Article

The Effect of ATM Service Quality Global Business Review

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on Customer Satisfaction and © 2019 IMI
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DOI: 10.1177/0972150919846965
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Wajeeha Aslam1
Ayesha Tariq1
Imtiaz Arif1

Abstract
This study examines the impact of automated teller machine (ATM) service quality on customer
satisfaction and its effect on customer loyalty. The data were collected from 360 ATM users in
Karachi, Pakistan, using a structured questionnaire. After the data screening process and the removal
of outliers, 322 responses were found useable. To identify the dimensions of ATM service quality
and their relationship with customer satisfaction and customer loyalty, exploratory factor analysis,
confirmatory factor analysis and structural equation modelling (SEM) were used. The findings indicate
that (a) fulfilment, reliability, ease of use, and security and privacy are the major dimensions of ATM
service quality, (b) dimensions such as convenience and responsiveness are positively insignificantly
correlated with customer satisfaction and (c) customer satisfaction significantly influences customer
loyalty. This study suggests concrete strategies for bank managers to improve customer experience
with ATM and identifies the issues to be resolved in order to improve ATM service quality.

Keywords
Customer satisfaction, customer loyalty, service quality, ATM, structural equation modelling

Introduction
In the course of last 20 years, an increase in employment costs and advancement in technology has
convinced service providers towards exploring technology-based service opportunities that empower
clients in the direction of yielding self-governing services (Dabholkar, 1996; Lin & Chang, 2011).
Technology is one of the most significant drivers in many service sectors in terms of attracting more

1
Department of Business Administration, Iqra University Town, Gulshan-e-Iqbal, Karachi, Pakistan.

Corresponding author:
Wajeeha Aslam, Department of Business Administration, Iqra University Town, Block-2, Gulshan-e-Iqbal, Karachi 75300, Pakistan.
E-mail: wajeeha_aslam_87@live.com
2 Global Business Review

customers, providing better services and improving transaction execution (Boon-itt, 2015). Service
providers want the consumers to use technology because it increases services processes, enhances
proficiency of services, offers efficient assistance to customers and multiplies services delivery
alternatives (Curran & Meuter, 2005).
Self-service technologies (SSTs) are ‘high-tech edges which aid customers in creating self-regulating
services of uninterrupted employee participation in service’. It is considered as a substitute for banks that
are responsible for cash deposit and withdrawal as well as over the counter transactions (Iberahim,
Taufik, Adzmir, & Saharuddin, 2016). SSTs are intentionally intended towards advancing excellence to
fulfil the needs of the customers (Zhao, Mattila, & Eva Tao, 2008).
Automated service quality has turned into a viable tool because of its ability to easily duplicate a bank
product, but not its level of service. Therefore, by accepting the consequences of automated service
quality, reimbursements are offered to banks in terms of enhancing the level of service quality, gaining
competitive advantages, expanding their market share, increasing their innovation ability and finally
improving the bank performance (Al-Hawari, 2011).
Meuter, Ostrom, Roundtree, and Bitner (2000), and Lin and Chang (2011) suggested automated teller
machines (ATMs), check-in machines and automated ticketing, telephone banking and online services as
examples of SSTs and stated that customers who take advantage of SSTs appreciate service surrounded
by extra flexible time frames plus additional channels. Bitner (2001) stated that service providers
correspondingly enhance efficiency as well as effectiveness over SSTs.
ATM service quality is stated as ‘customer’s total assessment and verdict for quality of services
delivered by means of ATM channel’ (Narteh, 2013). Lower labour cost, efficiency, more consumer
involvement, standardization of service delivery, customer satisfaction and loyalty are the reasons for the
introduction of ATMs in retail banking (Al-Hawari & Ward, 2006; Hsieh et al., 2012; Narteh, 2015).
Service quality is an essential requirement for creating and sustaining a satisfactory relationship with
customers in a traditional banking context (Sureshchandar, Rajendran, & Anantharaman, 2002). Rod,
Ashill, Shao, and Carruthers (2009) observed a direct association between automated service quality and
customer satisfaction. According to Day (2003), Wong and Zhou (2006), Olorunniwo, Hsu, and Udo
(2006), and Aslam and Frooghi (2018), service quality has been found as an important determinant to
attain customer loyalty and satisfaction. According to Parasuraman, Zeithaml, and Berry (1988),
advocated service quality is measured by variance concerning customer anticipations of a service
provider’s performance and assessment of services they received. Lee and Lin (2005) and Gefen (2002)
used the SERVQUAL model by modifying its dimensions to measure the service quality (Shachaf,
Oltmann, & Horowitz, 2008).
Several studies have been conducted to investigate the effect of the ATM service quality on customer
satisfaction globally (Narteh, 2013, 2015; Proença & Rodrigues, 2011), but none of such studies have
been conducted in Pakistan. Khan (2010) stated that ease of use, efficiency, reliability, privacy,
responsiveness; convenience and efficiency are the factors of ATM service quality. However, his research
ignored a vital ATM service quality dimension, that is, fulfilment, which has been assumed as a foremost
automated quality dimension (Parasuraman, Zeithaml, & Malholtra, 2005; Wolfinbarger & Gilly, 2003)
as well as customer loyalty (Ariff, Yun, Zakuan, & Ismail, 2013). Narteh (2015) determined security and
privacy as one of the quality dimensions.
Bearing in mind the significance of SSTs in the retail banking industry, there is a need to expand the
study and explore some concerns (inconsistency in operations) of service quality that influence customer
loyalty and customer satisfaction in retail banking sector of Karachi, Pakistan.
Aslam et al. 3

With the continuous acceptance of ATMs as a service delivery choice in retail banking, the research
into the dimensions of service quality of ATM and their association with customer satisfaction and
customer loyalty is an important requirement and this study aims to fulfil this research need.
In Pakistan, banks are offering automated services to attain superior success in these vibrant environs.
Banks must be able to deliver a high level of service quality to their customers to increase their cost-
effectiveness and attractiveness. This study attempts to observe the impact of the ATM service quality on
customer satisfaction and its influence on customer loyalty. Furthermore, the study discovers issues that
are to be focussed in order to improve service delivery through the ATMs. Findings from the assessment
could also offer bank managers insights to increase and develop customer satisfaction and loyalty in
retail banking for using ATMs.
The next section reviews the related literature and presents the framework of the study and service
quality dimensions with respect to customer satisfaction, and then objective and rationale of the study
are discussed. Data source, sample frame and empirical model are incorporated in the section of
methodology, followed by the section of data analysis. At the end, the paper presents the discussion,
managerial implications and directions for future research.

Review of Literature

Conceptual Framework
For predicting the acceptance of new technologies, Davis (1986) proposed the technology acceptance
model (TAM) that is an adaptation of the theory of reasoned action (TRA) (Ajzen & Fishbein, 1980).
TAM comprises subsequent conceptions: perceived ease of use (PEOU), perceived usefulness (PU),
attitudes towards use and intention to use/actual use (King & He, 2006; Lin & Chang, 2011). TAM
postulates that PEOU is a main element that affects acceptance of information system, whether directly
or indirectly over PU. The aim of the TAM is to deliver a broad-spectrum description of the elements of
acceptance of technology that is proficient in clarifying users’ behaviour towards technology (Davis et
al., 1989). According to Kumar, Lall, and Mane, (2017), the TAM model states that if an application is
perceived to be easy to use, it would have a greater level of acceptance. Sahi and Gupta (2013) argued
that an application that is apparent to be stress free to use than another is more likely to be accepted by
the users. For the adoption of innovation, both PEU and PU have been used and the influence of PU on
system utilization is found more significant (Lucas, Swanson, & Zmud, 2008; Robey, 1979).
Wang, Butler, Hsieh, and Hsu (2008) also discovered the casual impact of ease of use (EOU) on PU,
and noticed that consumers are focussed to adopt an innovation primarily because technology is easy to
use and secondarily for usefulness of the technology for them. Both the factors significantly affect
customers’ attitude and intention to use SSTs, as consumers are expected to be more satisfied with SSTs,
if they consider that using the system will increase their productivity and performance.
Davis et al. (1989), Wang, Wang, Lin, and Tang (2003), and Pikkarainen, Pikkarainen, Karjaluoto,
and Pahnila (2004) have revealed that PEOU is the main element of acceptance by user and it has a
significant impact on the proposed system use. While acknowledging the robustness and supremacy of
the TAM, they continue towards extending the model with external determinants critical to technology
adoption and use (Dimitriadis & Kyrezis, 2010; Wu & Lederer, 2009).
Bolton and Drew (1991) suggested that customer satisfaction causes service quality. Bitner,
Ostrom, and Meuter (2002) and Proença and Rodrigues (2011) acknowledged ease of access and
convenience to services as reimbursements of SSTs that encourage customer satisfaction; however,
4 Global Business Review

out-of-order hardware and software cause dissatisfaction. Perceived service quality is assumed to
have an indirect positive effect on loyalty via satisfaction (Eakuru & Matt, 2008). In previous
studies, dimensions of ATM service quality are found to be significantly related to customer
satisfaction (Narteh, 2015).
In the current study, we have applied the TAM theory to support the relationship of ATM service
quality with customer satisfaction and customer loyalty. Hence, based on the previous research (Khan,
2010; Narteh, 2015), we have extended the model of ATM perceived service quality with the added
construct of Customer Loyalty (Ariff et al., 2013; Eakuru & Matt, 2008; Ribbink et al., 2004). The
service quality hypothesis development is discussed in the next section.

Self Service Technology

SSTs are ‘high-tech edges which aid customers in creating self-regulating services of uninterrupted
employee participation in service’. It is considered as a substitute for banks, which is responsible for
cash deposit and withdrawal as well as over the counter-transactions (Iberahim et al., 2016).
Makarem, Mudambi, and Podoshen (2009) said that, by attractive SSTs, the firm’s crucial purpose is
to deliver superior value to customers at convenient times and at cheaper costs in order to satisfy and
retain customers. In the past two decades, the introduction of SSTs in business world has resulted in an
overabundance of academic research (Agnihothri, Sivasubramaniam, & Simmons, 2002; Hsieh et al.,
2012; Joseph & Stone, 2003; Lee & Allaway, 2002; Snellman & Vihtkari, 2003). The results of these
studies suggest that customers assess technology-based service innovations more confidently, if the
assumed innovation has the features of high expectedness, controllability, and outcome attractiveness.
Though, like all other man-made inventions, SSTs sometimes do fail, and while interacting with
technology-based service delivery systems, customer frustration is also evident (Parasuraman, 2000).
The frustration has been largely accredited to the lack of readiness and confidence on the part of
customers in operating tech-based service delivery interfaces (Ganguli & Roy, 2010). In spite of these
problems, SSTs have become enduring features of retail banking service delivery and an examination
into their quality dimensions and how they affect customer satisfaction especially in emerging countries
is critical for managing customer satisfaction and loyalty of retail banks.

Customer Satisfaction
According to Saleem and Rashid (2011), customer satisfaction is usually regarded as the degree to which
a product or service delivered by a firm meets customer expectations. Molina, Martín-Consuegra, and
Esteban (2007) claimed that satisfaction results from the feelings consumers attain throughout and later
the consumption process.
According to Oliver (1980) and Meng, Tepanon, and Uysal (2008), the expectancy-disconfirmation
paradigm is constructed on the intention that customers form expectancies about a product or service
prior to consumption. However, Cronin and Taylor (1992) have debated that neither expectation nor
disconfirmation has any influence on customer satisfaction due to the diverse definitions of customer
expectations as well as the problems in its measurement.
Aslam et al. 5

Service Quality and Customer Satisfaction in Automated Channels

Services function as the most prominent phenomena that customers can experience and perceive, and
service quality can be assessed based on the interactions of customers with service providers, technology
interface and physical evidence (Hanaysha, 2016). Day (2003), Wong and Zhou (2006), Olorunniwo et
al. (2006), and Gursoy and Swanger (2007) postulated that service quality is related to customer
satisfaction and loyalty. Parasuraman et al. (1988) propose that service quality is measured by the
difference between customer expectations of service provider’s performance and their evaluation of the
service they received. Various models have been established in the previous studies to measure service
quality. The SERVQUAL model, proposed by Parasuraman et al. (1988), and the alternative SERVPERF
model by Cronin and Taylor (1992) have acknowledged extensive research consideration and solicitation
in the service quality texts. According to Cronin and Taylor (1992), the SERVQUAL model, in spite of
its shortcomings, seems to have attained a recognized status with service quality research. The model is
built on the statement that service quality is dependent on five major factors of reliability, tangibles,
empathy, assurance and responsiveness (Parasuraman et al., 1988). Lee and Lin (2005) and Gefen (2002)
used the SERVQUAL model and altered its dimensions to measure service quality. In situations where
machines are used to substitute employees in the service delivery process, new dimensions of service
quality might be perceived as central by customers. The inference from these studies is that service
quality dimensions in traditional services cannot be entirely valid to automated service environments.

ATM Service Quality and Customer Satisfaction

ATMs are electronic devices which let customers deposit, withdraw and transfer money, pay bills and
perform other financial transactions without the assistance of a branch representative or a teller. From the
prior research, it is evident that ATM is the electronic version of the brick-and-mortar banking hall and
customers visit the ATM to make financial transactions, be it withdrawals, deposits or balance enquiry,
as they would have done in the normal banking halls. Santos (2003) stated that ATM service quality is
the customers’ overall evaluation and judgement of the excellence of services provided through ATM
channels. Research shows that ATM quality dimensions are multi-dimensional (Katono, 2011; Khan,
2010; Narteh, 2013). Narteh (2013) identified several dimensions of ATM service quality, such as
reliability, convenience, security and privacy, ease of use, fulfilment and responsiveness.
Reliability
Reliability is the capability to carry out the required service precisely and reliably (within the traditional
service quality research) (Parasuraman et al., 1988). Wolfinbarger and Gilly (2003) claimed that
reliability is the robust interpreter of customer satisfaction in electronic channels. The reliability
dimension is critical because it embeds the active competency to perform the undertaken service
dependably and accurately. In the ATM environment, reliability predicts the ability of the machine to
function all the time, and provide error-free and consistent services. In online transactions, Stiakakis and
Georgiadis (2009) found reliability as the essential benchmark of higher electronic service quality.
Within ATMs, both Khan (2010) and Katono (2011) found reliability to be an essential ATM quality
dimension which impacts customer satisfaction.
6 Global Business Review

Convenience
Convenience refers to the situation where work is simplified with no hassle (Aslam, Arif, & Farhat,
2017). Convenience is regarded as the site or location of the ATM and includes 24/7 accessibility of the
services to the customers (Narteh, 2013, 2015). ATMs are conveniently located at bank branches, or off
sites, such as shopping malls and college campuses. The bank’s ATM card is compatible with other
banks ATM platforms and this makes it possible for customers to withdraw money from other ATMs at
a small fee (Narteh, 2015). It lessens the troublesomeness involved in using ATMs and is found to be
positively correlated with customer satisfaction (Al-Hawari et al., 2005). If the ATMs are conveniently
located, it reduces the inconvenience involved with covering long distances in order to carry out bank
transactions. Joseph and Stone (2003), Al-Hawari et al. (2005), Khan (2010), and Katono (2011) stated
that convenience has been the most used dimension of ATM service quality and has been found to be
positively correlated with customer satisfaction.
Ease of Use
Technology can be threatening to some customers, and therefore, one expects that ATMs should be
intended to abridge the transactional process for customers. Davis et al. (1989) described the ease of use
as the extent to which the potential user anticipates target system to be stress-free. If users feel that
electronic banking is easy to use and free of stress, then the likelihoods of them using the system will be
higher (Chong, Ooi, Lin, & Tan, 2010). This study uses the concept to mean the degree to which ATMs
offer trouble-free transaction for the customer. Ease of use is a key element in defining the acceptance
and use of various corporate information technologies such as online banking (Gounaris & Koritos,
2008). Researchers such as Al-Hawari et al. (2005) and Khan (2010) found that ease of use leads to
customer satisfaction in case of ATM usage.
Security and Privacy
An ATM should also deliver customers with security and privacy. Security includes defence of customers
from deception and monetary loss, whereas privacy is fortification of personal information (Zeithaml,
Parasuraman, & Malhotra, 2002). Casaló, Flavián, and Guinaliu (2007) defined security as ‘the technical
assurance that the legal obligation and practices concerning privacy will be met successfully’.
In Bangladesh and Brazil, privacy and security were found to be of serious value and an important
enabler for customers in online transactions (Hernandez & Mazzon, 2007; Jahangir & Begum, 2008;
Kim, Kim, & Lennon, 2006). Similarly, Chong et al. (2010) found security and privacy as important
factors in the adoption of Internet banking in Vietnam. Every customer expects protection for their
money and personal information from their banks. In the studies of USA, Australia and Pakistan, security
and privacy were considered as important ATM service quality dimensions (Al-Hawari et al., 2005;
Joseph & Stone, 2003; Khan, 2010). Consequently, the current study assumes that security and privacy
will be positively correlated with customer satisfaction.
Fulfilment
It is the degree to which the site’s assurances about order delivery and item readiness are encountered
(Parasuraman et al., 2005). The fulfilment of websites has a noteworthy influence on total quality,
satisfaction and loyalty intents (Wolfinbarger & Gilly, 2003). Previous studies related to ATM considered
fulfilment as a quality dimension to measure consequence desirability or the degree to which the ATM
performs outcomes to meet the customers’ expectations. This includes the genuineness of notes provided
by the ATM (eradicate counterfeits), the amount provided to customers per transaction, and the ATM’s
transactional charges imposed on customers. Narteh (2015) found availability of cash and the quality of
bank notes to be important ATM service quality variables.
Aslam et al. 7

Responsiveness
Like all technologies, ATMs are also sometimes disposed to service failures. Responsiveness measures
the accomplishment of strategies which the banks introduce to get better services, when ATM services
are undesirably established (Narteh, 2015). Responsiveness or recovery is a major determinant in many
electronic service quality scales (Narteh, 2013, 2015; Parasuraman et al., 2005). With ATMs, response or
recovery quality deals with the banks’ ability to handle customer complaints arising as an outcome of
transactional failures as well as reimbursing customers in contradiction of losses experienced, such as
money illegally withdrawn out of their accounts. Khan (2010) and Narteh (2015) stated that effective
ATM response strategies anticipate customer satisfaction in Pakistan.

Customer Satisfaction and Customer Loyalty

The function of both customer satisfaction and perceived value is known as customer loyalty (Alhemoud,
2010). It is profoundly believed that commitment means to rebuy desired product/service dependably in
prospect, thus causing repetitive same-brand/same-set purchasing, regardless of situational effects and
marketing determinations ensuring possibility to cause switching behaviour (Al-Hawari, 2011). The
degree to which a customer exhibits repeat purchasing behaviour from a service provider possesses a
positive attitudinal disposition towards the provider, and considers using only this provider when a need
for this service arises (Fianko et al., 2015).
According to Fianko et al. (2015), a loyal customer may not necessarily be a satisfied customer.
Oliver (1999) points out that satisfaction and loyalty are related. Satisfaction is, therefore, a function of
relative level of expectation and perceived performance. Expectations are built on the basis of previous
experience with the same or similar situations, statements made by friends, or other associates. A
customer is said to be loyal to a brand that provides a satisfactory experience. Beerli, Martin, and
Quintana (2004) stated that satisfaction has been shown to have its effect on customer loyalty and
conclude that satisfaction together with personal switching costs is an antecedent of loyalty.
Building on the existing literature revised above, the current study suggests that reliability,
convenience, ease of use, security and privacy, responsiveness, and fulfilment are projected to be the
chief dimensions of ATM service quality, which will impact customer satisfaction and influence customer
loyalty.

Objectives
Due to the importance and increase in usage of SSTs, the objective of this study is to investigate the
effect of ATM service quality on customer satisfaction and customer loyalty. Responsiveness, ease of
use, reliability, convenience, fulfilment, and security and privacy have been taken as the dimensions of
service quality. By considering these dimensions, customer satisfaction as well as the impact of customer
satisfaction on customer loyalty has been assessed in the present study.

Rationale of Studies
The purpose of the study is to identify the service quality dimensions that help in increasing customer
satisfaction, which leads to loyalty. Due to the increase in the usage of SSTs and the acceptance of ATMs
8 Global Business Review

as service delivery choice in retail banking, there is a need to identify the factors that help in satisfying
the customer.

Methodology
To foresee the ATM service quality impact on customer satisfaction and loyalty, primary data were
collected through a self-administered questionnaire. The questionnaire was designed for use as a survey
instrument to record the respondents’ experiences and perceptions about ATM service on a 5-point
Likert-type scale that varied from ‘strongly disagree’ (1) to ‘strongly agree’ (5). The technique used for
data collection and the sources from where the questionnaire was adapted are mentioned in data source.
Under the sample frame, the target audience of this study was mentioned. Statistical tests which were
applied on the data are mentioned under the heading of Data analysis tool.

Data Source
The items used for the survey instrument were adopted from earlier studies and the measurements taken
are mentioned in Table 1. The Questionnaire was based on two parts: one was related to demographic
profile of respondents and the other was based on constructs. After compilation of the questionnaire, it
was circulated among the respondents in both hard copy and soft copy forms. Soft copy was shared with
the respondents by sending a link of the questionnaire through e-mails and social media. A non-probability
convenience sampling method was implemented. A total of 360 questionnaires were distributed, but 322
usable completed questionnaires were received.

Table 1. Exploratory Factor Analysis

Adapted Factor
Items
Source Loadings

RESPONSIVENESS Cronbach’s alpha = 0.800

ATM contact person is available to set right the problems. 0.66
Narteh
Broken-down ATMs are fixed promptly. 0.765
(2015)
ATM cards are promptly replaced. 0.76
ATM banking settles complaints in a reasonable time. 0.672
EASE OF USE Cronbach’s alpha = 0.853
ATM provides clear instructions on usage. 0.765
Narteh
ATMs are easy to use for transactions. 0.824
(2015)
ATM language is easy to understand. 0.845
ATM provides graphics and adverts of bank services. 0.525
RELIABILITY Cronbach’s alpha = 0.764
(Table 1 Continued)
Aslam et al. 9

(Table 1 Continued)

Adapted Factor
Items
Source Loadings

ATM functions all the time. Narteh 0.697

ATM provides consistent services. (2015) 0.703
I don’t find fake currency notes from my ATM. Jha et al. 0.608
I never found my ATM out of cash. (2014) 0.731
CONVENIENCE Cronbach’s alpha = 0.828
Narteh
ATMs are conveniently located in my city. 0.634
(2015)
ATMs of my bank are easily found at all useful places like hospitals, malls,
Jha et al. 0.693
airports &amp, stations, etc.
I can locate my bank’s ATMs easily when I am out of station. (2014) 0.712
Narteh
ATM cards are compatible on other platforms. 0.73
(2013)
FULFILMENT Cronbach’s alpha = 0.826
ATM provides fast services. 0.685
Narteh
ATM provides enough money during transactions. 0.687
(2015)
ATM satisfies most of my banking needs. 0.615
Narteh
ATM charges are reasonable. 0.525
(2013)
ATM gives instant money all the time. 0.618
SECURITY AND PRIVACY Cronbach’s alpha = 0.829
I have trust and confidence in the security of ATM banking. 0.665
Narteh
I feel safe during ATM transactions. 0.746
(2015)
I have confidence in the security of my personal information. 0.805
Collier
I trust that ATM will not misuse my personal information. 0.787
(2006)
CUSTOMER SATISFACTION Cronbach’s alpha = 0.821
My bank’s ATMs provide the service that I need. Cockrill, 0.736
Overall I am very satisfied with the services an ATM provides me with. Goode, 0.674
and Beetles
I like to encourage friends and relatives to use an ATM machine operated by
(2009) 0.596
this bank.
Casaló,
Flavián, and
I think that I made the correct decision to use this bank’s ATM. 0.734
Guinaliu
(2008)
(Table 1 Continued)
10 Global Business Review

(Table 1 Continued)

Adapted Factor
Items
Source Loadings

CUSTOMER LOYALTY Cronbach’s alpha = 0.788

I have a positive emotional relation with the bank’s ATM I have chosen. Eakuru and 0.518
I intend to remain a user of the bank’s ATM I have chosen. Matt (2008) 0.794
Beerli et al.
I would always recommend my bank’s ATM to someone who seeks my advice. 0.79
(2004)
Based on my experience, I am very likely to continue my relationship with this Casaló et al.
0.54
bank’s ATM in the next months. (2008)
Source: The authors.

Responsiveness

Ease of Use

Reliability

Customer Satisfaction Customer Loyalty

Convenience

Fulfilment

Security and Privacy

Figure 1. Research Model

Source: The authors.

Sample Frame
Data were collected from ATM users of different banks in Karachi, since this market segment is viewed
as important for the continued advancement of the retail banking industry.
Aslam et al. 11

Data Analysis Tools

Reliability analysis was performed to evaluate the internal consistency of the items. Exploratory factor
analysis was performed using the option of varimax rotation in order to compile the construct using
SPSS 22.0. After performing exploratory factor analysis, confirmatory factor analysis was performed to
check all the model fitness criteria. To further test the hypothesized relationships among the latent
variables, the structural equation modelling (SEM) was employed using IBM SPSS Amos 22.0.

Empirical Model
Founded on the aforementioned literature review, the study proposes a framework which guides the
current research.

Analysis

Demographic Profile
The gender composition of the respondents indicated that 57.8 per cent of the respondents were male,
while 42.2 per cent of the respondents were female. Only 11.5 per cent of the respondents were 30–40
years old, and 2.8 per cent were above 40 years of age. As the data were collected from different
universities of Karachi, the largest group of ATM users were from 20–30 years age group, that is 73.3
per cent followed by 12.4 per cent of the respondents belonging to under 20 years of age category. The
education level of 47.2 per cent of the respondents was graduation, while 27 per cent and 25.8 per cent
respondents were postgraduates and undergraduates, respectively. In addition, the survey of the ATM
usage pattern revealed that about 47.8 per cent of the respondents use their cards once a week for
transactions, 23.9 per cent twice a week, and 17.7 per cent and 10.6 per cent of the respondents reported
that they use their ATM cards three to four times per week. Occupational distribution reflects that 54.7
per cent respondents were salaried employees, 37.3 per cent were students, while 8.1 per cent were self-
employed. The analysis of respondents’ reported monthly income revealed that only 13.4 per cent
respondents earn PKR 50,000 per month or more, 37.3 per cent earn PKR 20,000–30,000 per month,
while 28.9 per cent earn less than PKR 20,000. Finally, 19.9 per cent and 10.6 per cent respondents earn
PKR 30,000–40,000 and PKR 40,000–50,000, respectively. The maximum number of people (71.1%)
use ATM for cash withdrawal, 9.9 per cent use ATM for balance enquiry, 9.6 per cent use ATM for
transfer funds, while 9.3 per cent it for bill payments; 12.4 per cent people use ATM due to its time
saving nature, while 7.1 per cent like it for its faster transaction; 18.3 per cent respondents prefer it as it
is easy for them to use, whereas 43.8 per cent people consider it as easy banking anytime/anywhere as
they do not have to look around for their own bank’s branch every time to get cash or check their balance;
18.3 per cent customers consider it to be meeting all the mentioned features that lead to their needs
fulfilment. Table 2 illustrates the demographic profile of respondents.
12 Global Business Review

Table 2. Demographic Profile of Respondents

Frequency Percentage
Gender
Male 186 57.8
Female 136 42.2
Age
Below 20 years 40 12.4
20–30 Years 236 73.3
30–40 Years 37 11.5
Above 40 Years 9 2.8
Qualification
Under graduate 83 25.8
Graduate 152 47.2
Postgraduate and above 87 27
ATM usage per week
Once 154 47.8
Twice 77 23.9
Thrice 57 17.7
Four times 34 10.6
Occupation
Student 120 37.3
Salaried employee 176 54.7
Self-employed 26 8.1
Monthly income
Less than PKR 20,000 93 28.9
PKR 20,000–30,000 88 37.3
PKR 30,000–40,000 64 19.9
PKR 40,000–50,000 34 10.6
Above 50,000 43 13.4
Purpose of using ATM
Cash withdrawal 229 71.1
Balance Enquiry 32 9.9
Transfer funds 31 9.6
Bill payments 30 9.3
Reason to prefer ATM
(Table 2 Continued)
Aslam et al. 13

(Table 2 Continued)
Frequency Percentage
Easy banking any time any where 141 43.8
Easy to use 59 18.3
Faster transactions 23 7.1
Time saving 40 12.4
All of the above 59 18.3
Source: The authors.

Descriptive Statistics
Table 3 displays the means and standard deviations of the various variables used. These values describe
the extent to which the sampled respondents agreed/disagreed with the statements used in the
questionnaire. The descriptive statistics below indicate moderate-to-high mean values from the
respondents. The highest mean was 4.17 (ATMs are easy to use for transactions and ATM language is
easy to understand), whilst the lowest value was 3.09 (I never found my ATM out of cash). Hence, it is
evident from Table 3 that majority of the respondents agreed that ATMs are easy to use for transactions
and ATM language is easy to understand, although they sometimes found ATM out of cash.

Table 3. Descriptive Statistics

Variables Mean Std. Deviation

ATM contact person is available to set right the problems. 3.35 1.116
Broken-down ATMs are fixed promptly. 3.25 1.141
ATM cards are promptly replaced. 3.43 1.066
ATM banking settles complaints in a reasonable time. 3.5 1.02
ATM provides clear instructions on usage. 4.02 0.925
ATMs are easy to use for transactions. 4.17 0.883
ATM language is easy to understand. 4.17 0.857
ATM provides graphics and adverts of bank services. 3.95 0.973
ATM functions all the time. 3.4 1.193
ATM provides consistent services. 3.59 1.044
I do not find fake currency notes from my ATM. 3.76 1.211
I never found my ATM out of cash. 3.09 1.287
ATMs are conveniently located in my city. 4.01 0.854
ATMs of my bank are easily found at all useful places like hospitals, malls, airports
3.86 0.917
& stations etc.
I can locate my bank’s ATMs easily when I am out of station. 3.85 0.907
(Table 3 Continued)
14 Global Business Review

(Table 3 Continued)
Variables Mean Std. Deviation
ATM cards are compatible on other platforms. 3.88 0.867
ATM provides fast services. 4 0.818
ATM provides enough money during transactions. 3.8 0.889
ATM satisfies most of my banking needs. 3.9 0.771
ATM charges are reasonable. 3.64 0.964
ATM gives instant money all the time. 3.79 1.007
I have trust and confidence in the security of ATM banking. 3.81 0.969
I feel safe during ATM transactions. 3.48 1.023
I have confidence in the security of my personal information. 3.88 0.859
I trust that ATM will not misuse my personal information. 3.89 0.862
My bank’s ATMs provide the service that I need. 3.87 0.716
Overall I am very satisfied with the services an ATM provides me with. 3.96 0.823
I like to encourage friends and relatives to use an ATM machine operated by this
3.99 0.797
bank.
I think that I made the correct decision to use this bank’s ATM. 3.87 0.833
I have a positive emotional relation with the bank’s ATM I have chosen. 3.75 0.865
I intend to remain a user of the bank’s ATM I have chosen. 3.75 0.849
I would always recommend my bank’s ATM to someone who seeks my advice. 3.82 0.864
Based on my experience, I am very likely to continue my relationship with this
3.96 0.777
bank’s ATM in the next months.
Source: The authors.

Factor Adequacy, Reliability and Validity of Construct Scales

To check the dimensionality of the instrument, all the items of the questionnaire were factor analyzed by
using varimax rotation. The validation process was initiated using an initial exploratory analysis of
reliability and dimensionality. The values of the Bartlett test of sphericity and the Kaiser–Meyer–Olkin
(KMO) measure of sampling adequacy, which were 0.000 and 0.899 (>0.60), respectively, confirmed that
there is a significant correlation among the variables (Hair, Anderson, Babin, & Black, 2010). The variables
with loadings of at least 0.5 and factors with a reliability threshold of 0.7 (Hair, Black, Babin, Anderson, &
Tatham, 2006) were incorporated into the analysis. Cronbach’s α statistics for the constructs range from
0.764 for reliability to 0.853 for ease of use, which advocates that scales are adequately reliable (Hair et al.,
2010). Table 1 illustrates the overall factor loadings and reliability of the individual items.
After exploring the eight factors through EFA, IBM AMOS 22 is used for confirmatory factor analysis
to facilitate cross-validation of the model. During CFA, average variance extracted (AVE) and composite
reliability (CR) were measured for the variables. The value of CR should be >0.7 and AVE should be
>0.5 (Fornell & Larcker, 1981). Table 4 illustrates the values of AVE, CR and standardized factor
loadings of CFA.
Aslam et al. 15

Table 4. Confirmatory Factor Loadings, Composite Reliability and Average Variance Extracted

Constructs Items Standardized Loadings CR AVE

RES3 0.79
Responsiveness RES4 0.69 0.782 0.545
RES5 0.73
EOU1 0.89
Ease of use EOU2 0.79 0.888 0.727
EOU4 0.88
REL1 0.86
Reliability REL2 0.85 0.843 0.644
REL4 0.69
SP1 0.93
Security and privacy SP3 0.88 0.904 0.759
SP4 0.81
CON2 0.74
Convenience CON3 0.81 0.814 0.594
CON4 0.76
FUL3 0.79
FUL4 0.79
Fulfilment 0.875 0.637
FUL5 0.79
FUL7 0.82
CS2 0.72
Customer satisfaction CS3 0.75 0.774 0.534
CS4 0.71
CS5 0.83
CS6 0.78
Customer loyalty 0.86 0.605
CS7 0.75
CS8 0.75
Source: The authors.

To check whether the variables are correlated, discriminant validity (test/measure?) was performed.
The square roots of the AVE values are greater than corresponding correlations (Fornell & Larcker,
1981). It was observed that the variable is correlated with itself only. Table 5 illustrates the values of
correlation among the variables and the squared value of AVE to check the discriminant validity.
16 Global Business Review

Table 5. Discriminant Validity and Correlation

CL EOU CS SP CON FUL RES REL

CL 0.778
EOU 0.307 0.852
CS 0.696 0.489 0.731
SP 0.315 0.384 0.424 0.871
CON 0.351 0.583 0.511 0.474 0.771
FUL 0.378 0.489 0.595 0.484 0.701 0.798
RES 0.328 0.469 0.472 0.312 0.484 0.509 0.738
REL 0.335 0.461 0.513 0.356 0.47 0.54 0.569 0.802
Source: The authors.

Model Fitness
To analyze the simultaneous effects of the variables included in the final construct, the model was further
studied by SEM. A few items were excluded from the model in order to achieve model fitness. The items
are as follows: ‘ATM banking settles complaints in a reasonable time’, ‘ATM language is easy to
understand’, ‘I never found my ATM out of cash’, ‘I feel safe during ATM transactions’, ‘ATM cards are
compatible on other platforms’, ‘ATM charges are reasonable’ and ‘I think that I made the correct
decision to use this bank’s ATM’.
From the results of various indices, the model showed good fitness. The value of χ2(CMIN/df) was
(2.106) which is between the acceptable range of 3:1(Arif, Aslam, & Ali, 2016; Kline, 2011) and CMIN
is (526.469), df is 250, and the probability level is (0.000). While goodness-of-fit index (GFI) is (0.892)
and possible good range of GFI is 0–1, high values show better fit, and previously values greater than
0.90 were considered good (Hair et al., 2010). Trucker Lewis Index (TLI) was found to be (0.906), which
also lies in the acceptable range of 0 to 1 (Arif, Afshan, & Sharif, 2016; Aslam, Batool, & Haq, 2016;
Byrne, 2013) for better model fitness. The root mean square error of approximation is (0.059), which is
less than 0.07 and shows good fit (Aslam et al., 2015; Byrne, 2013). The results indicated that the overall
model was a good fit at 95 per cent level of confidence. The value of standardized root mean square
residual (SRMR) for the default model is found to be 0.0496, and according to Hu and Bentler (1999), it
must be less than 0.08. These various indices showed that the model fits the data perfectly. All the stated
values are between acceptable regions for the default model. Table 6 demonstrates the model fitness for
the SEM.

Path Analysis
As per the proposed model, the relation was built and checked after the model fit of SEM. The estimated
relationship is shown in Table 7. Out of six service quality dimensions, four were found to be statistically
significant, and thus, they supported five of the seven hypothesized relationships. The results show that
customer satisfaction with ATM service quality is chiefly predicted by fulfilment, reliability, ease of use
Aslam et al. 17

and security and privacy, thus they are significant and H2, H3, H5 and H6 are supported. Although
responsiveness and convenience had a positive correlation with customer satisfaction, they are statistically
insignificant. Therefore, H1 and H4 are not supported. The R2-value between the dimensions of ATM
service quality on customer satisfaction was found to be 0.44, which shows that 44 per cent of the
variation in customer satisfaction could be predicted by dimensions of ATM service quality. There is
strong support for the path from customer satisfaction to customer loyalty, so H7 is also supported. The
R2-value was 0.46, which means that 46 per cent of the variation in customer loyalty was accounted for
by customer satisfaction.

Table 6. Model Fit

Absolute fit Measures Recommended Value Model Value

χ2 526.469

df 250

χ2/df <3a 2.106

Goodness-of-fit index (GFI) >0.8c 0.891

Root mean square error of approximation (RMSEA) <0.08b 0.059

Incremental fit index (IFI) >0.90a 0.929

Tucker–Lewis coefficient (TLI) >0.90a 0.906

Comparative fit index (CFI) >0.90a 0.927

Parsimony normed fit index (PNFI) >0.50a 0.671

Parsimony comparative fit index (PCFI) >0.50a 0.713

Sources: Bagozzi and Yi (1988); Browne and Cudeck (1993); Baumgartner and Homburg (1996), and Doll, Xia, and
a b c

Torkzadeh (1994).

Table 7. Hypothesis Testing

Path Coefficients S.E. C.R. p-Value Results

Reliability → customer satisfaction 0.083 0.036 2.284 0.022 Supported
Responsiveness → customer satisfaction 0.061 0.046 1.339 0.181 Unsupported
Fulfilment → customer satisfaction 0.232 0.072 3.21 0.001 Supported
Convenience → customer satisfaction 0.029 0.078 0.369 0.712 Unsupported
Security and privacy → customer satisfaction 0.07 0.033 2.098 0.036 Supported
Ease of use → customer satisfaction 0.093 0.043 2.186 0.029 Supported
Customer satisfaction → customer loyalty 0.953 0.105 9.049 0.000 Supported
Source: The authors.
18 Global Business Review

Discussion
The motive of the study was to examine the customer satisfaction as well as check the relationship of
dimensions of ATM service quality and customer loyalty. The ATM service quality is found to be multi-
dimensional, which is concordant with previous studies (Nateh, 2013, 2015). The study has delivered a
comprehensive set of ATM quality dimensions and demonstrates that apart from convenience and
responsiveness, dimensions such as fulfilment, security and privacy, ease of use, and reliability have a
significant effect on customer satisfaction and this influences customer loyalty.
The study has discovered that fulfilment is the most essential determining factor of customer
satisfaction for ATM service quality. The findings are in accordance with previous studies (Narteh,
2015), which also found that ATM must provide fast services, precisely record transactions with receipts
in order to meet the needs of the customers, ensure availability of adequate quality bank notes and
enough cash in a sufficiently early manner, and create receipts to approve transactions.
Second, the results showed that reliability is an important contributor of customer satisfaction of ATM
services. To enhance customer satisfaction, ATMs must have technical and functional reliability and
provide error-free services. The outcomes are similar to the results obtained by scholars (Narteh, 2013,
2015; Parasuraman et al., 2005) who also found that customers anticipate ATMs to function persistently,
provide reliable services and create exact account records. The purpose of creating automated channels is
to facilitate the clients, so that they can carry out their financial transactions during any period of the day.
Third, security and privacy is another significant dimension of ATM service quality in predicting
customer satisfaction. The results suggest that all customers anticipate security, confidence, and trust for
their money as well as their personal information. Installation of CCTV cameras and the presence of
security guards on on-site ATMs have increased the trust factor in customers during transactions.
Moreover, the study has found that the ease of use has a significant impact on customer satisfaction.
Even technology-savvy customers occasionally find technology use a bit intimidating, so customers
anticipate the ATM to be effort free and less complex. The results are consistent with past studies (Narteh,
2013, 2015), which also found that the facility of an easy-to-understand language as well as user-friendly
instructions are an important determinant for improving customers’ ATM experience.
Furthermore, the study revealed that customer satisfaction has a strong influence on customer loyalty.
Customer satisfaction leads to customer loyalty with an estimated value of 93 per cent. The results are
consistent with previous studies (Beerli et al., 2004; Casaló et al., 2008; Eakuru & Mat, 2008; Kaura,
Durga Prasad, & Sharma, 2015), which found that customer satisfaction will be created, if the customers’
anticipations about the services are met, as expectations are built on the basis of previous encounters
with the same or similar situations and testimonials made by friends or other associates. Satisfaction is
an essential criterion for loyalty, because satisfied customers are loyal, and therefore, they incline to
select the same service providers.
The results further show that responsiveness has an insignificant effect on customer satisfaction. This
might be due to the reason that customers do not consider quick complaints compensations, prompt
recovery of malfunctions of ATMs and replacement of ATM cards as much important as other dimensions.
The results are concordant with earlier studies (Kumbhar, 2011; Wong, Rexha, & Phau, 2008) that
responsiveness is not significantly associated with satisfaction in ATM services. Another reason for this
insignificant result might be that if the ATM card gets trapped or damaged in the machine and customer
makes complaints against it, the customer has confidence that the card would be returned to them only
after displaying his identity.
Convenience has a positive insignificant impact on customer satisfaction. The results are similar to
the study of Mohammed (2012), which also concluded that convenience has no attentive effect on the
Aslam et al. 19

use of advanced IT banking services. Location of ATMs and compatibility of cards at other platforms are
not the only reasons for creating customer satisfaction. Another reason might be e-banking channels that
have resolved this issue, and customers feel comfortable in performing their transactions online. As this
study has been conducted in Karachi city, where debit card use is very common at several shopping malls
and restaurants, people can easily use their ATM cards anytime and anywhere.

Conclusion
Nowadays, SSTs have gained much popularity. SSTs are changing the way customers interact with the
firm for service outcomes. This study reflects the consumer behaviour towards SSTs; mainly ATM
service was focussed. For determining consumer behaviour, customer satisfaction and loyalty were
considered. Different service quality dimensions (reliability, fulfilment, ease of use, convenience,
security and privacy and responsiveness) were taken to assess customer satisfaction, which leads to
loyalty. An adapted 5-point Likert-type scale questionnaire was used for the data collection. In total, 322
usable responses were gathered. Different statistical techniques such as EFA, CFA and SEM were
implied. Reliability, content validity and discriminant validity were also examined. According to the
results of path analysis, consumers get satisfied by the ATM service if it is reliable in terms of consistent
service and availability of cash. Fulfilment and ease of use are also found to be the key factor, which
helps in gaining satisfied customers. Consumers want to feel secure and want privacy while doing
transactions; therefore, if the firm provides secure transaction facility, it can easily be able to get the
satisfied customer.

Managerial Implications
This study delivers and exhibits the sustained importance of ATMs in the retail banking in Karachi.
These identified dimensions will offer bank managers insights into what factors clients find to be most
important in their ATM usage experience. The quality dimensions used in this study recognize the need
for enhancement in ATM banking systems in order to offer value-added services to customers. In current
study, continence has failed to establish a significant relation with customer satisfaction. This might be
because mostly ATMs are used for cash withdrawal only and are under-utilized. A full range of bank
services should be enabled through ATMs, which may add to the customer convenience and may
contribute to the customer satisfaction. Banks should upgrade their ATM platforms to aid customers to
receive all services, which are enabled through Internet banking, for instance, inter-bank transfer,
payment of utility bills, cash deposit, making of pay-order, etc. These new services will probably attract
more customers into the ATMs use and reduce the long queues in banking halls, which will help in
building a robust and persistent relationship with customers. The banks should ensure that ATMs are
there to fulfil the needs of customer belonging to all income classes. The ATM must provide notes of
smaller denominations too, at times notes of small denomination finish quickly and customers may get
‘service denied’ message for lesser amounts. The resulting increase in customers’ inclination to use ATM
for multidimensional features will also add to the demands on banks to promptly respond to meet the
needs of customers. The focus of bank management should also be on delivering better interactivity,
expanded assistance and increased ease of use through their ATM service, which will also ensure
customer retention.
20 Global Business Review

The service standards of ATMs can be improved through a two-way communication, that is, rapid
response to customer queries about the ATM-associated services and regular maintenance at the ATMs
to reduce failures, ensuring that all malfunctioning ATMs are fixed quickly. Banks should introduce new
user-friendly, multilingual, biometric access-based, competitive systems and applications that will assist
customers take the full advantage of the ATM service.

Limitations of the Study and Future Recommendations

This study is carried out in Karachi which limits the generalizability of the outcomes beyond the context
of the study. Future studies must be conducted in other cities of Pakistan using random sampling in order
to augment understanding of ATM quality dimensions and customer satisfaction. Future studies must
investigate the relationship of additional dimensions of service quality with customer satisfaction, loyalty
and retention in other SSTs (Internet banking and mobile banking), comparing the cross-cultural service
quality of conventional commercial banks and Islamic banks.

Acknowledgement
The authors are grateful to the anonymous referees of the journal for their extremely useful suggestions to improve
the quality of the article. Usual disclaimers apply.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of
this article.

Funding
The authors received no financial support for the research, authorship and/or publication of this article.

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