic payments, loans, deposits, or securities have become heavily dependable on information and telecommunication technology. This is the main reason why banks are the biggest users of modern technology equipment. Due to the complexity of banking services, every opportunity to speed up their performance or to make them more accessible for customers is very well welcomed by banks. However with improvements of the quality of services, the important question appears if this process can provide the economic values for banks? Unfortunately not every increase in the customers’ satisfaction transfers into the higher bank profits, especially in the case of very expensive investments in technology like automated teller machines (ATMs).

Automated Teller Machine (ATM), also known as a automated banking machine (ABM) or Cash Machineand by several other names, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information such as an expiration date or CVVC (CVV). Authentication is provided by the customer entering a personal identification number (PIN). Using an ATM, customers can access their bank accounts in order to make cash withdrawals, credit card cash advances, and check their account balances as well as purchase prepaid cellphone credit.

The use of Automated Teller Machine system of banking therefore brought efficiency in the banking industry majorly in terms of speed, data processing and storage. Thus it saw a huge improvement in the long queuing in most banking halls. Despite all the merits of the ATMs, customers still complaint of shortcomings on the use of the system like; break downs of ATMs, long queues at Automated Teller Machine service points, retention of customer’s cards. Against this background, this study examines the impact of Automated Teller Machine on customers’ satisfaction in the Nigeria banking system.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Effect of Automated Teller Machine on the Performance of Nigerian Banks.

1.3 Statement of Problems

Investigation revealed that Nigeria problem in automated teller machine is the use of outdated or inappropriate technology and lack of adequate knowledge or experience about the machine being use is another problem facing automated teller machine. The introduction and use of ATM system of banking has received different perceptions. One of the views is that, it may not have really created customer satisfaction for bank clients, and the other is that, it may have.

Despite all the merits of the ATMs, customers still complain of shortfalls on the use of the system such as; break downs of ATMs, long queues at ATM service points, retention of customers’ cards, limited knowledge on the use of ATM cards, fraudulent transactions and its operation in just a few languages. The impact of Automated Teller Machine cannot be ignored if meaningful goals and objectives are expected to be achieved (Balunywa, 2003).

1.4 Aim and Objectives of Study

The aim of the study is to investigate the Effect of Automated Teller Machine on the Performance of Nigerian Banks. In achieving this aim, the following specific objectives were laid out as follows:

1. To determine to what extent an Automated Teller Machine stimulate growth of banking system.
2. To find out the extent to which Automated Teller Machine speedily improve banking profitability.
3. To determine the extent to which Automated Teller Machine ATM influence fraud in banking sector.
4. To determine how the Automated Teller Machine (ATM) contribute immensely to effectiveness of banking sector.

1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• How has Automated Teller Machine (ATM) contribute immensely to effectiveness of banking sector?
• To what extent has Automated Teller Machine stimulate growth of banking system?
• How does the Automated Teller Machine speedily improve banking profitability?
• How does the Automated Teller Machine ATM influence fraud in banking sector?

1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: There is no significant influence of fraud towards banking operation using Automated Teller Machine (ATM)
• H1: There is a significant influence of fraud towards banking operation using Automated Teller Machine (ATM)

Hypothesis Two

• H0: Automated Teller Machine (ATM) has not contributed immensely to effectiveness of banking sector
• H1: Automated Teller Machine (ATM) has contributed immensely to effectiveness of banking sector

1.7 Significance of Study

This study is on the effects of the automated teller machine on the performance of Nigerian banks. The purpose of this research work is to find out the effects of Automated Teller Machines (ATM) on Bank’s services. Information technology, of which Automated Teller Machines are part of, has been the core tool of competitive strategies used by successful organizations for gaining competitive advantage over others. The rapid development in the banking sector has encouraged the accommodation of technology providers.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.8 Scope of Study

The scope of the research is focused on the Effect of Automated Teller Machine on the Performance of Nigerian Banks.

1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Research material: availability of research material is a major setback to the scope of the study.
3. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
4. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

1.10 Operational Definition of Terms

Automated Teller Machine: Is an electronic telecommunications device that enables the customers of a financial institution to perform financial transactions without the need for a human cashier, clerk or bank teller.

Credit Card: Is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder’s promise to pay for them. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

Electronic Banking: Is an electronic payment system that enables customers of a financial institution to conduct financial transactions on a website operated by the institution, such as a retail bank, virtual bank, credit union or building society. Online banking is also referred as Internet banking, e-banking, virtual banking and by other terms.