EFFECT OF ATM BANKING SERVICE QUALITY ON

CUSTOMER SATISFACTION:
THE CASE OF COMMERCIAL BANK OF ETHIOPIA, ADAMA

UNITY UNIVERSITY
ADAMA CAMPUS
DEPARTMENT OF BUSINESS ADMNISTRATION
MBA PROGRAM

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

DEGREE OF
MASTER OF BUSINESS ADMISTRATION

BY: BEMNET YEMANE

AUGUST, 02, 2021

ADAMA, ETHIOPIA
 EFFECT OF ATM BANKING SERVICE QUALITY ON
CUSTOMER SATISFACTION:
THE CASE OF COMMERCIAL BANK OF ETHIOPIA, ADAMA

A Thesis Submitted to Department of Business Administration in

Partial Fulfillment of the Requirements for the Award of Master
Degree in Business Administration (MBA)

By
Bemnet Yemane

Advisor: Bogale Alemu (Ph.D)

UNITY UNIVERSITY

FACULTY OF BUSINESS AND SOCIAL SCIENCES

DEPARTMENT OF BUSINESS ADMINISTRATION

MBA PROGRAM

AUGUST, 02, 2021

ADAMA, ETHIOPIA
 Declaration

I, the undersigned, declare that, this study “Effect of ATM Banking Services Quality on
Customer Satisfaction of Commercial Bank of Ethiopia: Adama” is my original work and has not
been presented for a degree in any other university, and that all sources of materials used for the
study have been duly acknowledged.

Declared by:

Name: Bemnet Yemane

Signature: ______________

Date: __________________

iii
 Confirmation
This is to certify that Bemnet Yemane has carried out this thesis on the topic entitled “Effect of
ATM Banking Services Quality on Customer Satisfaction of Commercial Bank of Ethiopia:
Adama” Under my supervision. Accordingly, I here assure that his work is appropriate and
standard enough to be submitted for the partial fulfillment of the requirements for the award of
Masters Degree in Business Administration.

Bogale Alemu (Ph.D.)

Signature: ______________

Date: __________________

iv
 Letter of Approval

EFFECT OF ATM BANKING SERVICE QUALITY ON

CUSTOMER SATISFACTION:
THE CASE OF COMMERCIAL BANK OF ETHIOPIA, ADAMA
Prepared by: Bemnet Yemane

Approved By a Board of Examiners

___________________ _____________ __________

Chair Person Signature Date

___________________ _____________ _________

Internal Examiner Signature Date

___________________ _____________ _________

External Examiner Signature Date

v
 ACKNOWLEDGMENTS
First and for most, my heartily thanks go to the almighty God, the Father and the Son and the
Holy Spirit for his graciously provision of knowledge, wisdom, inspiration and diligence
required for the successful completion of this study.

Secondly, I am very grateful to my advisor, Bogale Alemu (PhD) for his intelligent guidance,
encouragement and helpful advices during the whole process of research writing. Next, my
gratitude is extended to my beloved Parents and siblings I have no words to express my gratitude
for their unreserved support.

Finally, I would like to thank my friends who made a tremendous contribution in making this
project successful

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 Table of Contents
Contents Page
Declaration .....................................................................................................................................iii
Confirmation...................................................................................................................................iv
ACKNOWLEDGMENTS ..............................................................................................................vi
Acronyms........................................................................................................................................ix
List of Tables ...................................................................................................................................x
List of Figures.................................................................................................................................xi
Abstract..........................................................................................................................................xii
CHAPTER ONE: INTRODUCTION..............................................................................................1
1.1. Background of the Study...................................................................................................1
1.2. Statement of the Problem..................................................................................................3
1.3. Research Questions:..........................................................................................................5
1.4. Objectives of the Study .....................................................................................................5
1.4.1. General Objective ......................................................................................................5
1.4.2. Specific Objectives ....................................................................................................5
1.5. Significance of the Study ..................................................................................................6
1.6. Scope of the Study ............................................................................................................6
1.7. Definition of Basic Terms.................................................................................................7
1.8. Organization of the Study .................................................................................................7
CHAPTER TWO: REVIEW OF RELATED LITERATURES.......................................................8
2.1. Theoretical Review of Related Literature.............................................................................8
2.1.1. Concept and Definitions of Electronic Banking............................................................8
2.1.2. Automated Teller Machines (ATMs) ..........................................................................10
2.1.3. Prospect and Challenges of Automated Teller Machines (ATM) ...............................12
2.1.3.1. Benefits of ATMs to Customers ..........................................................................13
2.1.3.2. Benefits of ATMs to the Banking Industry..........................................................14
2.1.4. Concept of Service Quality .........................................................................................16
2.1.5. ATM Service Quality ..................................................................................................18
2.1.5.1. Dimensions of ATM Service Quality ..................................................................19
2.1.5.2. Service Quality Models........................................................................................20

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 2.1.6. Customer Satisfaction..................................................................................................20
2.1.7. Measuring Customer Satisfaction ...............................................................................22
2.2. Empirical Review ...............................................................................................................23
2.2.1. Identified Literature Gaps ...........................................................................................26
2.3. Conceptual Framework of Study ........................................................................................29
2.3.1. Research Hypothesis ...................................................................................................30
CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY.......................................32
3.1. Introduction.........................................................................................................................32
3.2. Research Approach .............................................................................................................32
3.3. Research Design .................................................................................................................32
3.4. Types and Sources of Data .................................................................................................32
3.5. Target Population................................................................................................................32
3.6. Sample Size Determination ................................................................................................33
3.7. Sampling Techniques..........................................................................................................34
3.8. Data Collection Instruments ...............................................................................................34
3.1.1. Design of Instrument ...................................................................................................34
3.9. Pilot Study ..........................................................................................................................35
3.9.1. Face Validity Test .......................................................................................................35
3.9.2. Test of Validity............................................................................................................35
3.9.3. Test of Reliability........................................................................................................36
3.10. Method of Data Analysis ................................................................................................37
3.11. Ethical Considerations ....................................................................................................38
CHAPTER FOUR:DATA PRESENTATION ANALYSIS AND DISCUSSION .......................39
4.1. Introduction.........................................................................................................................39
4.2. Response Rate.....................................................................................................................39
4.3. Demographic Characteristics..............................................................................................39
4.3.1. Gender of the Respondent ...........................................................................................40
4.3.2. Age of the Respondent ................................................................................................40
4.1.1. Marital Status of the Respondent.............................................................................41
4.3.3. Educational Qualification of the Respondent..............................................................41
4.3.4. Customer’s experience years with CBE ATM ............................................................41

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4.4. Descriptive Analysis...........................................................................................................41
4.4.1. Service Quality Dimensions........................................................................................42
4.4.1.1. Reliability.............................................................................................................42
4.4.1.2. Assurance .............................................................................................................43
4.4.1.3. Empathy ...............................................................................................................44
4.4.1.4. Tangibility............................................................................................................45
4.4.1.5. Responsiveness ....................................................................................................45
4.4.1.6. Customer Satisfaction ..........................................................................................46
4.5. Correlation Analysis between ATM SQ Dimensions and CS ............................................47
4.6. Regression Analysis............................................................................................................48
4.6.1. Multiple Regression Assumptions...............................................................................48
4.6.1.1. Sample Size..........................................................................................................48
4.6.1.2. Multi-co linearity Assumption .............................................................................49
4.6.1.3. Normality Assumption.........................................................................................50
4.6.2. Result of Regression Analysis.....................................................................................51
4.6.2.1. Model Summery...................................................................................................51
4.6.2.2. ANOVA Result ....................................................................................................51
4.6.2.3. Coefficients of Regression Analysis ....................................................................52
4.6.2.4. Hypotheses Testing ..............................................................................................53
4.6.2.5. Summary of Hypothesis Test...............................................................................54
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION........................56
5.1. Summary of Major Findings ...........................................................................................56
5.2. Conclusion ......................................................................................................................57
5.3. Recommendation ............................................................................................................57
5.4. Limitation and Suggestion for Future Research .............................................................58
Reference .......................................................................................................................................59
Appendix One: Questionnaires......................................................................................................64

ix
Acronyms
ANOVA Analysis of Variance
AS Assurance
ATM Automated Teller's Machine
CBE Commercial Bank of Ethiopia
CS= Customer Satisfaction
EM Empathy
E-payment Electronic Payment
PIN Personal Identification Number
RB Reliability
RP Responsiveness
SERVQUAL Service Quality
SPSS Statistical Package for Social Science
TG Tangibility
VIF Variance Inflation Factor
.
.
.

x
List of Tables
Table 3.1: Test of Validity----------------------------------------------------------------------------35
Table 3.2: Reliability of constructs ------------------------------------------------------------------36
Table 4.1 Demographic Profiles of Respondents--------------------------------------------------39
Table 4.2: Descriptive statistics on Reliability-----------------------------------------------------42
Table 4.3: Descriptive statistics on Assurance-----------------------------------------------------43
Table 4.4: Descriptive statistics on Empathy ------------------------------------------------------44
Table 4.5: Descriptive statistics on Tangibility ----------------------------------------------------45
Table 4.6: Descriptive statistics on Responsiveness ----------------------------------------------46
Table 4.7: Descriptive statistics on Customer Satisfaction---------------------------------------47
Table 4.8 Correlation matrix between constructs of ATM SQ Dimensions and CS----------48
Table 4.9: Multi co linearity test of independent variables --------------------------------------49
Table 4.10: Regression Model between ATM Service Quality Dimensions and CS ---------51
Table 4.11 ANOVA Result between constructs of ATM Service Quality and CS -----------51
Table 4.12 Regression Coefficients b\n ATM Service Quality Dimension and CS ----------52
Table 4.13 Summery of Hypothesis Test -----------------------------------------------------------55

xi
List of Figures
Figure 2.1.shows the relationship between independent and dependant variables------------29
Figure 4.1: P-P Plot of regression standardized residual -----------------------------------------50

xii
 Abstract
ATMs introduced with the view to automate the operation of the banks and create competitive
advantage in the banking industry. The main purpose of this study is to assess the effect of
automated teller machine services quality on customer satisfaction: experience from some
selected CBE in Adama. To achieve the research purpose five dimensions of service quality were
used as independent variables and tests the respondents understanding perspectives on the effect
of ATM Service Quality on customer satisfaction. A sample of 196 customers or samples was
taken using non probability sampling particularly purposive and convenience sampling
technique. A questionnaire was used as a research tool for the collection of data. Collected data
was analyzed through SPSS version 22 by running descriptive statistics, correlation and
regression. From the result of the analysis it is concluded that all variables of Service Quality
Dimensions (Reliability, Assurance, Empathy, Tangibility and Responsiveness) strongly,
significantly and positively affected Customer Satisfaction of the Commercial Bank of Ethiopia.
The study then concludes that ATM service quality determines customer satisfaction. The study
recommended that to increase customer satisfaction, commercial bank of Ethiopia should focus
on improving ATM machine service quality.

Key word: ATM-banking, customer satisfaction, ATM service quality

xiii
 CHAPTER ONE
INTRODUCTION

This chapter consists of the background of the study, statement of the problem, research
questions, and objectives of the study, significance of the study, scope of the study, definition of
terms and organization of the paper.

1.1. Background of the Study

Customer satisfaction has been an essential concept in the literature of marketing and for
customer focused firms, it is both a" goal and a tool”. And yet there are factors that affect
customer satisfaction such as friendly employee, service quality and competitive pricing
(Angelova and Zekiri, 2011). The challenge is as the environment endures drastic changes and
increased awareness with technological advancement, how firms can manage service quality and
hence satisfy customers, is what motivated the student researcher to focus on the topic area
which is contemporary and dynamic.

Several technology based models have been proposed to measure the service quality which has a
direct relationship with customer satisfaction. The technology provides arrays of opportunities to
customers such as checking balance, transferring funds and thereby reduces time and costs. Also
it enables service providers to customize their offering and make available with superior
delivery. And yet studies show that the economy of most developing countries including
Ethiopia is still cash driven and the monetary transactions are performed via the exchange of
bank notes, and coins for goods and services. To curve this and arm itself with such technology
CBE introduced for the first time ATM, in 2001. Currently active ATM card holders reached
more than 8 million (https://combanketh.et, Accessed 12/4/21).

E-Banking gives customers the opportunity to access banking services from the comfort of their
homes and offices and also be able to do most of the transactions which would have been done in
the banking halls. With the use of personal computer (PC) or even mobile phone with an internet
connection, customers are able to carry out transactions such as cash withdrawals, payments of
utility bills, transfers from one account to the other, viewing and printing of statements as well as
request for cheque books on their traditional accounts (Dzogbenuku, 2013). Therefore, to
continue achieving competitive advantage through ATM banking, bank managers need to know
1
the key features of ATM banking whose performance greatly influence customers ‘satisfaction
and factors contributing to customer dissatisfaction with regard to ATM service.

Today, more than ever before, CBE aggressively expanded its presence in all directions of the
country. To improve its service, retain & attract customers, CBE has introduced innovative
products like automatic teller machine, mobile banking, internet banking and other improved
banking facilities among others, all in the interest of enhancing customers comfort. There are
more than 27.5 million account holders in CBE out of this 450,560 are found in Adama District
(from those only 8 million customers are using ATM service in CBE and 131,345 in Adama
District). In addition to this, from the total number of 9.6 million customers only 8.2 million
customers are active users and 1.4 million are inactive users. (CBE, ATM Banking Status
Report, February 20th 2021).

However, despite CBE's effortless attempts in the last two decade about the ATM banking,
studies show that its service is still with different problems and challenges including low level of
infrastructure development ,frequent power interruption, broken and slow Internet connections
which have adverse effects on the service quality and customer satisfaction.

According to Sangeetha (2012) service sector technology has been employed to standardize
services through the minimization of employee-customer interface and customers prefer a
techno-based service offering instead of having interaction with human teller. He further
contends that as the interface between the customers and service providers shifted from a
customer-employee to a customer- technology in accessing a given organization, various issues
are coming to surface regarding the impact of technology on the service quality being delivered
and it’s thereof on customer satisfaction. Also Dabholkar (1996) cited in Sangeetha (2012)
contends that regarding customers preference for self-service alternatives little is known, where
customers' preference in Ethiopia, CBE in focus would not be exceptional.

By appreciating the actions taken by the CBE in adopting the technology such as a full-fledged
ATM and others to move the bank to the "world class" commercial bank, based on the above
premises it seems high time to examine the effect of ATM service quality dimensions on
customer satisfactions to maintain the momentum and accelerate its growth in such a way that to
do its level best to turn over the shortcomings and challenges into better opportunities. Simply

2
put, to provide more insights regarding the pertinent issues in association with the service quality
delivery via ATM, the study opts to put in place a model which will be comprehensive enough so
that it can be employed to measure the effect of ATM service quality and it’s thereof on
customer’s satisfaction. The study was conducted on the CBE ATM card holders with
convenient sampling technique to get input into the different factors utilized while conducting
the assessment of the ATM service quality. In so doing the study is vindicated as it presents a
model which integrates the main dimensions that need to be examined in measuring the effect of
the service quality of ATM on customer satisfaction in CBE. It is essentially paramount and
significantly valuable in providing comprehensive insights to the marketers and practitioners in
general and to the bank in particular, regarding the essential issues related to the ATM and
thereby presenting the cue about customers' needs, quality service and customer satisfaction..

1.2. Statement of the Problem

Banks are in the process of moving to a more competitive financial atmosphere, with a wide
variety of financial products/services. Commercial bank of Ethiopia (CBE) is the largest bank
&its customers made it so, without them the bank will end to exist. It is important to understand
the customer need and test their preference to satisfy them. There are more than 27.5 million
account holders in CBE out of this 450,560 are found in Adama District (from those only 8
million customers are using ATM service in CBE and 131,345 in Adama District). In addition to
this, from the total number of 9.6 million customers only 8.2 million customers are active users
and 1.4 million are inactive users. (CBE, ATM Banking Status Report, February 20th 2021).

Automated teller machine (ATM) banking is the second popular access channel to banking
services behind branch banking in Ethiopia which offers competitive advantage in the
homogenous market of retail banking products and services (CBE, ATM Banking Status Report,
February, 20th2021). Automated teller machine (ATM) is an innovative service delivery mode
that offers diversified financial services like cash withdrawal, funds transfer, cash deposits,
payment of utility and credit card bills, cheque book requests and other financial enquiries
(Muhammad, 2010). The concept of automated teller machine (ATM) has been quite old and has
been developing throughout the world. Undoubtedly, a fair number of theoretical and empirical
researches have been made worldwide, because of increase in scale of ATMs and consequently
to convert the economy into a cashless one (Pohwa and Saxean, 2010).

3
Aborampah (2010) noted that in Ghana, ATM is commonly used by customers of various banks
for cash withdrawal and account balance enquiry. The other functions of the ATMs such as funds
transfer, cheque-book requests and payment of utility bills among others which are collectively
aimed at increasing customers’ satisfaction are not fully utilized. This inability on the part of
customers to exploit these opportunities provided by the ATM is mainly due to reasons such as
inadequate knowledge about the functions of the ATMs apart from cash withdrawals and balance
enquiry, inability of some banks to render diversified ATM services, among others. However, it
should be noted that ATM services offered to clients differ among banks (Islam et al, 2007).

In bringing up the ATM technology, banks portrayed the use of ATMs to be more superior in the
delivery of service as compared to the use of cashiers. Looking at the many queues that
characterize the premises of several banks at sometimes, it may be inferred that the quality of
service delivery through the use of these ATMs may be greatly affected and hence the need to
look at the effectiveness of this technology. There are also some instances when customers
would prefer to queue up in the bank even when the ATMs are operational and no customers are
in sight using the facility. People do not believe that they can go and collect many without
talking to anybody; hence, instead of using ATMs, they prefer to go to bank premises to get the
service (Nazeret.com\Accessed June, 2021). Cash machines are relatively new to Ethiopia, but
their number is growing quickly, with banks eager to ease access for their customers. However,
despite the bank’s effort to improve access for its customers by increasing the number of
machines, ATM users are still feeling the brunt of the consequence of unreliable service Fortune
(Vol 14. No 700).

There are a number of researches conducted on measuring customer satisfaction in banking

industry and challenges of ATM usage. For instance, Adelowo S. (2010) has tried to show
challenges of automated teller machine (ATM) usage and fraud occurrences in selected Nigerian
commercial banks. Getachew Worku (2010) has also conducted a study on the assessment of
electronic banking practices, opportunities and challenges in Ethiopia. Moreover, Gezahegn
Balcha (2015) has attempted to assess ATM banking and customer’s satisfaction in Ethiopian
banks case of Addis Ababa city. In line with this, a study conducted by Gezahegn (2015) has
tried to associate the satisfaction of ATM services users with the service charge deducted while
withdrawal is requested.

4
Considering the above mentioned studies conducted on measuring customer satisfaction in
banking industry and challenges of ATM usage, the researcher has found both conceptual and
geographical gaps. On the one hand, the researcher has failed to find a study that tries to see
promoting ATM users satisfaction as a workable strategy on creating loyal customer. On the
other hand, the researcher didn’t find any researcher conducted at Adama. To fill the above listed
research gaps, this study is set out to assess the effect of automated teller machine services
quality on customer satisfaction: CBE, Adama, to see determinants of customer satisfaction in
the case of commercial bank of Ethiopia as explanatory study and to provide suggestions to the
organizations as how they can create loyal customer in order to achieve the organizational goals.

1.3. Research Questions:

The following research questions were answered in the study:

1) What are the existing Automated Teller Machine Service Quality practices in
Commercial Bank of Ethiopia?
2) What are the relationships between Automated Teller Machine Service Quality and
Customer Satisfaction of Commercial Bank of Ethiopia?
3) What is the effect of Automated Teller Machine Service Quality Practices on Customer
Satisfaction of Commercial Bank of Ethiopia?
1.4. Objectives of the Study
1.4.1. General Objective

The general objective the study was to examine the effect of the Automated Teller Machine
Service Quality on Customer Satisfaction of Commercial Bank of Ethiopia, Adama.

1.4.2. Specific Objectives

The study has the following specific objectives:

 To determine existing Automated Teller Machine Service Quality practices in

Commercial Bank of Ethiopia.
 To examine the relationship between Automated Teller Machine Service Quality and
Customer Satisfaction.

5
  To evaluate effect of Automated Teller Machine Service Quality practices on Customer
Satisfaction.
1.5. Significance of the Study

The study has tried to assess the ATM service on customer satisfaction and finds a solution for
the identified problems. Findings from this study was assist management of the banks to know
the problems associated with ATM service and to facilitate the customer with quality service
because the efficiency of banks relies on customer satisfaction, Banks was formulating strategy
and policy in terms of future investment and also customers were benefit in terms of improved
service and reduced time spent at the banks hence, resulting in customer satisfaction and
customer confidence in the banking sector

1.6. Scope of the Study

The scope of this study is discussed in three dimensions (i.e. Theoretically, Geographically, and
methodologically).

Theoretical Scope: this study was designed the effect of Automated teller machine services and
user satisfaction with reference to commercial Banks of Ethiopian in Adama while after all
banks’ ATMs interoperable. Satisfaction is defined strictly in term of pleasure derived by users
in relation to ATM services. Therefore, this study was limits to the assessment of the customers’
satisfaction on ATM banking service but concerning: ATM Service Quality regarding to
Tangibility, Responsiveness, Empathy, Assurance and Reliability.

Geographical Scope: The study was confined to assessment of the customers’ satisfaction on
ATMs’ service on commercial Banks of Ethiopian in Adama town as case study area which has
large concentration of ATMs and focusing on those banks with reasonable number of card holder
and to fairly represent the card holder population in the city.

Methodological Scope: The study has used both descriptive and explanatory survey design and
in the course of researching both primary and secondary data was used. With regarding to the
secondary sources various publications, books, and journals articles regarding the subject matter
were included. Population of the study were active ATM card users in Adama town from each
respective commercial banks of Ethiopia and to achieve the research objectives, well designed

6
five point Likert scale questionnaire was used to gather data from sample respondents selected
on convenience sampling basis

1.7. Definition of Basic Terms

ATM:-an electronic telecommunications device that enables customers of financial institutions

to perform financial transactions, such as cash withdrawals, deposits, transfer funds, or obtaining
account information, at any time and without the need for direct interaction with bank staff.

Customer:-The people who are using Automated Teller Machine (ATM) service in CBE.

Customer Satisfaction: It is a measure of how products and services supplied by a company

meet or surpass customer expectation. Customer satisfaction is defined as the number of
customers, or percentage of total customers, whose reported experience with a firm, its products,
or its services (ratings) exceeds specified satisfaction goals.

Customer Perception: is the subjective assessment of actual service received or experienced

and whether they are satisfied with the quality of the service (Zeithmal and Bitner, 1996).

Satisfaction: An overall evaluation based on the total purchase and consumption experience
with a good or service over time

1.8. Organization of the Study

This paper has five chapters with different sections and sub sections. The first chapter holds the
introductory part of the paper and it contains background of the study, statement of problem,
basic research questions, research objectives, research hypotheses, scope of the study, and
significance of the research. The second chapter focuses on the theoretical, empirical and
conceptual literature review regarding ATM service and customer’s satisfaction in different
countries experience. The third chapter discuses research methodology regarding research design
and approach, target population/study participants, sampling design/procedure, source of data
and method of data collection, data collection procedure, data analysis. The fourth chapter
focuses on results and discussions. Finally, the last and fifth chapter deals about major finding of
the study, conclusion and recommendation of the study.

7
 CHAPTER TWO
REVIEW OF RELATED LITERATURES

This part of the study provides theoretical and empirical review collected from different sources
and specific to concepts or ideas of Electronic Banking, Automated Teller Machine, Service
Quality and Customer Satisfaction. Based on the literature reviewed, the selected conceptual
framework of the study is also presented.

2.1. Theoretical Review of Related Literature

2.1.1. Concept and Definitions of Electronic Banking

The changing business environment offers challenges and opportunities to the organizations. The
changing customers’ perception of quality poses unique challenge. Excellence in quality has
Information technology (IT) is turning into the most important factor in the development of
banking, influencing banks’ marketing and business strategies. Growth of Electronic banking is
an invaluable and powerful tool driving development, supporting growth, promoting innovation
and enhancing competitiveness (Gupta, 2008; Kamel, 2005). In recent years, the adoption of e-
banking began to occur quite extensively as a channel of distribution for financial services due to
rapid advances in IT and intensive competitive banking markets (Mahdi and Mehrdad, 2010).

Advancement in Technology and communication the service industry found the different
channels of delivery for providing the best services to their customers. Recent ten years
evidenced that electronic based business models are replacing conventional ones and
organizations are rethinking business process designs and customer relationship management
strategies. Banks are no exception to this transformation; a use of Information and
Communication Technology (ICT) is revolutionizing the banking services through various
unthinkable innovations (Islam, Biswas, & Kumar, 2007). As a result, now banks are investing
money in ICT infrastructure to provide e-banking services to their customers. It provides various
alternative e-channels to using banking services e.g. ATM, credit card, debit card, internet
banking, mobile banking, electronic fund transfer, electronic clearing services etc. (Kumbhar,
2011). Electronic delivery channels are widely accepted in business and also in public for
providing the best services to customers for interaction and communication (Parasuraman and
Zinkhan, 2002; Bauer, Hammerschmidt and Falk, 2005).

8
The revolution of e-payment as captured by Cheng (2006) in his work ―Evolution of Electronic
Payment started in 1918, when the Federal Reserve Bank first moved currency via telegraph.
However, it was not until the Automated Clearing House was set up by the U.S Federal Reserve
in 1972 that electronic currency became widespread. This provided the U.S treasury and
commercial banks with an alternative to processing cheque. Daniel (1999) defines electronic
banking as the delivery of banks' information and services by banks to customers via different
delivery platforms that can be used with different terminal devices such as a personal computer
and a mobile phone with browser or desktop software, telephone or digital television. According
to the United Nations Conference on Trade and Development (UNCTAD), E- banking refers to
the deployment over the Internet of retail and wholesale banking services. It involves individual
and corporate clients, and includes bank transfers, payments and settlements, documentary
collections and credits, corporate and household lending, card business and some others
(UNCTAD, 2002).

According to Klingebiel, (2002), Electronic banking is an umbrella term for the process by
which a customer may perform banking transactions electronically without visiting a brick and
mortar institution. Electronic banking is usually done in following forms: ATMs, personal
computer (PC) banking, Internet banking, virtual banking, online banking, home banking, remote
electronic banking, and phone bank. PC banking and Internet or online banking is the most
frequently used designations. It should be noted, however, that the terms used to describe the
various types of electronic banking are often used interchangeably. PC banking is a form of
online banking that enables customers to execute bank transactions from a PC via a modem. In
most PC banking ventures, the bank offers the customer a proprietary financial software program
that allows the customer to perform financial transactions from his or her home computer. E-
banking brought great changing Excellence in the quality of service in the current competitive
environment has become imperative for banks to sustain organizational competitiveness in such
a dynamic world. Being customer oriented and able to offer quality service is the most effective
way of building trust and competitive position in banking industries (Athanassopoulos, 2000).

The recent trends to the customer favor self-service to manage their financial and the customers
increased their banking awareness and they prefer to manage the financial activities by
themselves , and thus the banks that do not have the adequate and advanced technology that
enable to develop them to a strategy based on self service of the customer will not survive and
9
continue in the banking market and the most important electronic channels is the ATM, which is
one of the more prevalent electronic channels, and most commonly used by customers where
there is a easy to use for diverse banking services, and currently the banks expand in use this
electronic channel because the cost of providing the service to customer which is less than the
cost of providing the service through the branch that traditional mean for banks( Zuhair,2012).
ATM is the most frequent instrument in electronic channel services of bank. ATM service plays
a significant role in customer satisfaction in banking. Now a day, banks began to adopt ATM
banking as a means of widening service options, reaching wider market share, increase customer
satisfaction and lower operational costs.

2.1.2. Automated Teller Machines (ATMs)

Research evidences have revealed that different authors have conceptualized the definition of
ATM in terms of function, process of operation, and nature of the card and others. For instance,
Adepoju, and Alhassan, (2010); Ali, and Emenike (2016) described ATM as a computerized
telecommunications device that enables the financial transactions to be performed publicly by
the customers of a financial institution without the need for bank personnel. The authors
explained the processes involve inserting a plastic ATM card containing a chip that has a unique
card number as well as security information with an expiration date while the customer operating
the ATM provides a security code known as personal identification number (PIN). The ATM
card is slowly replacing cheque, the personal attendance of various customers, has increased
banking hours and reduced the holidays. They do not require any paper based verification
(Meena, 2015). According to Attanasio et al., (2002), ATM transactions and cashless payments
do not only affect optimal cash holdings but also are likely to reduce the time-cost per
withdrawal.

According to Howells (2008), ATMs were first introduced in 1967 in UK and the first machine
was installed at Barclays bank in London. However, at the beginning they faced resistance from
users as they did not trust them. The resistance faded as young people especially college students
accepted the services with open hands. The use of this device has now become the way of life
worldwide. It has been observed by the Congressional Budget Office that technological advances
have made the ATM machines more functional, cheaper and easier to accommodate. Hence all
ATM users worldwide enjoy the ATM services.

10
Automated Teller Machine (ATM) has been considered as the prominent amongst the most
critical segments of e-managing an account framework. ATM is a terminal conveyed by a bank
or any money related establishment which empowers the clients to withdraw money, make offset
enquiries, request bank statements, exchange stores furthermore store money. The ATMs are
essentially self-overhauled saving money terminals and are gone for giving quick and
advantageous administrations to the bank's clients (Rasiah, 2010). Basically, it is an electronic
terminal which gives clients the chance to acquire managing an account administration at
whatever time. To withdraw money, make stores or exchange trusts between records, a purchaser
needs an ATM card and an Individual Personal Identification Number (PIN).

The ATM card helps the customer to be identified by a plastic ATM card with a magnetic stripe
or a plastic smartcard with a chip. The security is provided by the customer entering a personal
identification number (PIN). As a result of this, the number of bank customers preferring to use
self service delivery systems is on the increase. This preference is attributed to increased
autonomy in executing the transactions) (Meena, 2015). Jane (2000) also noted that the customer
is identified by inserting a plastic ATM card with a magnetic strip or a plastic smart card with a
chip that cont0ains a unique card number and some security information such as the expiration
date, and the ATM’s are conveniently placed in public places with the aim of enabling customers
to transact without the help of a teller of banking officer. Sowunmi et al. (2014) noted that
Automated Teller Machine (ATM) is a cash dispenser that enables bank customers to enjoy
banking services without coming in contact with bank tellers (cashier) and helps them to perform
the duties of the cashier in term of payment services.

Goodhart and Krueger (2001) found that the demand for small bank notes is positively related to
the number of ATMs. People may visit ATMs more often and withdraw small amounts of cash,
which would increase the demand for small bank notes. Sowunmi, et al. (2014) noted that
Automated Teller Machine (ATM) is a cash dispenser that enables bank customers to enjoy
banking services without coming in contact with bank tellers (cashier) and helps them to perform
the duties of the cashier in term of payment services. Automatic Teller Machines (ATMs) have
been adopted and are still being adopted by banks to offer considerable benefits to both banks
and their depositors. The machines can enable depositors to withdraw cash at more convenient
times and places than during banking hours at branches. In addition, by automating services that

11
were previously completed manually, ATMs reduce the costs of servicing some depositor
demands (Olatokun and Igbinedio, 2009).

2.1.3. Prospect and Challenges of Automated Teller Machines (ATM)

The usefulness of the ATMs is numerous in number. According to Ali and Emenike(2016), with
the use of ATM, customers can operate their bank accounts to perform operations such as cash
withdrawals, cash deposit, balances enquiry and purchase of prepaid credit card into cell phone.
The two most common types of electronic card identified by the authors in Nigeria includes,
debit cards and credit cards.Debit cards enable customer to confirm immediate payment into his
account when connected. On the other hand, many countries accepted credit cards which make it
to be locally and internationally accessible. However, ATM can either be regarded as an
Automated Banking Machine (ABM) or Cash Machine (Jegede, 2014).

According to Jegede (2014) and Adeoti (2011) ATM plays a key role in retail banking with the
main effort to use technology as a tool for competition. It offers convenience, speed and works
24/7. Its safety and convenience foster easily settlement of bills. These benefits accounted for its
wide spread in Nigeria. Since 2006, the percentage increase in the number of ATM in circulation
has rising from 83% to 289% in 2007. Reliably, ATM also contributes largely to the
development of marketing banking services. In this regard, money is easily transferable from one
account to another at a click of a button and detail of such transaction is made available
instantaneously. Recently, banks developed and deployed personalized services from ATM. For
instance, in Nigeria, customers are provided with access terminals where balances and other
transactions can be viewed and printed from their accounts.

Other usefulness of ATM identified by researchers such as Ebiringa(2010), Maiyaki (2010),

Lovelock (2000), Chung, Yam and Chan (2004), and Asif(2011) includes investment
opportunities, cost reduction, quick service delivery, branding of shared network, customer’s
satisfaction and competitiveness, etc. The speed and safety in ATM transaction for customers
enables other value-added services such as fee payment, online payment for application fee,
mobile top-up, bill settlement, religion/trust Donation, insurance premium payment, funds
transfer card to account, etc. Increased ATM usage is also assisted by the fact that customers
now enjoy the flexibility of using ATMs of other banks, where interbank networks exist. This
has to a larger extent brought together ATMs of several banks so that customers would gain

12
access to any of the participating banks’ ATMs. Banks find it inexpensive to pay membership
fees to these networks compare to setting up additional units.

Ahaiwe (2011) in his work identified some of the challenges associated with the use of ATM.
These includes (i)irregular printing of statements owing to printer error or inadequate papers, (ii)
sometimes out-of-service due to unstable internet connection (iii)deduction in error from
customers’ accounts even when ATM machines do not dispense cash, (iv) un notified
swallowing or retainment of ATM (v) intra bank charges on using other banks’ ATM either per
transaction regular maintenance fee, (vi) banks located ATM are sometimes out-of-cash and (vii)
unnecessary waste of time for music while the card may end up being rejected.

Among other challenges identified by Ali and Emenike (2016) was poor power supply which
does not only slow down the speed of e-transactions but also increases the cost of operating the
services of e-banking. This is because no ICT infrastructure, including ATM can function
without electricity. This therefore increases the waiting time for each transaction, while the high
costs are passed to customers. Another major challenge identified by Ali, et al is inadequate
security associated with ATM hardware and software.

2.1.3.1. Benefits of ATMs to Customers

Just like customer satisfaction, the benefits of ATMs to customers cannot be overemphasized.
Al-Hawariand Ward (2006), Olatokun and Igbinedion (2009), sees customer convenience as one
of the most important influence of the benefit of ATMs, but Marshalland Heslop (1988),
disagreed with the issue of customer convenience, they argued that, customers have high
reliability on ATM machines, which dictates that ATM service providers should take a step to
minimize network failure. However, the researches of Marshall and Heslop (1988) Komal (2009)
Deutsche Bank AG Research (2006), Opined that ATM services enhance operations and
customer satisfaction in terms of flexibility of time, add value in terms of speedy handling of
voluminous transactions which traditional services were unable to handle efficiently and
appropriately. Similarly, Attanasio et al., (2002)., also identified speed as a major factor
influencing customer satisfaction. However, ATM transactions and cashless payments will affect
optimal cash holdings and reduce the time-cost per withdrawal.

According to Godwin (2001) Jun and Cai (2001) Yen, Tsai and Chen (2010) agreed that ideas
that are innovative oriented in the banking sector like internet banking, ATM, among others have

13
been in place in order to encourage customer’s patronages to banks and reduce cost in the
services. Conversely, the impacts of such innovative technologies will be lost when-ever the
systems are rejected by the users. The ‘user acceptance’ is therefore considered as a determining
factor that measure the degree of success or failure of any new innovation or technology. Safety
is also one of the benefits of ATMs. Godwin (2001) Tague (2010) and Singh (2011) Jun and Cai
(2001) and Yu-Min (2003), described reliability as the promptness of delivering e-banking
service such as ATM banking in an accurate way and in line with advertised attributes. Flavian et
al, (2006), argued that the success of electronic banking depends on e-banking service and
reliability. Some studies emphasize reliability as a key factor consider by most customers before
and even during the use of e-banking service (Ndubisi, Wah&Ndubisi, 2007). Previous studies
have showed qualities such as reliable/prompt responses, attentiveness, and error-free e-banking
platforms have an appreciable impact on customer satisfaction (Yang & Xiang, 2004). ATMs
also serve cost, ATM, and other electronic banks can be of a low-cost alternative to traditional
banking for customers. In all things considered, E-banking can provide a banking activity at the
lowest cost possible. As noted by Rose (1999) in Ephream (2016), ATM transaction is an
average of 6,400 per month compared to human tellers which is 4,300 per month. Moreover, it
saves customers time in service delivery as alternative to queuing in bank halls, customers can
invest such time saved into other productive activities.

2.1.3.2. Benefits of ATMs to the Banking Industry

According to Gabriel, et al (2015), in self-service technologies, the customer assumes the role of
a producer and there are a number of benefits that are accrued to both the bank and the customer
as a result of the introduction of this type of technology. The ATMs provide an opportunity for
most financial institutions to expand their revenue though the initial costs involved in securing,
installing, updating and servicing ATMs to leverage this opportunity can be quite prohibitive.
ATMs can reduce the cost of servicing some customer demands for instance the bank will make
savings as a result of a reduction in the number of tellers in the bank and reduction in overtime
claims made by bank employees working late.

E-banking helps to enhance the image of the organization as a customer focused innovative
organization. This was especially true in early days when only the most innovative organizations
were implementing this channel. Despite its common availability today, an attractive banking

14
website with a large portfolio of innovative products still enhances a bank’s image. This image
also helps in becoming effective at e-marketing and attracting young/professional customer base
(Shah et al., 2009). According to Wisdom (2012), online banking ensures customer satisfaction
as it extends financial services to customers outside the banking hall. Similarly, e-banking has
provided banks with a large customer base as it has resulted in increased customer loyalty and
satisfaction. Foley (2000) indicated that, e-banking products help to enhance the image of the
organization as a customer focused innovative organization.

On the other hand, recent trends to the customer favor self-service to manage their financial and
the customers increased their banking awareness and the most important electronic channels is
the ATM, which is one of the more prevalent electronic channels, and most commonly used by
customers where there is a easy to use for diverse banking services ( Zuhair,2012). Traditionally,
when a bank wanted to expand geographically it had to open new branches, thereby incurring
high startup and maintenance costs. E-channels, such as the ATM, have made this unnecessary in
many circumstances, now banks with a traditional customer base in one part of the country or
world can attract customers from other parts, as most of the financial transactions do not require
a physical presence near customers living/working place (Ongkasuwan and Tantichattanon,
2002).

Gabriel et al, (2015) noted that ATMs reduce the cost of servicing some customer demands for
instance the bank will make savings as a result of a reduction in the number of tellers in the bank
and reduction in overtime claims made by bank employees working late. Productivity by bank
staff is increased in that the ATM takes up some of the functions that were previously only
performed by the banker such as giving out cash, statements, taking cash/cheque deposits and
hence the bank staff can now concentrate more in other areas that need impro vement and one
such area is the cheque sorting and clearing department.

Ongkasuwan and Tantichattanon (2002) indicate that the main economic argument of Electronic
Banking so far has been reduction of overhead costs of other channels such as branches, which
require expensive buildings and a staff presence. It also seems that the cost per transaction of
ebanking often falls more rapidly than that of traditional banks once a critical mass of customers
is achieved. The general consensus is that fixed costs of e-banking are much greater than variable
costs, so the larger the customer base of a bank, the lower the cost per transaction would be.

15
Whilst this implies that cost per transaction for smaller banks would in most cases be greater
than those of larger banks, even in small banks it is seen as likely that the cost per transaction
will be below that of other banking channels. Wise and Ali (2009) argued that many banks want
to invest in ATMs to reduce branch cost since customers prefer to use them instead of a branch
to transact business. The financial impact of ATMs is a marginal increase in fee income
substantially offset by the cost of significant increases in the number of customer transactions.

2.1.4. Concept of Service Quality

Services can be defined as " any activity or benefits that one part can offer to another that is
essentially intangible and dose sot necessarily result in the ownership of anything". That is "
services are a form of product that consist of activities , benefits or satisfactions offered to, for
sale that are essentially intangible and does not result in the ownership of anything" including
banks, hotels ,airlines(Kotler and Armstrong,2006:233)

Quality according to ISO 9000 (Enríquez et al, 2019) is: "a degree to which a set of inherent
characteristics fulfills implied or obligatory" (the degree achieved by the inherent characteristics
meet the requirements). The requirements in this regard are: "need or expectation that is stated,
generally implied or obligatory" (i.e., the need or expectation that is stated, generally implied or
obligatory). So the quality of which is interpreted ISO 9000 is a combination of characteristics
which determine the extent to which output can meet the requirements of the customer's needs.
Customers who specify and assess how far the properties and characteristics that meet their
needs (Vafainia et al., 2018).

service quality has received much attention due to the fact that it is related to cost ,financial
performance ,customer satisfaction and customer loyalty(Al-Hawari etal.,2005) and it has drawn
the attention of mangers and researchers due to its great influence on the performance of
business firms (Anglova and Zekiri ,2011). So providing quality service is essential as it leads to
higher satisfaction, profitability and retention of customers (Ndamnsa and Hamde, 2010). Ahmad
and Al-Zu’bi (2011)state that quality has a long lasting effect on customer satisfaction.
Clow(1993) cited in Mosahab etal.(2010:72) claims "quality as the organization's life-giving
blood". Mesay's(2012) findings on the Private banks in Ethiopia show that all service quality
dimensions are positively correlated with customer satisfaction, showing that the quality of
banking service as essential prerequisite for having customers that are satisfied with the service

16
quality being delivered. Also nowadays commercial banks due to high pressure of globalization
and fierce competition among themselves and volatile and dynamic market are continuously
looking for new ways so that they will be in a position to add value to their services being
offered to their customers (Muyeed, 2012). Accordingly due to the fact that financial services are
competing in the market place most of the time with "undifferentiated products" service quality
is a prime competitive tool (Stafford, 1996) cited in Muyeed (2012).

Ndamnsa and Hamde(2013) pointed out service quality as one of the basic aspects among other
factors which has significant contribution to business growth and leading position in today's
fierce competition of the business environment, in which service quality has a significant role in
the service sector, because of its untouchable nature which cannot be disclosed to customers to
make judgment before reaching the final decision. Moreover, services are increasingly taken as a
tool for sources of revenue across regions, nations and across the globe(Mosahab etal.,2010)
Thus building and maintaining relationships with customer has become as service industries'
main strategy which enables them to have long term relations and corporate performance via
customer loyalty and customer retention(Anglova and Zeriki, 2011).

According to Rahaman etal.(2011) service quality is an approach which enables to manage the
business processes so that it is feasible to ensure full satisfaction of customers and this in turn
will result to increasing competitiveness and effectiveness of the given industry. These show that
for business firms to improve and maintain a better position in the era of globalization, it
demands to evaluate the performance of the services provided to their customers (Ndamnsa and
Hamde, 2013). This is due to the fact that service quality is an essential gateway for customer
satisfaction (Mosahab etal.,2010). In the old days the game was "best cost " ,however, in the era
of globalization ,the game is "best cost and quality " underlying the quality of services being
offered as critical issue (Goetsch and Davis,2000).

Service quality has three unique features namely: intangibility, heterogeneity, and inseparability
of production and consumption and in the absence of objective measures, an appropriate
assessment of the service quality of a firm is to measure consumers’ perceptions of quality
(Parasuraman et al., 1988; cited in Angelova and Zekiri, 2011). There are four basic
characteristics of service offerings. Services are "performances or actions" and cannot be
touched, tasted, felt or seen. For instance, health care services are actions that will be carried out

17
by the service providers and directed toward patients including surgery and diagnosis treatment.
According to these characteristics in one hand, it is quite difficult for service providers to readily
display or easily communicate to customers the service which is intangible, on the other, it is
quite challenging for customers to assess the quality of the service being delivered (Zeithmal and
Bitner, 2004). So since it is not possible to store, or resale the services in the latter time, demand
forecasting and making creative planning to make available capacity utilization are quite
challenging for service providers ( Zeithaml and Bitner ,2004:22).

2.1.5. ATM Service Quality

Studies show that the age of e-business has been breaking out unconventional way of performing
business and one of such astonishing techno-based service delivery(e-business) is e-banking
.Accordingly studies pointed out that the advent of such e-business which has been accompanied
with technological innovations and globalization is urging firms to rethink and redefine their
business operations in light of value chain reengineering and restructuring business models.
Worldwide, e-banking such as ATM banking service has emerged in the 1990s as one of the
fastest means of service delivery in the service industry such as banks(Saleem and Rashied,
2011) . According to Allen and Barr(1996) cited in Zaman and Chowdhury (2012) e-service
quality/techno-enabled self service is any banking service which is rendered by employing
computer -controlled systems based on the application of IT without involvement of banks usual
branch. The trend in the banking industry has undergone through various economic revolutions ,
passing from cash economy to cheque economy and converted to plastic and card
economy(Pahwa and Saxena, 2011). Some call the present globalised era a "digital economy".

Rust and Lemon(2001) cited in Seth etal.(2004) defined E-service as "the role of service in
cyberspace". According to Saleem and Rashid(2010) the banking industry is driven by
technological innovations and market uncertainty and competition ,which in turn forced the
business firms to shift from traditional banking to technology based banking. Accordingly the
technological innovation has provided an astonishing plate form in such a way that to remove
obstacles and limitations in the traditional service setting. Simply put the astonishing innovations
is in a position to cutoff the requirements of office set up and other utilities ,reduced numbers
and cost of staff customers at the branch ,save firms investment on staff employee and thereby
allow firms to carry out the required activities under the supervisions of few skilled IT

18
professionals( Saleem and Rashid, 2010). Moreover, the e- services are revolutionizing the way
business is performed in the banking industry. Accordingly the technobased business models
have replaced the traditional banking system and banks are reevaluating the business process
designs and customer relationship management strategies( Kumbhar,2011). Zhu et al.(2002)
cited in Seth etal.(2004)in their study on IT-based model demonstrated that service providers
employ IT for the purpose of cost reduction and creating value-added services for their
customers.

And yet studies show that measuring the quality of e- service quality is quite difficult and
complicated. The reason behind the difficulties and complication of measuring the quality of
eservice quality in light of e-retailing is that unlike the traditional retailing ,e-retailing is not a
single uniform marketing activities(Francis and White, 2004 ). Voss(2003)states that eretailing
based service systems differ from the traditional one in terms of channel delivery, service content
and product type cited in (Swaid and Wigand, 2009).

2.1.5.1. Dimensions of ATM Service Quality

The review of literature shows that there are different models and dimensions of ATM service
quality and different scholars have proposed and developed various ATM service quality
dimensions. For instance AL-Hawari etal.(2005)proposed five items of ATM service quality
dimensions including sufficient number of ATM, secure locations , user friendly system,
conveniently location and ATM functions. Khan (2010) identified convenience, efficient
operation, security and privacy ,reliability and responsiveness as the dimensions of ATM service
quality. Lovelock(2000) cited in Khan(2010) singled out that secure, convenient location ,
adequate number of ATM , user friendly system and functionality of ATM are the dimensions of
ATM service quality . Dilijonas etal.(2009) identified five ATM dimensions namely: sufficient
number of ATMs, search locations, user friendly. Convenient locations and ATM functionality
(such as withdrawal, money transfer and balance checking). Ganguli and Roy(2010) came out
with four dimensions namely customer service , technology security and information quality
,technology convenience and technology usage easiness and reliability

Joseph and Stone(2003) in their study regarding the US bank customers' perception of the impact
of technology on service delivery came out with accurate ATM and electronic banking ,customer
service ,excellent telephone and internet banking, secure and flexible service, easy and

19
convenient banking and personalized service as the essential dimensions of the technology based
banking service quality including ATM. Sangeetha (2012)has identified different dimensions of
technology interface service quality including ATM ,Telephone banking, Internet banking, Call
center, Customer perception of price and Core services and Queue systems.

2.1.5.2. Service Quality Models

A number of models have been proposed with the intent to define and measure service quality in
service literature. The SERVQUAL model (Parasuraman, Zeithaml& Berry, 1988), the
SERVPERF model (Cronin & Taylor, 2007), the Evaluated Performance (EP) model (Teas,
2008), the IPA model (Martilla& James, 2011) and the HEdPERF model (Firdaus, 2006) are
among the widely used models in service quality research. However, SERVQUAL and
SERVPERF models are the most frequently applied service quality models in higher learning
education (Ford et al., 2009).
Jordaan and Prinsloo (2008) stated that the SERVQUAL measurement instrument places
emphasis on quality as it indicates the difference among customers’ expectations about a
particular service and their perceptions of the service received. According to Brochado (2009)
the SERVQUAL measurement instrument is the most commonly used scale to measure the
quality of services provided. It is critical for organizations that want to deliver exceptional
quality services to place emphasis on the measurement of their services. This can be
accomplished by focusing on the SERVQUAL measurement instrument, which includes five
dimensions, namely: reliability, responsiveness, empathy, tangibility and assurance (Machado
and Diggines, 2012).

2.1.6. Customer Satisfaction

Customer satisfaction has been a central concept in the literature of marketing and a goal of firms
to attain. The primary focus of marketing is to connect with customers by building a strong
customer relationship so that they can meet customers' expectations and for customer focused
firms, customer satisfaction is both a " goal and a tool "(Angelova and Zekir, 2011).
Sureshchandar etal.(2002) indicate an existence of two- way relationship between satisfaction
and service quality cited in (Mosahab etal.,2010) while Mohammad and Alhamadani(2011) state
that customer satisfaction is highly influenced by customers perceptions of the quality of service
being delivered.

20
Customer satisfaction has been defined by numerous scholars, among which Hensemart and
Albenson (2004) commonly sees customer satisfaction as regarding the fulfillment of some
needs, goals and desires. According to Farris et al (2010), Customer satisfaction is a measure of
how products and services supplied by a company meet or surpass customer expectation.
Customer satisfaction is also defined as the number of customers, or percentage of total
customers, whose reported experience with a firm, its products or its services (ratings) exceeds
specified satisfac tion goals (Work et al ,2016). Customer satisfaction has been defined as the
difference between expectation and performance of organization is offering, but there are
differences between quality and satisfaction. Satisfaction determined after experience that quality
is the same or not. Customer satisfaction as the extent to which a product’s perceived
performance matches a buyer’s expectations. If the product performance falls short of
expectations, the buyer is dissatisfied. If performance matches or exceeds expectations, the buyer
is satisfied or delighted (Kotler et al. 2005).

Customer satisfaction as a response, emotional or cognitive pertaining to a particular focus either

expectation about a product or consumption experience which occurs at particular time after the
consumption or choice based at cumulative experience. Customer satisfaction with ATM
banking similarly a response to the used experience of ATMs which occurs at a particular time
and is based on customer’s automated experience of ATM banking services (Giese and Cote,
2002). Many scholars like; Sowunmi, Amoo, Olaleye and Salako (2014), Joseph and Stone
(2003) concurred that ATM provides the customers of banks with the ability to operate their
accounts for withdrawing cash and performing other financial transactions without the need to
actually visit a bank branch. Hence, ATM is an Electronic Fund Transfer terminal capable of
handling cash withdrawals, cash deposits, balance enquiries, transfer between accounts and bill
payments.

Okior (2015) and Kumbhar (2011) stated that timely ‘withdrawal’ of cash facilitates customer
satisfaction. Moreover, cash withdrawal of funds enables customers to meet their immediate
needs which lead to the satisfaction of the customers. Satisfied customers are most likely to share
their experiences with others which lead to investment in customer relationship, hence,
maximizing profitability of the company. Funds Transfer as agued by Chalete, (2011) enable
customers to transfer money from their bank account to an account in their own bank or another
bank through ATM. ‘Balance Inquiry’, according to Anderson (2001) Chaer, et al, (2011)
21
Cacioppo (2000) the main reasons why people used to visit the banks was to keep their
passbooks updated, so as to know their current balance. When the balance inquiry service was
offered through ATM, people started using it instead of visiting the bank. Balance inquiry via
ATM is one of the key factors which significantly affect customer's satisfaction.

Service quality is an essential tool in order to measure customer satisfaction (Pitt etal.,1995)
cited in Paul(2013). Accordingly there exist a close relationship between service quality and
customer satisfaction and it is usually taken as the critical prerequisite and determinant of
competitiveness for launching and sustaining, satisfying relationships with customers( Rasheed
and Latif 2011) and it is an essential indicator of customer satisfaction (Spreng and Machoy,
1996) cited in Rasheed and Latif(2011).

Studies show that service quality has direct link with customer satisfaction( Parasuraman
etal.,1988) cited in Khan(2010). Hallowell(1996) states that in the long term customer
satisfaction and loyalty has been perceived as the paramount performance for the firms'
performance. Due to globalization and liberalization, which affect economies of both developed
and developing nations across the globe, the focus areas of organizations are shifted from profits
maximizations to maximize profits via increased customer satisfaction. According to
Mohammad and Alhamasani's(2011) findings, service quality is an essential antecedent of
customer satisfaction and consistent with prior findings (Gotlieb et al., 1994; Buttle, 1996;
Zeithaml and Bitner ,1996; Lee et al., 2000)cited in Mohammad and Alhamadani's(2011).
Amirzadeh and Mousavi's(2011)findings show that security and privacy is the most indicators of
the ATM users while suitable place of ATM and integrated interbank network are the essential
factors which are in a position to increase the level of customer satisfaction.

2.1.7. Measuring Customer Satisfaction

Some scholars like; Nysveen, Pedersen and Thorbjornsen (2005), Chang and Chen (2009),
considered ‘security’ as one of the most important measure of customer satisfaction. Security is
referring to the protection of information or systems from unauthorized interruptions or outflows.
Fear of the lack of security is one of the factors that have been identified in most studies as
affecting the growth and development of technology including ATM banking adoption. Smith
(2000) and Jannat and Ahmed (2015), sees ‘speed’ as one of the measures of customer
satisfaction because they believe that, fast and easier banking services influence customers'

22
attitudes regarding human and automated banking and also affect their overall perception on
satisfaction.
Scholarly researcher of; Mohammad (2010) Okafor and Ezeani (2012) Olowookere and
Olowookere (2014)., agreed that ‘convenience’ in using technology positively influence
customer satisfaction, while Gilaninia, Taleghani, Taheri and Mousavian (2011)., maintained
that ‘Trust’ is one of the most influential factors as regards customer satisfaction in the use of
organizational products and services such as ATM. Fonchamnyo (2013) Venkatesh and Davis
(2000)., believes that ‘usefulness’ can be seen as the individual's perception or opinion by using
the new technology will improve his /her performance. Zeimaml et al., (2002) noted that
‘Accessibility’ is an important component of banking services that has positive effect on
customer satisfaction. Thus, the study contends that; security, ease of use, speed, convenience,
trust usefulness and accessibility have significant influence in determining adoption of
innovations, hence they invariably measure customer satisfaction.
Joseph and Stone (2003) conducted a research and find out that secure and convenient location,
adequate number of ATM, user friendly system and functionality of ATM play important role in
customer satisfaction. Profitability of firm comes from customer satisfaction which results in
behaviors’ such as word of mouth recommendation, reduced price sensitivity and product or
service loyalty that follows after the achievement of certain level of satisfaction. The under listed
are some of the consequences that express satisfied customers.
In general, satisfaction is a person’s feelings of pleasure or disappointment that result from
comparing a product’s or service’s perceived performance or outcome to the expectation (Lau et
al, 2013 and Ibojo, 2015). If the performance falls short of expectations, the customer is
dissatisfied. If the performance matches the expectations the customer is satisfied. If the
performance exceeds expectations, the customer is highly satisfied and delighted (Elsaghier and
Nathan, 2013 and Ibojo et al, 2013). this study used the above arguent to measure customer
satisfaction of CBE ATM users.

2.2. Empirical Review

Charles Mwatsika (2016) ―Customer satisfaction with ATM Banking in Malawi‖ The study
conducted on data collected from 353 ATM card users. The study adopted the importance
performance approach (Fishbein and Ajzen, 1975) to measure customer satisfaction.
Measurement of satisfaction was based on performance only (SERVPERF). Descriptive and

23
correlation analysis used to answer research questions. The result shows that all service quality
dimensions significantly correlate with customer satisfaction and responsiveness was the list
performing service quality dimension. The result further showed that, reliability is the most
important dimension followed by responsiveness, empathy, assurance and tangibles are the least
important dimension
Kanik Verma (2014) conduct comparative study on’’ analyzing the satisfaction level of
customers of Union Bank of India and Yes Bank based on various aspects related to ATMs”. In
the study, data related to various aspects of ATMs services like location of ATMs, processing
time, availability of cash, quality of notes, ATMs grievances settlement, safety & security,
sufficient numbers of ATMs etc. was collected from 40 ATMs users of Union Bank of India and
Yes Bank through convenient sampling, and the data were analyzed by using statistical technique
and tools like Descriptive Statistics, Percentage Method, and Ranking Method. The findings
reveals that ATM services of public sector bank are providing more satisfactory services as
compared to public sector bank in this study. Therefore private sector banks should concentrate
their attention on ATM services quality to improve customer satisfaction. Majority of the
respondents in both the banks dissatisfied with the ATM Grievance settlement and sufficient
number of ATMs in city, working conditions, cash availability, quality of notes . The study
suggested that bank administration should concentrate on proper mechanism on Grievances
settlement; besides that, customers’ data is increasing day by day correspondingly the number of
ATMs should be increased, so it leads to customers’ satisfaction

Al-Hawary et al.,(2011) examined the effects of service quality on customers’ satisfaction. This
study used SERVQUAL model to examine service quality and related them with customers’
satisfaction. The results showed that the four service quality dimensions which include
tangibility, reliability, assurance, and responsiveness had a positive and significant effect on
customer satisfaction. But, Empathy has a negative effect on customer satisfaction.

Similarly, Mohammad & Alhamadani (2011) assessed the effects of the five service quality
dimension on customers’ satisfaction. Results showed that the five service quality dimensions
(tangibility, reliability, responsiveness, assurance and empathy) have a positive and significant
effect on customer satisfaction.

24
Munusamy et al., (2010) studied the effects of the service quality dimensions on customers’
satisfaction Results indicated that the three service quality dimensions (assurance, empathy, and
responsiveness) had positive but insignificant effect on customer satisfaction. However,
tangibility had a positive and significant impact on customer satisfaction. Reliability has a
negative and insignificant effect on customer satisfaction. Munusamy and his colleagues reported
that assurance and responsiveness dimensions have positive but insignificant effect on
customers’ satisfaction.

Tizazu (2012) examined the effect of customer service quality on customer satisfaction in
selected private banks. The findings show that there were positive and significant relationships
between Tangibility, reliability, assurance, empathy and customer satisfaction. However, the
results also indicated that, there is a negative but insignificant relationship between
responsiveness and customer satisfaction.

Abebe (2013) conducted exploratory study on entitled” ATM service quality and customers’
satisfaction in Ethiopian banks”, Zemen , Dashen, and Commercial Bank of Ethiopia in Addis
Ababa were study’s target population from them 150 respondents were selected through quota
sampling method . Study results shown that majority of the customers are satisfied with ATM
banking service regarding accuracy and ease of use. But some of the customers felt that ATM
service of their banks have to be improved for their utmost satisfaction regarding convenience
and responsiveness.

Ephreame (2016) conducted his masters’ thesis on “assessment of ATM Banking service and
satisfaction of customers in Ethiopian private Banks case of PSS member banks”. The study used
descriptive research design and the target population of the study was six PSS member private
banks in Addis Ababa city. The questionnaire was distributed to 369 and collected data from
respondents they are selected conveniently. The study identified that majority of the respondents
agree that the number of ATMs across distance is fair, and the ATMs have user friendly system
environment to handle transactions and get services. The study finding result shows that majority
of the customers’ are dissatisfied with the automated teller machine services and they don’t
recommend others to use the ATM service.

Lemma Belay (2016) while studied the effect of ATM service quality on customer satisfaction in
Ethiopian commercial Banks in Debremarkos town using proportional stratified and simple

25
random sampling technique and cross-sectional data collected from 190 customers of Ethiopian
commercial banks, in Debremarkos town. The study used Statistical tools such as mean, standard
deviation, correlation, and multiple regression models. The study indicated that except assurance,
tangibility, reliability, responsiveness and empathy have positive and significant effect on
customer satisfaction and the customers were mostly satisfied with the responsiveness
dimensions of ATM service quality.

Tirhas et al, (2017) ―Assessment of Customer Satisfaction on Automated Teller Machine in

Adigrat, Ethiopia‘‘ in Adigrat town using systematic sampling. Since the customers approach the
ATM machine in different time, the researcher was identified the skipping interval and consider
those customers approach the machine in that interval. The study used descriptive research
method. This study found that Promptness of card delivery, number transaction, quality of note
and conveniently located were extremely satisfied the customer. The study also indicates lack of
privacy in executing the transaction, reduction in balance without cash payment; Cards get
blocked of ATMs and fear of safety was the major cause of concern for the customers.

Gezahegn Bacha (2015), made an attempt to ―assessment of customer satisfaction with ATM
banking; empirical evidence from selected commercial banks in Ethiopia‖. The study used
descriptive statistics, correlation analysis and multiple regressions. The finding revealed that, out
of 379 ATM card users where over half are fairly satisfied with ATM services from their
respective bank. All ATM service quality attributes associated with technology have been
perceived good performers, while all attributes associated with employee performance and
management functionality have been perceived not so good in performance. The results have
further found that all service quality significantly correlate with customer satisfaction except
three items under responsiveness.

2.2.1. Identified Literature Gaps

After a wider range of assessment was done on the extant of the relevant literatures on the
research topic area, it is identified that presently there is no generally accepted model to measure
the e-service quality such as ATM service quality. Moreover, most of the research studies that
have been done and instruments developed so far as well employed in the traditional service
setting. Regarding technology based banking though efforts have been made the development is
still in its early stage and the researches that have been done so far across the globe are mainly

26
on internet and banking and lesser studies on ATM banking. For instance, Al-Hawari etal.(2005)
argues that studies that have been conducted so far and available to be used to measure ATM
service quality are quite limited in their focus and the emphasizes is only on one electronic
channels ,called internet banking and the attributes of the others such as ATM are ignored. They
contended that several models have been presented to measure the customer perceptions of
service quality in face to face interaction among customers and the employees of the firms so
that it is possible to conceptualize a service quality measurement models in the traditional service
setting and yet regarding the technology based banking very few are done.

Even there are divergent views among the scholars regarding the use of ATM and its service
quality measurement. For instance, Dilijonas etal.(2009) in the Baltic States assessed the five
most dominate lever for ATM delivery channels service quality improvement that can be
articulated in terms of sufficient number of ATMs, secure locations ,system user friendly,
convenient locations and ATM functionality. Al-Hawari etal.(2005)identified ATM service
quality dimensions such as sufficient number of ATM, secure locations, user friendly system,
conveniently location and ATM functions.

In Ethiopia, CBE in focus, the practice of delivering service via banking technology is quite
underdeveloped, and very few studies have been conducted in this area. And yet, regardless of
whether the banks in Ethiopia ,CBE in focus like it or not the application of technology in
banking service and its expansion is "knocking the front door " of every firm across the globe, in
which CBE would never be exceptional(Gardachew, 2010).

Thus it is imperative to assess the effect of ATM service quality dimensions on customer
satisfaction, as customer’s preference to the use of the techno-based service is increasingly
alarming. A few studies identify problems, challenges and opportunities of the e-banking in the
Ethiopian banking context and one thesis entertain the adoption of e banking in Ethiopia and the
other thesis assess the ATM banking service And yet, no one came out with the impact of the
ATM service quality dimensions on customer satisfaction and future prospects in the case of
CBE. Hence, the purpose of the study was to examine empirically the most pertinent dimensions
of the ATM service quality dimensions that can be employed when measuring the ATM service
quality and it’s thereof on the customer satisfaction and future prospects in the case of CBE.

27
Despite such divergent views, after a wider range of assessment was done on the extant models a
structural model was adapted for this study (Machado and Diggines, 2012) with five dimensions
namely reliability, responsiveness, empathy, tangibility and assurance. The very reason for
adapting such model was that the technology presented a plate form by which companies can be
in a position to design out and deliver services which is perceived by customers as superior
(Surjadjaja etal., 2003) cited in Al-Hawari etal.(2005)and it addresses the essential constructs of
the technology and managers may gain more insights and learn about customers' needs and
hence satisfy them.

The other reason for adapting this model over others is, it incorporates the possible factors that
may shape customer perceptions of ATM banking. Thus the outcome of this study is essentially
paramount and significantly valuable in providing comprehensive insights to the practitioners in
general and to the bank in particular, regarding the essential issues of ATM and thereby
presenting the cue about customers' needs, quality service and customer satisfaction which
enables the bank to make available the right services at the customers' desire state and hence
satisfy and even delight them. Based on this the conceptual framework of the study and
hypothesis of the study are developed on the following section in order to study effect and
relationships between the study variables.

28
2.3. Conceptual Framework of Study

The main objective of the study was to examine the effect of ATM Service Quality Dimensions
on customer satisfaction. The conceptual framework will illustrate the linkage between ATM
Service Quality and customer Satisfaction.

Figure 2.1.shows the relationship between independent and dependant variables

Independent Variables

ATM Service Quality Dependant Variables

Dimensions

Performance of Reliability

Performance of Assurance Customer

Satisfaction
Performance of Empathy

Performance of Tangibles

Performance of Responsiveness

Source: (Machado and Diggines, 2012), and modified by researcher

According to (Machado and Diggines, 2012) these dimensions are defined as follows:
1. Reliability: Refers to the ability of an organization to provide the promised service quality
reliably and consistently.

2. Responsiveness: Refers to the organization and its staff’s ability to show willingness to assist
the customers.

3. Empathy: Refers to the perceived attention and care given by the organization to the
customers to ensure that their needs are met.

4. Tangibility: Refers to the tangible component of a business that has an important impact on
the customer and serves as a physical indicator of the intended service quality.

29
 5. Assurance: Refers to the customers’ perceptions on the ability of the organization’s
employees to provide the service with the needed skills, knowledge and communication
techniques.

Reliability refers to the service outcome and whether the customer received the promised service.
The remaining four dimensions refer to the development of the service. The second most
important dimension of the SERVQUAL model is assurance, and thereafter responsiveness.
These are followed by empathy and tangibility which are regarded as the least important
dimensions (Parasuraman et.al., 1991). Although reliability is observed as being the core of a
service, the overall satisfaction can only be determined through the general observation of all
five the dimensions (Jordaan and Prinsloo, 2008). Jordaan & Prinsloo (2008) stated that the main
purpose for using SERVQUAL to test the quality of the service offered, is to firstly determine
the level of service the customer will expect from the service provider, and secondly to assess the
actual service the customer receives from the specific organization. Furthermore, Tan & Kek
(2004) indicated that service quality equals perception minus expectation. Therefore, it can be
inferred that service quality can be defined as “… a customer’s evaluative judgment about the
degree of superiority of service performance”, this meaning that service quality is the degree and
direction of discrepancy between customers’ service perceptions and expectations (Boshoff,
2014).

2.3.1. Research Hypothesis

The following hypotheses were formulated based on the literature reviewed with the aim of
achieving objective of the study and tested to confirm the theory. For this study five Service
Quality Dimensions (i.e. reliability, responsiveness, empathy, tangibility and assurance) were
used as independent variables and customer satisfaction as dependent variables. Therefore, Most
of previous researchers found that service quality variables had a positive and significant effect
on customer satisfaction. For instance, Munusamy et al., (2010) and Mohammad & Alhamadani
(2011) assessed the effects of the five service quality dimension on customers’ satisfaction.
Results showed that the five service quality dimensions (tangibility, reliability, responsiveness,
assurance and empathy) have a positive and significant effect on customer satisfaction. on the
other hand Al-Hawary et al.,(2011) examined the effects of service quality on customers’
satisfaction. This study used SERVQUAL model to examine service quality and related them
with customers’ satisfaction. The results showed that the four service quality dimensions which

30
include tangibility, reliability, assurance, and responsiveness had a positive and significant effect
on customer satisfaction. But, Empathy has a negative effect on customer satisfaction.
Therefore, based on the above arguments, this study hypothesizes that:
H1: Reliability has significant & positive effect on Customer Satisfaction of Commercial Bank
of Ethiopia.

H2: Assurance has significant & positive effect on Customer Satisfaction of Commercial Bank
of Ethiopia.

H3: Empathy has significant & positive effect on Customer Satisfaction of Commercial Bank of
Ethiopia.

H4: Tangibility has significant & positive effect on Customer Satisfaction of Commercial Bank
of Ethiopia.

H5: Responsiveness has significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.

31
 CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1. Introduction
This part of the study consists of research design, type and source of data, population, sampling
techniques, sample size determination, data collection instrument, data collection procedure,
methods of data analysis, ethical consideration, validity and reliability of the study.

3.2. Research Approach

The study used quantitative research approach through structured questionnaires with closed
Likert type statement; it is a means for testing objective theories by examining the relationship
among variables. These variables, in turn, measured, typically on instruments, so that numbered
data were analyzed using statistical procedures.

3.3. Research Design

For this study, the researcher has used descriptive and explanatory research design since the
major focus of the research was the effect of ATM Service Quality on customer satisfaction.
Explanatory studies and descriptive survey designs were used to allow for the gathering of
information, summarize, present and interpret it for the purpose of clarification (Creswell,
(2003). Therefore, in order to accurately describe the effect & relationships between the
independent variables and the dependent variable descriptive and explanatory research studies
were employed which helps to use quantitative data analysis.

3.4. Types and Sources of Data

In this study primary sources of data were utilized through Questionnaires. The questionnaires
were distributed to customers of the Commercial Bank of Ethiopia branches located in Adama
city

3.5. Target Population

To collect data about the service quality dimensions and customer satisfaction the researcher was
targeted all customers and employees of Commercial Bank of Ethiopia branches operating in
Adama city. All personal and/or commercial customers who use Commercial Bank of Ethiopia
branches were included in the study. According to the information obtained from the CBE‘s
Electronic Banking Department Director, there were around 44,496 ATMs card holders in

32
Adama city. Therefore, the target population of the study was all customers and employees of
CBE located in Adama city.

3.6. Sample Size Determination

Since an account does not represent the number of bank customers with a depository account
holders because one customer could have more than one account, the researcher were taken
sample based on infinite number of population. Alreck & Settle (2005) noted that the choice of
sample size is made after considering statistical precision, practical issues and availability of
resources. According to Malhotra & Peterson (2006) there is no a single and precise way to
determine the size of sample; hence there are a number of inadequacy for deciding on sample
size. The larger the sampling size of a research, the more accurate the data generated.
The researcher used Cochran (1963) formula to determine the sample size for the study based on
a 95% desired confidence level and a 5% desired level of precision. Accordingly, the following
formula gives the size of the sample in case of infinite population when we are to estimate the
proportion in the universe.
Where:-

Z²PQ n = sample size,

𝑛= P = proportion of success
(e)² Q = proportion of fail
Z = confidence level
e = the desired level of precision

The value for Z is found in statistical tables which contain the area under the normal curve (the
abscissa of the normal curve that cuts off an area α at the tails (1 - α equals the desired
confidence level, i.e. 95%).

1.96² ∗ 0.85 ∗ 0.15

𝑛= = 195.92 ≈ 196
(0.05)²
From the total target population 196 were considered as sample size of the study.

33
3.7. Sampling Techniques
For the purpose of study, the researcher were used non probability sampling technique since the
total population of the study is large and heterogeneous in type purposive sampling technique
were preferred. Therefore, the information required for the study involves selection of
respondents who have enough awareness about the Banks’ service quality customer satisfaction;
purposive and convenience sampling techniques were used to have the right peoples from every
concerned section in the bank. In this case respondents (sample employees) were selected from
each branch based on their job title (clerical workers only) and also the researcher was used a
systematic sampling technique to select a specific customer (selected as they happen to be in the
right place at the right time (Creswell, 2003)).

3.8. Data Collection Instruments

The researcher collected data through structured questionnaires with closed Likert type
statement. The Likert type scale, commonly used in business research was applied because it
allows participants to provide their perceptions and opinions both in terms of direction (positive
or negative) and intensity (degree of agreement or disagreement). The questionnaire was utilized
with a five point likert scale namely Strongly disagree (SD), Disagree (D), Neutral (N), Agree
(A) and Strongly Agree (SA) which will be assigned scores of between 1 and 5. The closed
ended questions and Likert type statements enabled the researcher to collect quantitative data.
3.8.1. Design of Instrument
The questionnaire was designed as a data gathering instrument for the quantitative study. The
literature review was served as the guide for its content. The close-ended Likert type
questionnaires were selected from similar studies. This questionnaire type is selected because it
is easy to administer to groups of people simultaneously; it is less costly and less time consuming
than other measuring instruments. Likert scale is a widely used rating scale which requires the
respondents to indicate a degree of agreement or disagreement with each of a series of statements
or questions i.e. from (1) strongly disagree to (5) strongly agree. The questionnaire were also
includes some questions about educational back ground of respondents, employee level (year of
relationship) of the respondents, experience of the respondents at their current position.

34
3.9. Pilot Study
In order to cross check its completeness the researcher have used service quality literature and
empirical review of the previous researches on the area of the study and additional content on the
framework are included based on it. However, according to the research texts, in survey based
research, before the questioners are administrated, it is important to validate the scales used for
reliability and validity. Though, the questionnaires used for this survey are adapted from
previous research with minor customization and its validity and reliability were tested. The
researcher has made a pre pilot and pilot survey to test the questioner validity and reliability on
current survey situations. Therefore, the test results are presented on the following topics.

3.9.1. Face Validity Test

Even if most of the questioners were adopted from the similar researches on the area of the study
and its validity were previously tested, to cross check its face validity after its customized
questions as the measuring instrument, the questionnaire was given to three academicians
including my adviser for their comment. In addition, the questioner also distributed to five
employees in different employment level on the selected departments of CBE Adama Branch
offices. Then, based on the observation of feedback of the academicians and respondents, the
redundant and ambiguous items were either modified or eliminated.

3.9.2. Test of Validity

Validity is the extent to which a score on a scale or test predicts scores on some criterion
measure (Cronbach & Meehl, 1955; as cited in Gleam & Rosemary, 2003). Validity is the most
critical criterion and indicates the degree to which an instrument measures what it is supposed to
measure. Malhotra (2010) mentioned about three types of validity in his study: content validity,
predictive validity, and construct validity. Based on the pilot test data using 20 respondents, the
Pearson the correlation between all independent variables and the dependent validity are shown
on the following table.
Table 3.1: Test of Validity

RB RP EM TG AS CS
Pearson Correlation .561 ** .532 .768**
* .687** .642** 1
CS
Sig. (2-tailed) .000 .010 .000 .016 .002
Source: Own Survey data and computation, (2021)

35
As it is shown on the above table, the predictive validity of the instrument test result based on the
correlation analysis has sig (2-tailed) value obtained of all variables are < 0.05, so it can be
concluded that all independent variables used as service quality dimension was valid and were
found to be significantly correlated with the dependent variables. In addition, this study
addressed content validity through the review of literature and adapting instruments used in
previous research. Therefore, the findings using these questioners will be acceptable by the
public.

3.9.3. Test of Reliability

This quality criterion of the research refers to the consistency of a measure of a concept. This
quality criterion deals with the question whether the results of a study are repeatable (Bryman
and Bell, 2007). Cronbach’s alpha is used in this study to assess the internal consistency
(reliability of the instrument (questionnaire). Cronbach’s alpha is a coefficient of reliability used
to measure internal consistency of a test. Cronbach’s alpha score ranges from 0 to 1. According
to George & Mallery (2003) a Cronbach’s alpha value > 0.9-Excellent, > 0.8- good,> 0.7-
accepteble,> 0.6 -questionable,> 0.5 -poor and < 5 is unacceptable.
Therefore, in the study, after verifying the construct and content validity, the questioners has
been reproduced and distributed to a sample of 20 respondents for the pilot test and the test
results of readability is presented on the following table.
Table 3.2: Reliability of constructs
Construct Variables Cronbach’s Alpha Result Number of items
Service Reliability .977 7
Quality Responsiveness .986 3
Dimension .984 5
Empathy
s
Tangibility .990 6
Assurance .988 5
Customer Satisfaction .899 8
Total 34
Source: Own Survey data and computation, (2021)
As indicated in the table 3.2, the Cronbach’s alpha values for all the variables considered are
greater than 0.7 and this indicates the items in each of the domains are well understood by the
respondents. Thus, the items have internal reliability and consistency to process the data for
further analysis.

36
3.10. Method of Data Analysis
After the data collection, both descriptive and inferential statistical techniques were employed to
analyze the data. Descriptive analytical technique was used with the aid of Statistical Package for
Social Sciences (SPSS) version 22. The reliability of the variables was measured by Cronbach
alpha. And also, the collected data was analyzed by Regression analysis and correlation analysis
because it helps to investigate the relationship between the independent variable of Service
Quality Dimensions and customer satisfaction and its effect on the dependent variables customer
satisfaction. The study was also used tables, frequencies, and percentages to analyze and present
the collected data.

Base on the conceptual model of the study expressed by Figure 2.1, mathematically the
relationship between Service Quality Dimensions and customer satisfaction was expressed in the
multiple regression equation as:
Y = X0 +X1(RB) +X2 (RP) +X3 (EM) +X4 (TG) +X5 (AS) + e
Where: Y= Customer Satisfaction.
RB= Reliability
RP = Responsiveness.
EM = Empathy.
TG = Tangibility.
AS = Assurance
e= Error (level of precision)
X0= the constant parameter.
X1= Coefficient of Reliability
X2= Coefficient of Responsiveness.
X3= Coefficient of Empathy.
X4= Coefficient of Tangibility.
X5= Coefficient of Assurance.

In accordance with the above mathematical model the constructed research hypothesis were
tested by considering significance level of each constant parameter in multiple regression
analysis.

37
3.11. Ethical Considerations
A formal letter was written by Unity University Adama campus, Department of Business
Administration to CBE branches located at Adama city. The data collection was started after
getting consent from the parties mentioned above. In addition to this, name of the customers
(selected for the sample) was not included to maintain confidentiality.

38
 CHAPTER FOUR
DATA PRESENTATION ANALYSIS AND DISCUSSION
4.1. Introduction
This chapter presents the data analysis and interpretation part of the research. The study
attempted to examine the Effect of ATM Service Quality on Customer Satisfaction. The
collected data were presented and analyzed using SPSS version 22.0 statistical software. The
study used correlation analysis, specifically Pearson correlation to measure the degree of
association between different variables under consideration. Regression Analysis was used to test
the impact of independent variable on dependent variable.

4.2. Response Rate

From a total of 196 questionnaires which were distributed to employees and customers of
Commercial Bank of Ethiopia operating in Adama city, 186 (94.89%) questionnaire were
obtained and identified as valid and used for analysis. Based on these, the response rate is
94.89%.
4.3. Demographic Characteristics
The demographic profile of the sample respondents were presented and analyzed below. The
purpose of assessing respondents’ age is used to determine whether the researcher considered
heterogeneity and maturity of sample units. On the other hand assessing the work experience and
education level of the respondents’ is that, when the respondents are more experienced and
educated they have better opportunity to understand the case and give better response than else.
Therefore, the respondent’s demographic characteristics age, educational qualification and work
experience in the organization presented in the following figures.
Table 4.1 Demographic Profiles of Respondents

No Title Description Frequency Percent

1. Gender Male 97 52.15
Female 89 47.85
Total 186 100
2. Age Under 20 15 8.06
21-30 45 24.19
31-40 57 30.64

39
 41-50 42 22.58
Above 50 27 14.52
Total 186 100
3. Marital status Single 69 37.10
Married 93 50.00
Divorced 24 12.90
Total 186 100
4. Educational Illiterate 11 5.91
background secondary school and less 33 17.74
Certificate 41 22.04
Diploma and Degree 83 44.62
Masters and Above 18 9.67
Total 186 100
5. How long have you Less than 1 years 17 9.13
been with CBE 1-5 years 45 24.19
ATM used? 6-10 years 75 40.32
More than ten years ago 49 26.34
Total 186 100
Source: Own Survey data and computation, (2021)
4.3.1. Gender of the Respondent
As indicated on Table 3above from the total of 186 respondents, 97 (52.15%) were male and 89
(47.85%) of the respondents were female. Therefore, we can conclude that during the study
period more of the respondents were males than female participants in using the ATM service.

4.3.2. Age of the Respondent

As it shown on Table 3 aboveout of the total 186 respondents, 15(8.06%) respondents are aged
under 20 years, 45 (24.19%) respondents are aged between 21-30 years, 57 (30.64%) of the
respondents are aged between 31-40, 42 (22.58%) are aged between 41-50, and finally 27
(14.52%) of the respondents are aged above 50 years. Hence, from the data we can understand
that majority of the respondents fall in the working age group which is age “between” 31-40. To
this end, we can say that most of ATM users are from working class population.

40
 4.1.1. Marital Status of the Respondent
As it shown on Table 3 above from the total of 186 respondents, 69 (37.10%) respondents are
single, 93 (50.0%) respondents are married and 24 (12.9%) of the respondents are separated from
their marriage. Hence, the data confirmed that majority of the respondents are single and
married.

4.3.3. Educational Qualification of the Respondent

The study also sought to understand the academic qualifications of the respondents in the
sample; it is presented in Table 3 above. This would help us to see the effect of education on the
ATM user. From the total of 186 respondents, 11(5.91%) are illiterate, 33 (17.74%) attend
secondary school and less, 41 (22.04%) have TEVT certificate, 83(44.62%) have Diploma and
Degree and finally 18(9.67 %) are Masters Holdersand above. Hence, this confirms that most of
the ATM service users are those who have Diploma and Degree.

4.3.4. Customer’s experience years with CBE ATM

With regard to customer’s experience in using ATM service, about 17 (9.13%) have an
experience of Less than 1 years; 45 (24.19%) have an experience of from 1-5 years; 75 (40.32%)
have an experience of 6-10 years and 49 (26.34%) have more than ten years’ experience. From
this we can understand that most of the ATM users have an experience of 6-10 years. The longer
the users experience in using the ATM service serves to evaluate better how effective and
efficient is the ATMservice of CBE.

4.4. Descriptive Analysis

Descriptive statistics are used to describe the basic features of the data in a study. They provide
simple summaries about the sample and the measures (Mann, 1995). In this section, respondents
were asked to indicate their agreement/disagreement with each item on a five-point Likert scale
ranging from 1 for “very poor” to 5 for “very good”. The scores of very poor represent a variable
which had a mean score 0 to 1.8 on the continuous Likert scale; (0≤ very poor<1.8) and poor
have been taken to represent a variable which had a mean score of 1.81 to 2.6 on the continuous
Likert scale ;( 1.8≤ poor<2.6). The scores of undecided have been taken to represent a variable
with a mean score of 2.61 to 3.4 on the continuous Likert scale: (2.61 ≤ undecided<3.4). The
mean from score of good 3.41 to 4.2, on the continuous Likertscale ;(3.41≤ good<4.2) and very

41
good have been taken to represent a variable which had a mean score of 4.21 to 5.0 on a
continuous Likert scale; (3.5≤ very good<5.0). A standard deviation of >0.7 implies a significant
difference on the impact of the variable among respondents. Data for examining the items were
obtained through questionnaires administered to sample of 186 CBE ATM users in Adama city
under study.
4.4.1. Service Quality Dimensions
4.4.1.1. Reliability
Reliability refers to the ability to deliver expected standard at all time, how the organization
handle customer services problem, performing right services for the first time, providing services
within promised time and maintaining error free record (Meron, 2015 and Shanka, 2012). Meron
(2015) and Mahmud (2015) stated that reliability contains the accurate order of fulfillment,
accurate record, accurate quote, accurate billing, and accurate calculation of commissions which
keep the service promising to the customer. In order to collect respondents’ perception towards
the Reliability dimensions seven questions were provided and the results of the finding are
provided in the following table.
Table 4.2: Descriptive statistics on Reliability
Item
no & Reliability Std.
code CBEs:- N Mean Deviation
RB1 ATMs not out of Order 186 4.03 1.098
RB2 Cash availability in ATMs 186 4.22 .957
RB 3 ATM card delivery System 186 3.73 1.187
RB 4 ATM serves 24 hours of a day 186 4.30 .909
RB 5 User friendliness of ATM system 186 3.69 1.311
RB 6 Speed of ATM Operation 186 2.73 1.415
RB 7 Accuracy of Transaction by ATMs 186 3.63 1.309
Valid N (listwise) 186 3.76
Source: Own Survey data, (2021)
As it is indicated on the table 4.2, the overall mean for the customer perception on ATM based
on its reliability is presented in Table 5 above. The score with the maximum possible score being
5 and the actual average mean score is greater than half 3.76 with a standard deviation of 1.17,
which Linkert scale shows “Good”. This implies that the ATM service is Reliable for customers.

42
The results of specific items in the reliability dimension shows that service recipients convince
their satisfaction.

Specifically, description of perception of Reliability on ATM service has seven items stated with
mean score. The highest score mean from the dimension of reliability ATM service; ATM serves
24 hours of a day mean 4.30,Cash availability in ATMs mean 4.22, ATMs not out of order mean
4.03, ATM card delivery system and Speed of ATM operation mean 2.73, User friendliness of
ATM system mean 3.69, Accuracy of Transaction by ATMs mean 3.63. Each item display to
what extent does customers are getting advantage from the ATM service depends on reliability
4.4.1.2. Assurance
The assurance dimension in SERVQUAL refers to the knowledge and courtesy of employees
and their ability to inspire trust and confidence (Parasuraman et al., 1988). When we take
decision for banking variety then friends, service quality, family impact, banks reliability and
company image stood very important and major factors for customers of banks (Shanka, 2012).
Employees characteristics similar to their capability, equal of respect in the direction of
customers and competence in the banking measures of procedures for operation (Mahmud,
2015). In order to collect respondents’ perception towards the Assurance practices three
questions were provided and the results of the finding are provided in the following table.
Table 4.3: Descriptive statistics on Assurance
Item
no & Assurance Std.
code CBEs:- N Mean Deviation
AS1 Privacy when using ATMs 186 2.41 1.15
AS 2 Security at ATMs 186 2.52 1.12
AS 3 Advise on ATM usage and security 186 2.67 1.01
Valid N (listwise) 186 2.53
Source: Own Survey data and computation, (2021)
The data in the Table 4.3 overall average mean score (2.53) for all variables in this dimension are
generally Poor. This shows that respondents are not satisfied with CBE ATM service with
concerned to assurance.

Regarding the assurance dimension, the figure depicts that the highest mean score is (2.67)
which Advise on ATM usage and security. The findings reveal that customers are satisfied by the
Security at ATMs with a mean score of (2.52) and Advise on ATM usage and security with a

43
mean score of (2.41). Therefore, the above data tell us that the assurance of CBE ATM service
low.

4.4.1.3. Empathy

Parasuraman et al. (1985) defined empathy as a caring and individual attention that the firm
provides to its clients. It contains giving individual attention to employees who understand the
needs of their customers and cure search of private sector banks, provide individual attention and
easy operation time; give personal attention, and understand the specific needs of customers.
Fitzsimmons and Fitzsimmons (2001 cited in Mahmud, 2015) suggest that empathy contains
approachability, sensitivity, and efforts to understand customer needs. Additionally, the
SERVQUAL model indicates that satisfaction is related to the size and direction of
disconfirmation of a person’s experience when he/she faces his/her initial expectations
(Parasuraman et al, 1985). In order to collect respondents’ perception towards the Empathy five
questions were provided and the result of the finding is provided in the following table.
Table 4.4: Descriptive statistics on Empathy
Item
no & Empathy Std.
code CBEs:- N Mean Deviation
EM1 Accessibility of employee to solve ATM problem 186 3.74 1.469
EM 2 Easy access to ATMs 186 3.92 1.277
EM 3 Fees charged 186 3.85 1.359
EM 4 Convenient location 186 3.69 1.399
EM 5 The number of ATMs across distance 186 3.79 1.452
Valid N (listwise) 186 3.80
Source: Own Survey data and computation, (2021)
In table 4.4 above it is shown that overall empathy score for all variables are generally good.
Accordingly, respondents are satisfied with CBE ATMs service with regard of empathy. See
table 7 above Average Mean Score in Empathy Dimension.

Regarding empathy, one question is showing the lowest mean score is 3.69 and 3.74 for
convenient location of ATMs and Accessibility of employee to solve ATM problem respectively,
this means that customer response is good, hence most of the ATM machines are in convenient
area. It also shows that customer’s accessibility of employee to solve ATM problems was almost
the same in different areas. However, the score regarding the factors that “Easy access to ATMs,

44
Fees charged, and the number of ATMs across distance”, shows mean score of 3.92, 3.85 and
3.79, respectively.
4.4.1.4. Tangibility
The tangibles involve the firms’ representatives, physical facilities, materials, and equipment as
well as communication materials (Meron, 2015). Furthermore, Physical environmental
conditions appeared as a clear evidence of them care and attention paid for the details offered by
the service provider (Mahmud, 2015). More specifically, Parasuraman et al. (1985) define the
tangibility appearance of physical facilities, equipment, personnel, and written materials. In order
to collect respondents’ perception towards Tangibility six questions were provided and the
results of the finding are provided in the following table.
Table 4.5: Descriptive statistics on Tangibility
Item
no & TANGIBILITY Std.
code CBEs:- N Mean Deviation
TG 1 has up-to date equipment and technology for ATM service 186 3.39 1.387
TG 2 Cleanness of ATMs and ATM Stations 186 3.83 1.236
TG 3 Number of ATMs per station 186 3.46 1.320
TG 4 Appearance of Corporate branding on ATMs 186 3.30 1.377
TG 5 Issuing of clean or new notes 186 3.84 1.206
TG 6 Issuing of readable slips 186 3.68 1.381
Valid N (listwise) 186 3.58
Source: Own Survey data, (2021)
As it is indicated on Table 4.5, average customers are comfortable with “issuing of clean or new
notes, Cleanness of ATMs and ATM stations and issuing of readable slips” of the ATM service.
It is used to be reported to have the highest mean score in this regard issuing of clean or new
notes (3.84), Cleanness of ATMs (3.83) and ATM stations and issuing of readable slips (3.64)
respectively in average dimensions. Hence, the data has indicated that respondents’ overall mean
score for all variables in tangibility dimensions are averagely positive. This shows that
respondents are satisfied with CBE ATMs provider regarding the tangibility of ATMs. In the
other side customers are no longer satisfied with appearance of corporate branding on ATMs;
rather they need to have up-to-date equipment and Number of ATMs per station.
4.4.1.5. Responsiveness
Responsiveness is defined as the ability to respond to customer requirements timely and flexibly.
Banks have to adopt technology to deliver their services and at same time reduce cost due to

45
creation of value added services for customers (Mahmud, 2015 and Meron, 2015). It is crucial
for banks to better understand the changing customers’ needs and adopt the latest information
technology system in order to compete more effectively with global organizations (Meron, 2015
and Shanka, 2012). In order to collect respondents’ perception towards the responsiveness five
questions were provided and the result of the finding is provided in the following table.
Table 4.6: Descriptive statistics on Responsiveness
Item
no & RESPONSIVENESS Std.
code CBEs:- N Mean Deviation
RP1 Quick replacement of lost cards 186 2.88 1.428
RP2 Bank employees Friendliness 186 3.20 1.467
RP3 Easy process of applying for ATM cards 186 3.78 1.402
RP4 Returning fast swallowed cards 186 3.08 1.474
RP5 Employee speed in responding to ATM problems 186 3.17 1.488
Valid N (listwise) 186 3.22
Source: Own Survey data, (2021)

According to the result in table 4.6, for responsiveness, as shown in Table 9, the overall mean
scores for the respondents’ satisfactions of ATM service satisfaction are undecided. This
undecided shows that respondents are neither satisfied nor unsatisfied with CBE ATMs service
with regards to responsiveness. The highest mean score from the dimension of responsiveness
was easy process of applying for ATM cards mean score (3.78), this show customers are
satisfied by the easy process of applying for ATM cards. In the other side “Bank employee’s
friendliness, employee speed in responding to ATM problems, returning fast swallowed cards
and Quick replacement of lost cards” have mean score of 3.20, 3.17, 3.08 and 2.88 respectively.

Modern marketing strategy is defined as generating profit through satisfying customers.

Therefore, in order to improve or satisfy customers and generate more profit responsiveness is
one of the tools that make happy customers in order to buy more and repeatedly and CBE should
give due attention and consider its organizational culture in terms of responsiveness and improve
its customer satisfaction.
4.4.1.6. Customer Satisfaction
Satisfaction is the emotional state that occurs as a result of a customers’ overall evaluation of
interaction experiences with a service firm over time (Verhoef, 2003). Specifically, relationship

46
satisfaction is customers’ affective state toward a relationship (Palmatier et al., 2006). In order to
collect respondents’ perception towards the Customer Satisfaction eight questions were provided
and the result of the finding is provided in the following table.
Table 4.7: Descriptive statistics on Customer Satisfaction
Item
no & CUSTOMER SATISFACTION Std.
code N Mean Deviation
CS1 I’m always happy with the ATM Services of CBE 186 3.52 .639
CS2 I recommend my families and relatives to use the ATM services from 186 3.46 .638
CBE banks’ ATM terminals
CS3 I am satisfied with the organizations ethics and integrity 186 3.85 .375
CS4 The charge for getting service from CBE bank’s ATM terminals is fair. 186 3.40 .737
CS5 The employee was able to render the service according to my expectations 186 3.47 .513
CS6 I am satisfied with time it took to process my transaction. 186 3.41 .746
CS7 I am satisfied with the professional competence of employees of the bank. 186 3.77 .543
CS8 I am satisfied with the overall service quality offered by the bank 186 3.39 .744
Valid N (listwise) 186 3.53
Source: Own Survey data, (2021)
As it is indicated on the table 4.7, based on the mean value, the variables for Customer
Satisfaction vary from the highest (3.85), I am satisfied with the organizations ethics and integrity e to
the lowest (3.39) for I am satisfied with the overall service quality offered by the bank. Based on the
grand mean of customer satisfaction variable (Mean= 3.53) Commercial bank of Ethiopia got
good performance. Therefore in order to improve overall customer satisfaction performance CBE
has to give due attentions for its service quality in general, improve the processing speed of their
ATM machines and relook its charge on ATM transactions and make it fair for its customers.
4.5. Correlation Analysis between ATM SQ Dimensions and CS
Correlations are the measure of the linear relationship between two variables. The Measures of
correlation (here designated in general as r) have the representative of being dimensionless and
scaled to lie in the range −1 ≤ r ≤ 1 When there is no correlation between two variables, r = 0.
When one variable increases as the second increases, r is positive. When they vary in opposite
directions, r is negative. Correlation is also significant at the p < 0.01 level (2- tailed), 0 < r < 0.1
= little or no relationship, 0.1< r < 0.5= weakly related, 0.5 < r < 0.9 = strongly related. The
relationship between ATM SQ Dimensions and customer satisfaction was investigated using
correlation analysis. This provided correlation Coefficients which indicated the strength and
direction of relationship.
47
Table 4.8 Correlation matrix between constructs of ATM SQ Dimensions and CS

RB AS EM TG RP CS
RB Pearson Correlation 1 .283** .217** .339** .238** .424**
Sig. (2-tailed) .000 .003 .000 .001 .000
AS Pearson Correlation .283** 1 .453** .413** .376** .619**
Sig. (2-tailed) .000 .000 .000 .000 .000
EM Pearson Correlation .217** .453** 1 .427** .191** .593**
Sig. (2-tailed) .003 .000 .000 .009 .000
TG Pearson Correlation .339** .413** .427** 1 .243** .641**
Sig. (2-tailed) .000 .000 .000 .001 .000
RP Pearson Correlation .238** .376** .191** .243** 1 .418**
Sig. (2-tailed) .001 .000 .009 .001 .000
CS Pearson Correlation .424** .619** .593** .641** .418** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
**. Correlation is significant at the 0.01 level (2-tailed).
b. Listwise N=186
Source: Own Survey data and computation, (2021)
The correlation table revealed that there was a positive significant relationship between ATM
Service Quality Dimensions (Reliability, Assurance, Empathy, Tangibility, Responsiveness) and
Customer Satisfaction with (0.424**, p<0.001) (0.619**p<0.001), (0.593**,p<0.001), (0.641
**,p<0.001) and (0.418**,p<0.001) respectively. This implies that the five independent variables
have the potential to influence Customer Satisfaction of Commercial Bank of Ethiopia.
4.6. Regression Analysis
The collected data from the customers of Commercial Bank of Ethiopia were used to make the
inferential analysis of the study. In multiple regression model, before making a regression
analysis it is important to test regression assumptions.
4.6.1. Multiple Regression Assumptions
In order to get the reliable and dependable result of the analysis, all the assumptions of the
multiple regressions should be fulfilled before making the regression analysis interpretation.
Therefore, before going to answer the research questions the researcher have tested the following
pre regression assumptions and the assumption results are presented on the following topics of
this research paper.
4.6.1.1. Sample Size

48
Sample size is an important factor to be considered while conducting the regression analysis. As
it is cited Field (2009), Green (1991) makes two rules of thumb for the minimum acceptable
sample size, the first based on whether you want to test the overall fit of your regression model
(i.e. test the R2), and the second based on whether you want to test the individual predictors
within the model (i.e. test b-values of the model). If you want to test the model overall, then he
recommends a minimum sample size of 50 + 8k, where k is the number of predictors. So, with
five predictors, you’d need a sample size of 50 + 40 = 90. If you want to test the individual
predictors then he suggests a minimum sample size of 104 + k, so again taking the example of 5
predictors you’d need a sample size of 104 + 5 = 109 (Field, 2009). Therefore, since the samples
for this survey is 186 that means it provide enough case for the survey in predicting both the
model overall or individual predictors in the model.
4.6.1.2. Multi-co linearity Assumption
Multi-co linearity is used to determine whether there is similarity of independent variable with
the other independent variables in the regression model or not. This assumption can be assessed
by examining tolerance and the variance inflation factor (VIF). VIF values well below 10 and the
tolerance statistics well above 0.2 can safely to conclude that there is no co linearity within the
data (Field, 2009). A good regression model must not have a strong correlation among its
independent variables or must not have a multi-co linearity problem and that the value of
variance inflation factor (VIF) must have a value between 1 and 10 and the tolerance level
should be more than 0.2 (SPSS Inc., 2017) . The result of Multi co linearity test is shown in the
table below:
Table 4.9: Multi co linearity test of independent variables

Collinearity Statistics
Model Tolerance VIF
1 Reliability .846 1.182
Assurance .664 1.507
Empathy .724 1.380
Tangibility .711 1.406
Responsiveness .836 1.196
a. Dependent Variable: CS
Source: Own Survey data, (2021)

49
The result in table 4.10 shows that the co linearity between independent variables had no series
problem since the value of tolerance for all independent variable is greater than 0.2 and all VIF is
less than ten (VIF<10) (Pallant 2005). From the above table hence, we can conclude that there is
no co linearity between the data of the study.
4.6.1.3. Normality Assumption
According to statistics solution (2017), in multiple linear regression analysis requires that the
error between observed and predicted values (i.e., the residuals of the regression) should be
normally distributed. This assumption can best be checked by plotting residual values on a
histogram with a fitted normal curve or by reviewing a Q-Q-Plot. Normality can also be checked
with a goodness of fit test (e.g., the Kolmogorov-Smirnov test), though this test must be
conducted on the residuals themselves. When the data is not normally distributed, a non-linear
transformation (e.g., log-transformation) might correct this issue if one or more of the individual
predictor variables are to blame, though this does not directly respond to the normality of the
residuals.
Figure 4.1: P-P Plot of regression standardized residual

Source: Own Survey data and computation, (2021)

50
Figure 4.5 show that the residuals have a sound normal distribution because the plotted residuals
were around the diagonal straight line instead of making any other shape or curve.
4.6.2. Result of Regression Analysis
The researcher conducted a multiple regression analysis so as to know how much the
independent variable explains the dependent variable. The regression was conducted between
ATM Service Quality Dimensions (independent variable) and Customer Satisfaction (dependent
variable). The results of the regression analysis are presented as follows:
4.6.2.1. Model Summery
Table 4.10: Regression Model between ATM Service Quality Dimensions and CS

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .812a .660 .650 .18105
a. Predictors: (Constant), RP, EM, RB, TG, AS
b. Dependent Variable: CS
Source: Own Survey data and computation, (2021)
Adjusted R squared is coefficient of determination which tells us the variation in the dependent
variable (customer satisfaction) due to changes in the independent variable service quality
dimensions. From the above table 4.11 the value of adjusted R squared was 0.650 indicating that
there was variation of 66% on customer Satisfaction (dependent variable) due to changes in
ATM service quality dimensions Reliability, Assurance, Empathy, Tangibility and
Responsiveness (independent variables) at 95% confidence interval, While the rest 35%
customer satisfaction is affected by other external variables that are not included under this
study.
4.6.2.2. ANOVA Result
Table 4.11 ANOVA Result between constructs of ATM Service Quality Dimensions and CS

Model Sum of Squares df Mean Square F Sig.

1 Regression 11.436 5 2.287 69.773 .000b
Residual 5.900 180 .033
Total 17.336 185
a. Dependent Variable: CS
b. Predictors: (Constant), RP, EM, RB, TG, AS
Source: Own Survey data and computation, (2021)
From the ANOVA statics in table 4.12 above, the processed data which is the population
parameters, had a significance level of 0% which shows that the data is ideal for making a

51
conclusion on the population’s parameter as the value of significance (p-value=0.000) is less
than 5%
4.6.2.3. Coefficients of Regression Analysis
In this section, Regression analysis conducted in the light of each research objectives. In order to
know which of the predictors’ (constructs) i.e. Reliability, Assurance, Empathy, Tangibility and
Responsiveness has contributed significantly to our understanding of Customer Satisfaction, the
following table shows Coefficients when we explore each predictor’s beta (i.e., standardized
regression coefficient) and its level of significance.
Table 4.12 Regression Coefficients between ATM Service Quality Dimensions and CS

Unstandardized Coefficients Standardized Coefficients

Model B Std. Error Beta t Sig.
1 (Constant) -.505 .320 -1.577 .117
Reliability .167 .055 .143 3.020 .003
Assurance .386 .079 .261 4.898 .000
Empathy .170 .032 .273 5.335 .000
Tangibility .189 .029 .331 6.414 .000
Responsiveness .277 .086 .153 3.210 .002
a. Dependent Variable: CS
Source: Own Survey data, (2021)
As reflected on Table 4.12, the variable test shows all significant value for service quality
dimensions and constant value has value of .00 which is p-value < 0.05 resulting positive
significant relationship with the dependent variable customer satisfaction.
The model of the regression is stated as follows:
Y = X0 +0.143(RB) + 0.261 (AS) + 0.273(EM) +0.331 (TG) +0.153(RP) + e
The values of the Standardized Beta Coefficients (β) indicate the effects of each independent
variable on dependent variable. The values of the Standardized Beta Coefficients in the Beta
column on the above Table indicated sign implies the direction of the relationship between the
dependent and independent variables. From the multi regression result all independent variables
have positive coefficient values with acceptable level of significance. This implies the increase in
every independent variables (service quality dimensions) result in increase on customer
satisfaction.

52
 4.6.2.4. Hypotheses Testing
In accordance with this mathematical model the constructed hypothesizes has tested by
considering significance level of each constant parameter and Regression Coefficients in
multiple regression analysis. Consequently, tests for each hypothesis are discussed in the next
paragraphs based on Regression Coefficients output in the above table.

H01: Reliability has no significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.

HA1: Reliability has significant & positive effect on Customer Satisfaction of Commercial Bank
of Ethiopia.

Based on the result in table 4.12, standardized coefficients β-value and p-value for Reliability
and Customer Satisfaction were (P<0.05 and β=0.143) Reliability has positive relation with
customer satisfaction that holding other variables constant as one unit of Reliability increases,
there would be 14.3% an increase on Customer Satisfaction. Thus hypothesis (HO1) is rejected
and alternative HA1 is accepted.

H02: Assurance has no significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.
HA2: Assurance has significant & positive effect on Customer Satisfaction of Commercial Bank
of Ethiopia.
From the result of the study Assurance has positive and significant (P<0.05 and β=0.261)
relation and has 26.1% contribution on Customer Satisfaction in which the banking technology is
reliable and has positive and significant effect on Customer Satisfaction. Thus hypothesis (HO2)
is rejected and alternative hypothesis HA2 is accepted.

H03: Empathy has no significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.
HA3: Empathy has significant & positive effect on Customer Satisfaction of Commercial Bank
of Ethiopia.
The result in the table above also found that Empathy had a positively and significantly influence
with (P<0.05 and β=0.273) on Customer Satisfaction. This indicates holding other variables

53
constant as one unit of Empathy increases, there would be 27.3% an increase on Customer
Satisfaction. Thus hypothesis (HO3) is rejected and alternative (HA3) is accepted.

H04: Tangibility has no significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.
HA4: Tangibility has significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.
The result in the table above also found that Tangibility had a positively and significantly
influence with (P<0.05 and β=0.331) on Customer Satisfaction. This indicates that holding other
variables constant as one unit of Tangibility increases, there would be 33.1% an increase on
Customer Satisfaction. Thus hypothesis (HO4) is rejected and alternative (HA4) is accepted.

H05: Tangibility has no significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.
HA5: Tangibility has significant & positive effect on Customer Satisfaction of Commercial
Bank of Ethiopia.
Regarding Responsiveness the result in the table above found that Responsiveness had a
positively and significantly influence with (P<0.05 and β=0.153) on Customer Satisfaction. This
indicates that when other variables are held constant, from the standardized coefficient 0.153 as
one unit of Responsiveness increases 15.3% increase on Customer Satisfaction. Thus hypothesis
(HO5) is rejected and alternative (HA5) is accepted.
4.6.2.5. Summary of Hypothesis Test
The standardized beta coefficients in Table 4.12 implied that the independent variables have
strong effect on customer’s satisfaction. Here, 1% changes in reliability leads to 14.3%
corresponding change in the level of customer’s satisfaction, 1% changes in Assurance leads to
26.1% change in customer’s satisfaction level, 1% change in Empathy leads to 27.3% change in
customer’s satisfaction level. Tangibility and responsiveness leads to 33.1%, and 15.3% change
in customer’s satisfaction level respectively.

54
Table 4.13 Summery of Hypothesis Test
Hypothesis Significa Result of the
nce hypothesis
Level tested
HA1 Reliability has positive and significant effect on customer satisfaction < 0.05 Accepted
HA2 Assurance has positive and significant effect on customer satisfaction < 0.05 Accepted
HA3 Empathy has positive and significant effect on customer satisfaction < 0.05 Accepted
HA4 Tangibles has positive and significant effect on customer satisfaction < 0.05 Accepted
HA5 Responsive has positive and significant effect on customer satisfaction < 0.05 Accepted
Source: Own Survey data and computation, (2021)
As it is shown on the above results all contract variables of service quality (i.e. Reliability,
Assurance, Empathy, Tangibility and Responsiveness) had significant and positive effect on
customer satisfaction of Commercial Bank of Ethiopia.
Therefore, the result of this finding is consistent with the findings of Munusamy et al., (2010)
and Mohammad & Alhamadani (2011) and Al-Hawary et al.,(2011) who found the effects of the
five service quality dimension on customers’ satisfaction. their Results showed that the five
service quality dimensions (tangibility, reliability, responsiveness, assurance and empathy) have
a positive and significant effect on customer satisfaction.

55
 CHAPTER FIVE
SUMMARY OF MAJOR FINDINGS, CONCLUSION AND
RECOMMENDATION
This chapter presents summary of major findings which are organized as the research objective,
conclusions that are drawn from the findings and recommendations based on the findings.

5.1. Summary of Major Findings

According to the data analysis in the previous section, summary of the findings presented as
follows:

 Demographic characteristics of respondent from the total of 186 respondents, 97

(52.15%) were male and 89 (47.85%) of the respondents were female. In this regard
males are more ATM user than female. According to Age respondents, the majority of
the respondents fall in the working age group which is 31-40 age group, 57
(30.64%).From the total of 186 respondents, 69 (37.10%) respondents are single, 93
(50.0%) respondents are married and 24 (12.9%) of the respondents are separated from
their marriage. Hence, it confirmed the majority of the respondents are single and
married. Depending on educational background 83(44.62%) have Diploma and Degree.
This is the highest rate from others; this confirmed that most of the users of ATM service
have more educational qualification which is Diploma and Degree. Customer’s
experience in using the bank ATM service 75 (40.32%) has an experience of 6-10 years.
This is the highest rate from the others.
 According to ANOVA test there is a relationship between service quality dimensions
(reliability, responsiveness, assurance, tangibility and convenience) and customer
satisfaction having significant value or P value is less than 0.05, F statistics (69.773) at a
significant point.
 According to correlation analysis there is positive relationship exists between the
automated teller machine service quality dimensions (reliability, responsiveness,
assurance, tangibility and convenience) and customer satisfaction.

56
  Finally, the hypothesis result shows that, all predictors (i.e. reliability, responsiveness,
assurance, tangibility and convenience) are accepted, having positive significant effect on
customer Satisfaction towards ATM banking.
5.2. Conclusion

The primary purpose of this study was to investigating the effect of ATM banking service quality
on customer satisfaction of Commercial Bank of Ethiopia Adama branches, Stratified sampling
was used to come up with the appropriate sample size of customers. Convenience and systematic
sampling technique were used to gather primary information from customer. The study was
conducted by distributing questioners to 196 customers from which 186 (94%) have been
collected and analyzed. The overall satisfaction level of customers was measured using a point
likert scale range from strongly dissatisfied (1) to strongly satisfied (5).

Based on the findings using the data collected and by using multiple regression analysis, the
results of the study showed that:

The study found that the independent variables have strong effect on customer’s satisfaction.
Here, 1% changes in reliability leads to 14.3% corresponding change in the level of customer’s
satisfaction, 1% changes in Assurance leads to 26.1% change in customer’s satisfaction level,
1% change in Empathy leads to 27.3% change in customer’s satisfaction level. Tangibility and
responsiveness leads to 33.1%, and 15.3% change in customer’s satisfaction level respectively.

The findings of the study also shows that 65% of corresponding change in determining
Customer Satisfaction of Commercial Bank of Ethiopia is the results of the change in ATM
banking service quality of all the five predictor variables jointly. The test of overall significance
of all the seven variables jointly i.e. Reliability, Assurance, Empathy, Tangibility and
Responsiveness are significant at 0.000 levels which found out that the model used for this study
was also to be valid.
5.3. Recommendation
Based on major findings, the study has suggested the following recommendations to be taken by
concerned parties at different level.
 According to the demographic analysis, the majority of the respondents were male’s
customers. So, the bank should encourage female customers to use ATM banking service.

57
  The bank should attempt to maintain consistent ATM service quality by assessing all the
service quality dimensions regularly.
 The bank should increase ability to provide accurate and trustworthy ATM services to
customers.
 The bank should make sure cash is available in the every ATMs machines at any time.
 The bank should focus more on the functionality of the ATM machines every day aligned
with deploying it everywhere near to the customer.
 The bank should continue responding quickly for customer question regarding the ATM
service.

 The bank should develop confidence of customer and increase customer satisfaction with
error free ATM banking service.
5.4. Limitation and Suggestion for Future Research
This study taken samples only from commercial bank of Ethiopia and doesn’t include other
banks that operate in Ethiopia. Plus CBE is currently operating in each of regional states of
Ethiopia. Limitations of this research were not considering other regional branches and other tier
of the banking industry only taking samples from Adama city branches. And also five
dimensions of service quality were examined in this study. Future studies should attempt to draw
profiles based on characteristics other than these dimensions and to be more comprehensive that
incorporate outside of Adama.

58
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Appendix One: Questionnaires
SURVEY QUESTIONNAIRE

Unity University
School of Graduate Studies MBA
Questionnaire for Customers of CBE ATM user
Part I: Inquiry for ATM user

Dear respondents,
This questionnaire is prepared for research purpose entitled “assessment of customer satisfaction
towards automated teller machine services quality: experience from some selected CBE in
Adama”. You are expected to give accurate data to make proper analysis. Your participation is
completely voluntary. I would be indebted if you co-operate with me in filling the questionnaire.
This questionnaire contains two sections and three (3) pages that were expected to take
approximately 20 to 30 minutes to complete. You are kindly requested to respond to the
questions based on the instructions under each section. No need to write your name in the
questionnaire. Since the questionnaire is being used for academic purpose, the information
gathered will remain strictly confidential. If you have any enquiry you can reach the student
researcher via the following address:
For further information, please contact BemnetYemaneby the following address: Tel:
0910201288

Part II: General Instructions

I. Please provide your responses by marking a tick (√) in the relevant boxes.
II. To the questions with alternatives that do not match to your response, please write
your appropriate response on the space provided
III. Do not write your name on the questionnaire.

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Part III: Respondent Profile
Please put a ‟ √ ‟ mark in the appropriate space to indicate your answer

No Tittle Description Mark ‟ √ ‟

6. Gender Male
Female
7. Age Under 20
21-30
31-40
41-50
Above 50
8. Marital status Singe
Married
Divorced
9. Educational Illiterate
background General secondary school or less
Certificate
Diploma and Degree
Masters and Above
10. How long have you Less than 1 years
been with CBE ATM 1-5 years
used? 6-10 years
More than ten years ago

Part IV: Questionnaires for respondents

Please respond by putting a ‟ √ ‟ mark in the box that indicates your extent of agreement
ordisagreement with each statement. The value of each answer will be weighted as follows: VP
=1, P =2, U =3, G =4 and VG =5. Where

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  VP = Very Poor
 P= Poor,
 U=Undecided,
 G= Good
 VG = Very Good
Reliability VP P U G VG
11. ATMs not out of order
12. Cash availability in ATMs
13. ATM card delivery system
14. ATM serves 24 hours of a day
15. User friendliness of ATM system
16. Speed of ATM operation
17. Accuracy of Transaction by ATMs
Assurance VP P U G VG
18. Privacy when using ATMs
19. Security at ATMs
20. Advise on ATM usage and security
Empathy VP P U G VG
21. Accessibility of employee to solve ATM problem
22. Easy access to ATMs
23. Fees charged
24. Convenient location
25. The number of ATMs across distance
Tangible VP P U G VG
26. Accessibility of wide range of services
27. Cleanness of ATMs and ATM stations
28. Number of ATMs per station
29. Appearance of corporate branding on ATMs
30. Issuing of clean or new notes
31. Issuing of readable slips
Responsiveness VP P U G VG
32. Quick replacement of lost cards
33. Bank employees friendliness
34. Easy process of applying for ATM cards
35. Returning fast swallowed cards
36. Employee speed in responding to ATM problems

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 CUSTOMER SATISFACTION

SDA

SAG
DA

AG
N
Customer Satisfaction 1 2 3 4 5
1 I’m always happy with the ATM Services of CBE
2 I recommend my families and relatives to use the ATM services
from CBE banks’ ATM terminals
3 I am satisfied with the organizations ethics and integrity
4 The charge for getting service from CBE bank’s ATM terminals is
fair.
5 The employee was able to render the service according to my
expectations
6 I am satisfied with time it took to process my transaction.
7 I am satisfied with the professional competence of employees of
the bank.
8 I am satisfied with the overall service quality offered by the bank

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