METTU UNIVERSITY

FACULITY OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSING THE EFFECTS OF ATM SERVICE ON CUSTOMER

SAVING/WITHDRAWAL RATE IN COMMERCIAL BANK OF
ETHIOPIA (THE CASE STUDY IN METTU BRANCH)

A RESEARCH PAPER SUBMITTED TO THE DEPARTEMENT OF

ACCOUNTING AND FINANCE

PRESENTED IN PARTIAL FULFILLMENT OF THE REQUAIREMENT

FOR THE DEGREE OF BA IN ACCOUNTING AND FINANCE

ADVISOR: ZEGALE. A
BY: BEREKET MELAKU
ID NUMBER: RBE 912/09

JUNE; 2019
METTU; ETHIOPIA
 DECLARATION

I Bereket Melaku declare that this work titled: Assessment of effects of ATM service on
customer saving/withdrawal rate in CBE (the case study in CBE mettu branch) is my own effort
and study and that all source of material used for the study have been duly acknowledged. I have
produced it independently except for the guidance and suggestion of the research advisor. This
study has not been submitted for any degree in this university or any other university. It is
offered for the partial fulfillment of the degree of BA in accounting and finance.

Name____________________ Signature__________ Date _________________

Approval board of examiners committee
Name______________________________ Signature______________ Date______________
Chairperson_________________________ ______________ ______________
Advisor____________________________ ______________ ______________
Examiner___________________________ ______________ ______________
 ACNOWLEDGEMENT
Above all, I would like to thank the almighty” God” who has made my child hood dream to
become real. Secondly, my special gratitude to my advisor ZEGALE M (M.Sc.), for his
invaluable support and smooth communication throughout the preparation of this study
Thirdly, I would like to extend my heartfelt thanks to my family for giving moral and financial
support and as well as customer of commercial bank of Ethiopia, found in Mettu town by giving
me a necessary data for the successful of this study. Lastly, but not the least my heartfelt thanks
goes to all those who credited to the successful completion of this paper.
 ABSTRACT
In today’s business world, globalization and international experience has become
critically important. ATM is new technology in the banking system for Customers
in saving and withdrawal of many. ATM banking had significant contribution to
bank performance. However, many challenges have been encountered on the
service. The general objective of the research project was to assess the effects of
ATM service on customers saving/withdrawal rate in Commercial Banks of
Ethiopia. In this study, the researcher was used both qualitative & quantitative
approach. For the purpose of the study, 42 respondents were purposively selected
from customers of commercial bank of Ethiopia in mettu. The choice of the banks
is based on the availability of ATM with senior customers’ base. Questionnaires
were served to selected client in the sampled banks. The qualitative data were
narrated and summarized. Frequency distribution was used to analyze the data
collected and examined the pattern of response to each variable under
investigation. The analysis of the result indicates that 70% of the respondents
reveal that ATM could decrease the saving rate, whereas the rest of 30% of the
respondents said that saving rate could increase or no change in saving rate by
using the ATM service. In general as the analysis indicates, using ATM could have
an effect on the saving/withdrawal rate of customers in CBE. The conclusion
therefore is that banks should strive to increase their safety to overthrow the
weakness, reduce the problem of the network, adjust the amount which customers
may be allowed to withdraw at a time and provide electronic alerts to customers
‘phone for all transactions carried out on their bank accounts through ATMs.

Table of Contents
DECLARATION...........................................................................................................................ii
Lists tables...................................................................................................................................viii
List of figures................................................................................................................................ix
List of acronyms.............................................................................................................................x
CHAPTER ONE............................................................................................................................1
1. INTRODUCTION.....................................................................................................................1
1.1 Background of the study.........................................................................................................1
1.2 Statement of the Problem.......................................................................................................................4
1.3 Objectives of the study..........................................................................................................................4
1.3.1 General Objective...............................................................................................................................4
1.3.2 Specific Objectives.............................................................................................................................4
1.7 Significance of the study.......................................................................................................................6
CHAPTER TWO...........................................................................................................................7
2. LITERATURE REVIEW.........................................................................................................7
2.1 Concepts of ATM Service.....................................................................................................................7
2.6 History of Automated Teller Machine in Ethiopia...............................................................................11
2.7 Impact of ATM on Banking Performance...........................................................................................12
CHAPTER THREE.....................................................................................................................14
3. RESARCH METHODOLOGY..............................................................................................14
3.1 Description of the study Area...............................................................................................14
3.2 Target population..................................................................................................................15
3.3 Sample technique and Sample size.......................................................................................15
3.4 Source of data and method of data collection.....................................................................15
3.5 Survey Instrument.................................................................................................................16
3.6 Research Approaches............................................................................................................16
3.7 Method of data Analysis and presentation..........................................................................16
CHAPTER FOUR.......................................................................................................................17
4 RESULTS AND DISCUSSION...............................................................................................17
4.1 Respondents’ Profile............................................................................................................................17
4.2 Examining “the impacts of ATM service on customers saving/withdrawal rate in CBE”……………19
5. CONCLUSION AND RECOMENDATION.........................................................................25
5.1 Conclusions.........................................................................................................................................25
5.2 Recommendations...............................................................................................................................26
REFERENCE...............................................................................................................................27
APPENDIX...................................................................................................................................29
Lists tables

Table 1 Gender Categories of the Respondents.............................................................................14

Table 2 Experiences of the Respondents.......................................................................................15
Table 3 Education level of the respondents...................................................................................15
Table 4. Type of service the customers use by ATM visa card.....................................................16
Table 5. Customer’s satisfaction by services delivered through ATM.........................................16
Table 6. How often do you visit (in month) withdrawal...............................................................17
Table 7. Any difference in saving/ withdrawal rate......................................................................17
Table 8. Problems during ATM service........................................................................................18
Table 9 Reliability of ATM service...............................................................................................19
Table 10 fraud in using ATM service............................................................................................19
Table 11. Safety of ATM Service..................................................................................................19
Table 12…………………………………………………………………………………………
Table 13…………………………………………………………………………………………….
 List of figures

Figure 1. ATM Machine and Visa card.....................................................................................................14

Figure 2. The extent on which the Impact of ATM on the of customers saving........................................18
Figure 3. Effect of Automated Teller Machine (ATM) on effectiveness of bank......................................20
List of acronyms

ATM Automated Teller Machines

CBE Commercial Bank of Ethiopia
PIN Personal Identification Number
TID Terminal ID number
 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the study

In today’s business world, globalization and international experience has become critically
important. Banking industries can no longer get away with operating loosely connected groups of
businesses that happen to be located around the world, but must strategically integrate their
activities. Thakor and Olazabal (2002) stated that, only the banks, businesses, industries, and
whole by societies that clearly understand the new rules of doing business in a world economy
will prosper. As a global banking, the only way to succeed is to develop an effective global
banking management system with personnel capable of designing and implementing
transnational business strategies through the use of modern technology such as automated teller
machines (ATMs) (Jegede, 2014).

Technology has tremendously stimulated expansion of the banking networks and range of the
offered services during recent years. All banking services, such as electronic payments, loans,
deposits, or securities have become heavily dependable on information and telecommunication
technology (Jegede, 2014). This is the main reason why banks are the biggest users of modern
technology equipment. Due to the complexity of banking services, every opportunity to speed up
their performance or to make them more accessible for customers is very well welcomed by
banks. However with improvements of the quality of services, the important question appears if
this process can provide the economic values for banks. Unfortunately not every increase in the
customers’ satisfaction transfers into the higher bank profits, especially in the case of very
expensive investments in technology like automated teller machines (ATMs).

Although every banking operation requires some technology applications, researcher varies on
the subject of the relationship between the level of employed automated teller machines, and the
value of the banking efficiency increase. All researchers agree on the importance of ATMs for
the further developments of the banking industry, but some of them have found lack of
proportionality between the increased in the scale of technology utilization and the increase in
banks profitability (Ogbuji, 2012).

Automated Teller Machine (ATM), also known as a automated banking machine (ABM) or Cash
Machine and by several other names, is a computerized telecommunications device that provides
the clients of a financial institution with access to financial transactions in a public space without
the need for a cashier, human clerk or bank teller. Authentication is provided by the customer
entering a personal identification number (PIN). Using an ATM, customers can access their bank
accounts in order to make cash withdrawals, credit card cash advances, and check their account
balances as well as purchase prepaid cellphone credit (Jegede, 2014).

Ogbuji (2012) suggest that ATM allows a bank customer to conduct his/her banking transactions
from almost every other ATM machine in the world. However, the spread of the machines has
been generating a lot of heat, as customers face a splurge of frustration in using it; either the
machines will not dispense cash, or debit transactions when cash is not dispensed or cards get
stuck in them. Dapo (2008), indicate that the proliferation of the machines is giving more
concern. As with every other technological breakthrough the ATMs have generated challenges
and problems for the beneficiaries of financial services in Ethiopia. Most users of ATM have
encountered the problem of using it. Apart from epileptic services rendered by the machines,
faceless crooks steal from the accounts of hundreds of bank customers via the ATM technology.
The fraudsters perpetrate this financial crime by stealing the personal identification number, PIN,
a special secret code that grants access to the usage of the cards, and consequently, getting hold
of the funds of the susceptible ATM users.

The relationship between banking efficiency and the use of ATM (Automated Teller Machine) is
a complex one. This is because the overall levels of efficiency and productivity do influence the
organization overall success (Giddens, 2008). This explains why most modern banking sectors
develop ways of increasing organization and workers’ efficiency. Some of these ways include
goal setting, job enrichment, adoption information technology, globalization, training and
development. All these represent several practical ways of increasing banking sector’s
performance, which could also be a reflection of institutions efficiency.
The achievements, goals, profit and attainment of banking sector depends largely on the proper
management and technology such as ATM adopted in the banking activities. It’s upon this basis
that the level of efficiency, effectiveness and performance of banking sector and other
organization is measured. The impact of ATM on the performance of banking institutions has
been without some challenges. There have been near lack of empirical research efforts on the
effect of ATM on performance of the providers will be studied. The most revolutionary
electronic innovation in this country has been the ATM. In Ethiopia, banks with ATM offerings
have them networked and this has increased their utility to customers. The ATM has been the
most successful delivery medium for consumer banking in this county.

In the contest of Ethiopia, the widely used e-banking system at urban and educated society sector
is ATM service. ATM is defined as a machine that uses to withdraw cash, transfer fund, and sell
Recharges without visiting to the bank hall. It reduce the burden of holding the hard cash which
make discomfort in traveling from place to place to buy goods and service, fearing the risk of
theft, and frequent visit to the client bank on the working time. This powerful and business
facilitating has recent year history in Ethiopia banking industry. It was introduced by Ethiopian
commercial bank. Some services of ATM are cash withdrawal, balance inquiry, fund transfer
between accounts attached to single card, PIN change and pin unblock.

There are several studies which have been conducted in Ethiopia and abroad to assess
customers’ satisfaction on e-banking or ATM services. The study which has been conducted in
Nigeria to determine the effects of ATM on the performance in Nigerian banks by using simple
survey in five commercial banks revealed that less than benefits the deployment of ATMs
terminals have averagely improved the performance of Nigerian banks because of the alarming
rate of the ATM fraud. As his view their fraud in ATM service and the banks should struggle to
increase the security layer to subvert the tricks of web scammer and the provision of extra
security layer that can prevent third party to make use someone else’s ATM card for
unauthorized withdrawal electronically(Admasu Woldesenbet Worako, 2018).
1.2 Statement of the Problem

ATM is new technology in the banking industry of Ethiopia. The ATM service has significant
influence on the saving rate of customers of the CBE. It affects by increasing or decreasing
saving rate this is clear for one who compares he’s/her balance before and after using ATM
service. ATM banking had significant contribution to bank performance (Admasu, 2018).
However, many problems have been encountered on the service. Problems which need
immediate and long-term solutions to improve service system like crediting customer account
without they make withdrawal, card retention, network interruption, card retention, and
unsuitability of installation place for the peoples with disability, limited amount withdrawal per a
day, high frequency of use. The most common problem known to all when one is new and do not
know how to insert ATM card. They wrongly insert the card and this problem is more common
with new users who are not familiar with ATM machine. There is no strong agreement of the
users on each attributes of ATM technology. In addition the attitude of ATM adopters towards
ATM were found to be positive (Admasu W, 2018). Previous studies emphasize on ATM
adoption of customer (Ahena FA, 2014), factors affecting adoption of e-banking system in
Ethiopia (Bultum AG, 2014). So, based on the above fact the study will try to investigate the
effect of ATM service on customer saving/withdrawal rate in CBE Mettu branch.

1.3 Objectives of the study

1.3.1 General Objective

The Overall Objective of the research paper was to assess the effects of ATM service on
customers saving/withdrawal rate in Commercial Banks of Ethiopia and to come up with
appropriate remedies.

1.3.2 Specific Objectives

The study has the following specific objectives

 To assess the main effects of ATM Service on customer saving/withdrawal rate in CBE
 To study the problems faced by customer while using ATM services offered by CBE
mettu
  To evaluate Extent that ATM improve profitability of CBE mettu branch

1.4 Basic research question

Based on this objective, the following specific research question is answered by the study

 How do ATM affect saving/withdrawal rate of customer of commercial bank of Ethiopia

mettu branch?
 What are the problems faced by customers while using ATM services offered by CBE
mettu branch of CBE mettu branch?
 Is ATM improving profitability of CBE mettu branch?

1.5 Scope of the Study

The ATM service in general scope goes from its design to procedure. For the reason that, the
research on a large basis needs much funds as well as time and manpower to survey all outlay
branches of commercial bank of Ethiopia but, for the sake of the study precision, constraint on
the above mentioned resources, this study would be restricted to the customer of CBE Mettu
branch. Though, it was important to include all these areas because of infeasibility from resource
and time perspectives, the focus of this study is only assessment of the effects of ATM Service
on Customers saving/Withdrawal Rate in CBE in Mettu branch.

1.6 Limitations of the study

Different factors were affect the quality of the study those are shortage of time, limited
knowledge and experience to conduct the research, problem on getting clear explanation on the
asked questioners, Not all distributed questionnaire were returned.

1.7 Significance of the study

The study provide significance both to the researcher and commercial bank of Ethiopia

To the commercial banks of Ethiopia (organization): The outcome of the study would have
helps CBE in evaluating the importance of financial innovation on their saving performance rate.
CBE becoming more aware of the impacts ATM service in the current time and this study would
add an input to the link between ATM and performance for customer service. Further, the results
of the study would inform banks on which innovations there will better link to financial
performance and hence save on the costs of conducting cost benefit research in their institutions.

To the students (Researcher): It is important to develop the researcher’s knowledge and skill
on how to conduct research and also it is important to develop the researcher’s knowledge with
regard to assessing effect of ATM service on customer saving/withdrawal rate. In addition to
this, academically the study is important to the student as pre-request for graduation and use to
adapt different challenges that the researcher will face in conducting another study in the future.

1.8 Organization of the paper

This research paper is organized in to five chapters. The first introduction chapter which deal
about the background of the study, statement of the problem, research hypothesis, objective of
the study, significance of the study, scope of the study and organization of the study. The second
chapter describes review literature related with the study that represents the detail discussion
about the effects of ATM service on the saving/withdrawal rate. The third chapter deals about
research methodology, which includes research design, Target population, sample size, sampling
techniques, data analysis technique and Source of data. The fourth chapter will deal about data
analysis and interpretation. The fifth chapter presents conclusion and recommendation.
 CHAPTER TWO

2. LITERATURE REVIEW

2.1 Concepts of ATM Service

The banking system with all its complexities, challenges and opportunities touches virtually all
aspects of the daily lives. Using a credit card to make a purchase, writing a personal or business
check, paying bills and moving funds online or accessing funds through an automatic teller
machine (ATM) are just a few examples of how people may participate daily in the banking
system (Jegede, 2014). Even the micro-finance banks provides banking-related services such as
loans and check cashing in communities where those services are either not readily available or
where consumers perceive the micro finance bank to be their best or only-banking alternative.

The techniques of managing of banking industries through the use of ATM towards improving
banking industry performance is a basket full where every financial institution is expected to
pick that which is applicable to it. According to the Fannie Mae Foundation, ATM as used in
banking sector serve approximately 420 million transactions annually for a total of $3.3 billion in
gross annual revenues (Jegede, 2014). The types of services provided by full service banks,
technological changes and the use and important of ATM and fringe banking services should be
studied well. ATMs are known by various other names particularly in the United States) (ABM),
Automated Transaction Machine, Cashpoint (particularly in the United Kingdom), Money
Machine, Bank Machine, Cash Machine, Hole-In-The-Wall, Auto teller (after the Bank of
Scotland's usage), Cashline Machine (after the Royal Bank of Scotland's usage), MAC Machine
(in the Philadelphia area), Bank mat (in various countries particularly in Europe and including
Russia), Multi banco (after a registered trade mark, in Portugal), Mini bank in Norway, Geld
Automat in Belgium and the Netherlands, and All Time Money in India.

Rose (1999) describes ATMs as follows: “an ATM combines a computer terminal, record-
keeping system and cash vault in one unit, permitting customers to enter the bank’s book keeping
system with a plastic card containing a Personal Identification Number (PIN) or by punching a
special code number into the computer terminal linked to the bank’s computerized records 24
hours a day”. Once access is gained, it offers several retail banking services to customers.

They are mostly located outside of banks, and are also found at airports, malls, and places far
away from the home bank of customers. They were introduced first to function as cash
dispensing machines. However, due to advancements in technology, ATMs are able to provide a
wide range of services, such as making deposits, funds transfer between two or accounts and bill
payments. Banks tend to utilize this electronic banking device, as all others for competitive
advantage.

Using an ATM card, a debit card, or a credit card, bank patrons can electronically access their
accounts and withdraw or deposit funds, make payments, or check balances. ATMs have
eliminated the need to enter a bank for basic transactions and allow access to accounts at
machines throughout the United States. Financial institutions started charging fees to use their
ATMs in the mid-1990s, making the transactions very profitable for the host banks. The use of
ATMs has cut service staff in traditional banks, impacting employment in the industry. As many
machines are now commercially owned and leased in public venues, a technical industry for
cresting, leasing, and maintaining the machines has developed (Aditi, 2013). ATM is one of
existing replacements of the cascading labor-intensive transaction system affected through what
is popularly referred to as paper-based payment instruments (Ogbuji, 2012). An automatic teller
machine allows a bank customer to conduct his/her banking transactions from almost every other
ATM machine in the world. The ATM, therefore, performs the traditional functions of bank
cashiers and other counter staff. It is electronically operated and as such response to a request by
a customer is done instantly.

The combined services of both the Automated and human tellers imply more productivity for the
bank during banking hours. Also, as it saves customers time in service delivery as alternative to
queuing in bank halls, customers can invest such time saved into other productive activities.
ATMs are a cost efficient way of yielding higher productivity as they achieve higher productivity
per period of time than human tellers. ATM works on the ATM cards, when a user inserts an
ATM card into the card reader component of the ATM machine, then it prompt for the
authentication through ATM PIN (Personal Identification Number (Ugwu, 2008). Each and
every ATM machine is programmed with a unique TID (Terminal ID number) assigned to
identify the ATM machine in different location. The ATM transactions are done through over the
phone line via internet connection (lease line). All the ATM machines are globally
interconnected with each other with the financial institutions through the global ATM network
like Master Card, Maestro, Cirrus, Visa, etc. In back side of every ATM card some logos are
printed which refers to the ATM network. So the ATM machine connects to ATM network
through processing center and the card holder’s bank. After the authorization step, if there is
sufficient fund in the ATM card holder’s account, then the transaction is completed successfully.

According to Siyanbola (2013), ATMs are set up to provide 24 hour services to bank customers,
who cannot expect to be able to transact with banks in the same period of time. ATM technology
allows customers carry out the above-mentioned transactions using an ATM card, which could
be a debit or a credit card. An ATM machine authenticates the card by reading and verifying the
magnetic strip, card number, expiration date, and an already provided or pre-selected PIN
number. Like with most technological advances, there is always a flaw which criminal-minded
individuals identify and exploit to perpetuate fraud.

2.2 The main effects of ATM service on customer saving/withdrawal rate

2.2.1 Decrees saving rate: by using the ATM services the saving rate decreased due to its
accessibility and frequent withdrawal of cash for their requirement rather than field withdraw of
money for their monthly expense for various aspect. The customer have explicitly interested by
using ATM services because they can access the required amount at anywhere like marketing,
recreation and other places for the immediate need than holding the hard cashes on their pocket
or bag. ATM machine gives 24 hour service this invite customer to withdraw money when they
desire. This is followed by decreasing effects of customer balance which is negatively affect
saving rate (Sakthivel N. (2008),
2.3 Problems that faced customer while using ATM service

2.3.1 Network interruption: ATM machine perform its work through the internet connection in
place where network is not available it is impossible to think that ATM machine perform its
work perfectly. So, among the problems that faced customer network is the major one. Network
disruption takes the lion share in reducing the satisfaction of customers on the services offered
by the banking institutes which deployed the e-banking systems (Ogbuji et al (2012),

2.3.2 Card retention: card retention is clear that it happen when the customer enter wrong
security while they insert in to the ATM machine in order to withdraw money (Reddy OC (2015)

2.4 Impact of ATM on Banking Performance

Bank customers in Ethiopian have a collective sign of relief when the Automated Teller Machine
(ATM) was introduced as an instrument to aid banking operations. The introduction of the ATM
by financial institutions changed the face of banking in Ethiopia but with some inherent
challenges. Automated Teller Machine and Electronic Payment System played a key role in any
retail banks’ efforts to use technology as a quality weapon to defeat competition”.

Automated Teller Machine provides a major role in offering conveniences, speedy and round the
clock services. Adeoti (2011) stressed that the use of ATM is safe and convenient. The ATM has
made settlement of bills in banking system easy and saver. These benefits have resulted into
phenomena growth in number of ATMs. Another great impact of automated teller machine and
information technology is that it contributes immensely to the promotion of marketing banking
services. With the aid of Information Technology, funds can be moved one account to another at
the push of a button, essential information relating to a transaction could be made available
thousands of miles away within minutes. Today, banks are developing and deployed better
personalized services through the use of automated teller machine. For example in Ethiopia
today, banks are providing customers with “Access Terminals” with which they (customers) can
access their balances and view or print movement in their accounts.

The advantages of ATM to the bank as follow: investment opportunities, reduction in costs (i.e.
cost savings), effective service delivery, branding of shared network, satisfaction of customers
and competitiveness (Maiyaki, 2010, Lovelock, 2000 and Asif, 2011). According to Moutinho
(2011) it established that ATM facility resulted in speed of transactions and saved time for
customers. Other value added services of ATM include college fee payment, online collection of
application fee, mobile top up, religion/trust Donation, bill settlement, insurance premium
payment, and funds transfer card to account, amongst others. Increased ATM usage is also
helped by the fact that customers have now the flexibility of using ATMs of other banks, as most
of the banks are part of major interbank networks. The interbank networks have brought together
ATMs of several banks so that consumers would gain access to any of the participating banks’
ATMs. Banks find it cheaper to pay membership fees to these networks as against setting up
additional units in expensive-to-deploy areas.

Many companies are interested in this model, where the ownership of the ATM will not be with
the banks but with third parties who deploy them and make money on fees charged on every
transaction. The concept is prevalent in the American continent. Wide acceptance of ATMs by
consumers, introduction of biometric ATMs, and increasing scope of value-added ATM services
will maintain growth in the industry. However, the advantages of safety and convenience of
ATM has unfortunately been lessened by the frauds that are perpetrated by ‘plastic money’. The
increase in number of customers using ATM has also increased the propensity to fraudulent
practices by the ATMs fraud perpetrators.

According to Ihejiahi (2009), expressed concern about the lack of cooperation among banks in
the fight to stem the incidence of ATM related frauds now plaguing the industry he expressed
that the silence among banks on ATM frauds makes it difficult for banks to share vital
information that will help curb the menace.

Muhammad (2009) suggests that the level of ATM fraud tend to have overshadowed the
improvements which it has brought into the service delivery systems of financial institutions.
Similarly, Ihejiahi (2009) suggest that despite the reality that the introduction of ATM terminals
as a banking instrument was lauded by several customers as an alternative to the frustrating
queues that characterized the country's banking hall, the situation today has changed drastically;
it has become a source of worry to users and providers (banks) because the function it was meant
to provide has been eroded seriously. As with any device containing objects of value, ATMs and
the systems they depend on to function are the targets of fraud. Fraud against ATMs and
people’s attempts to use them takes several forms. These include: Shoulder Surfing; Lebanese
Loop; Using Stolen Cards; Card Jamming; Use of Fake Cards; Duplicate ATMs; Card
Swapping: Diversion; and ATM Burglary (Report on Global ATM Frauds, 2007).

2.5 Evolution of ATM

ATM is said to have evolved from early cash dispenser and is said to have first been introduced
in the early 1970s. The dispensers were operated by a token inform of a punch card. This enabled
a customer to withdraw as sachets of suitable values of bank notes. These sachets processed and
then returned the card to the customers.

Another source has it that ATM concept was started around 1967, and that it was first installed in
End field town, on the London Borough of End field by Barclays. Bank (Thomas, 1996). This is
said to have been accredited to John Shepherded Baron, although George Simon registered
patent in New York and Don Wetzel and two other Engineers from Docatel Company also
registered patent in April 1973 (Brendan, 1996). In the second generation, it was improved to the
extent that made it possible to count proved money.

2.6 The benefits of ATM could be

Make financial transactions, including withdrawal of money without the help of a human clerk,
Accessible 24 hours a day and 7 days a week, No need to carry cash to purchase goods or
services; You can transfer the sum of money needed from your account to supplier account by
using POS terminal; No need to go to the bank every time you need to withdraw money you can
access your account at any of the bank’s ATM installed. Access to ATM is through the use of
Personal Identification Number (PIN) and a plastic card that contains magnetic strips with which
the customer is identified. Banks usually hand over the PIN to the customer personally and the
customer is usually instructed not to disclose the number to a third party. The Figure below
shows the ATM Machine and Visa card.
2.7 History of Automated Teller Machine in Ethiopia

The Automated Teller Machine (ATM) was introduced into Ethiopia market before 6 years in
Ethiopia, introducing a new form competition to come into the business offering locally
assembled machines at a time when CBE has started buying directly from manufacturers. In
Ethiopia, the first bank to introduce ATM was the Commercial bank of Ethiopia. One of the first
generation banks then, spread over the private banks. Access to ATM is through the use of
Personal Identification Number (PIN) and a plastic card that contains magnetic strips with which
the customer is identified. Banks usually hand over the PIN to the customer personally and the
customer is usually instructed not to disclose the number to a third party. ATM card is about the
size of a normal credit card and apart from the need to ensure its safety, its surface strips could
be mutilated l2which may make the machine to reject it even though the PIN number is entered
correctly.

Automated Teller Machine (ATM) is located in banks and customers convenience areas. This
allows customers to drive up and complete financial transaction without ever leaving the safety
of their belongings. Automated Teller Machine (ATM) is interconnected to allow anyone with a
bank card, debit card, or credit card to have access anywhere in the world because each station is
connected to an inter-bank network.
 CHAPTER THREE

3. RESARCH METHODOLOGY

3.1 Description of the study Area

The study would be conduct in Oromia regional state, Illu aba bora zone at Mettu town. Mettu is
located in south western part of Ethiopia at the distance of 600kms from the capital city of
Ethiopia, Addis Ababa. Mettu is one of the 14 woreda of Illubabor zone. It’s bordered on the
south by Botto kebeles on the west by Kodo here kebeles on the east by Kamise kebeles, on the
north by Geike kebele. Demographically Mettu town has to total population of 53,906 of whom
26,515 are male and 27,358 are female (Mettu administration office). This town has tropical
climate and has total area of land 68,723 hectare. The average annual rain fall is 170.1mm and
the average annual temperature is 19.9 degree cent grade. Mettu has been an important market of
the coffee trade, with several foreigners residing town as early as the 1930s to buy the crops from
local farmers. At this early date, the town was connected by telephone to Gore and Addis Ababa.
The city also has a high school and hospital. Mettu is one of the refortowns in the region and has
a town administration, Municipality and three kebeles. Mettu is known for its local water falls,
the best known being the Sor falls and their surrounding forest with its wildlife.

Mettu town has latitude and longitude of 80 18, N, 35035E/8030, N, 35058, E respectively and
latitude of 1605 meters. Mettu town has 230mean annual temperature and the mean annual rain
fall is between 1,191.6 to 1,960.7mm with little variation from year to year. The majority of the
inhabitants practiced Ethiopian Orthodox Christianity, with 47.55% of the population reporting
they observed this belief, while 26% of the populations were Muslim and 26% were protestant.
Mettu town consist many nations and nationalities like Oromo, Amara, Tigre, Gurage, Gambela
and others within their culture, Languages and religions. Also this town is beautified by the
natural green (Mettu administration office).
3.2 Target population

CBE has more than 1386 branches stretched across the country of these 3 are in Mettu town also
more than 1589 ATM machines are available in our county of these 11 ATM machines are in
mettu town. So the researcher’s target populations are those who get ATM machine service from
CBE mettu branch.

3.3 Sample technique and Sample size

The researcher in this study was used judgmental sampling technique. The reason for using this
sampling technique in this study is mainly it enable the researcher to select the respondent that
fits for the researcher, In addition, it is convenient, low cost and less time consuming as
compared with other sampling techniques. Using all population for data collection is difficult for
one researcher, as sampling is using small part of large population to make conclusion about the
whole population. There are 28315 ATM service users/customer of CBE in Mettu branch (CBE
Mettu branch). So, for the purpose of this study the researcher was take 42 customers of CBE
according to his own judgment.

3.4 Source of data and method of data collection

In the study to assess effect of ATM service on customer saving/withdrawal rate in CBE mettu
branch. The study is mainly based on the primary data source. The primary source of data
provides first-hand information, more information in depth and miss-interpretation of the answer
for the question was easily avoided. In this study the researcher was used a structured
questionnaire in order to collect primary source of data and communicating with nearly
friends/boons to deepen the level of information. Personal communication was made with the
customer on the ATM services.

The secondary data on the saving/withdrawal rate of customers before and after ATM services
analysis were designed for investigation but they have no such analysis and continuous
evaluation on the ATM transaction
3.5 Survey Instrument

The survey instrument was contains both open and closed ended questions. There was open
ended question that gives the respondent freedom to indicate the area not mention in the close
ended questionnaire (see the appendix).

3.6 Research Approaches

Research approaches are instruments in order to attain the proposed research objectives. The
approaches are adopted to achieve the best possible of the research objectives. In his study the
researcher was use both qualitative & quantitative approach

3.7 Method of data Analysis and presentation

The researcher was analyzed the collect data by using descriptive statistics method and present
by using tables and percentage. All the tables, percentages describe with words. Frequency
distribution was used to analyze the data collected and examined the pattern of response to each
variable under investigation.
 CHAPTER FOUR

4 RESULTS AND DISCUSSION

This section presents the result and analyzes the data collected using self-administered
questionnaire from sample of 42 respondents of commercial bank of Ethiopia customers from
mettu branch. The survey result on the impacts of ATM service on customers saving/withdrawal
rate in Commercial Banks of Ethiopia Mettu branch

Table 4.1 distributed and returned questionnaires from customer

Questionnaire Respondent Percentage

Returned 40 95
Not returned 2 5
Total 42 100%
Source; own survey result, 2011 EC

4.1 Respondents’ Profile

Accordingly the respondents were asked to respond to their gender category, year of experience,
level of education and field of qualification.

Table 4.2 Gender Categories of the Respondents

Gender Number of respondent Percentage

Male 22 55
Female 18 45
Total 40 100%

Source; own survey results, 2011 EC

As indicated in the above table 4.2 the gender proportion of male respondents is 55% while the
female respondents were 45 %. The figure reveals that the male uses more ATM services than
women since the ATM card is highly suitable to hold in their wallet or pocket in compared with
women. Though, the ratio of the respondents not proportional and varied both category of gender
were participated in the survey. This enables the researcher that there is no bias in the survey
instrument related to the gender of the respondents.

Table 4.3 Experiences of the Respondents

Years of experience Number of respondent Percentage

less than 3 8 20
Greater than3 less than 5 18 45
Greater than 5 14 35
Total 40 100%

Source; own survey results, 2011 EC

Experience is one of the competences to understand the impacts of ATM service on customers
saving/withdrawal rate in Commercial Banks of Ethiopia”. The more experienced users
(customers) are the more they understand about the use of ATM service. Out of the survey, 20%
of the respondents were less than 3, 45% were Greater than 3 less than 5 and 35% were greater
than 5. This imply that majority of the respondents (45%) were experienced therefore; they have
awareness about the ATM service

Table 4.4 Education level of the respondents

Level of education Number of respondent Percentage

Below diploma 5 12.5
Diploma 10 25
Degree and above 25 62.5
Total 40 100%

Source; own survey results, 2011 EC

Level of Education is one of the contributing factors to effectiveness of ATM service users. This
competence is referred to as academic competence. As summarized in the above table,
respondents qualified below diploma were 12.5%, diploma was 25, where a majority of the
respondents 62.5% were degree and above which is promising. This is an indication that the
respondents are also at adequate education level to understand the effects of ATM service on
customer saving/withdrawal.

4.2 Examining “the impacts of ATM service on customers saving/withdrawal

rate”

A total of 40 questionnaires were overseen and all of the respondents were having ATM cards
from CBE. Though the questionnaire covered various issues, only the relevant findings are
reported in following tables.

Table 1.5 Types of service the customers use by ATM visa card

Service used by ATM Number of respondent Percentage

Cash withdrawal 26 65
Balance checking 4 10
Fund transfer 3 7.5
All 7 17.5
Total 40 100%

Source; own survey results, 2011 EC

As indicated in the above table 4.5 10% were used for Balance Checking and 7.5% were used for
fund transfer and 17.5%were used for cash withdrawal, balance checking and fund transfer and
65%. This indicates that most of the respondents use the ATM card for Cash withdrawal which
could have an impact on the saving rate of customer.

Table 4.6 Customer’s satisfaction by services delivered through ATM

Customer satisfaction by Number of respondent Percentage

ATM
Strong enough 5 12.5
Enough 30 75
Neutral 2 5
Not enough 3 7.5
Total 40 100%
Source; own survey results, 2011 EC

The analysis for Customer’s satisfaction by services delivered through ATM in table above
reveals that 12.5% of the sample respondents indicate that strongly enough, 5% of the population
sample state Neutral while the rest 7.5% of the respondent say not enough. Majority of the
respondent about (75%) say enough, this show that customer satisfaction on service delivered by
ATM is found at good level.

Table 4.7 How often do you visit (in month) withdrawal before introduction of ATM

Withdraw amount of customer Number of respondent Percentage

1-2 times 14 35
3-4 times 11 27.5
5 times 5 12.5
>5 times 10 25
Total 40 100%

Source; own survey results, 2011 EC

As indicated in the table 4.6, the customer’s withdrawal rate per month is about 35 % of the
respondents visit 1-2 times per month, 27.5% visits 3-4 times, 12.5% is visits about 5 times and
then 25% visits more than 5 times per month. In general the results indicate that majority of the
respondents visit 1-2 times before introduction of ATM card. This could imply that customers’
were visited their bank client much more between 1-2 times per month which not have
significant change on saving.

Table 4.8 any difference in saving/withdrawal rate

Difference in saving/withdraw Number of respondent Percentage

Saving rate increase 8 20
Saving rate decrease 28 70
No difference 4 10
Total 40 100%
Source; own survey results, 2011 EC

The analysis of the result in table,4.8 indicates that 20% Automated Teller Machine could
increase saving rate and 70% of the respondents reveal that using ATM have been decreased the
users of the ATM card. The rest 10% said that there is no change in saving rate by using the
ATM. In general as the majority indicates, it could have an impact on decreasing the saving rate
of the customer. The main reason for the decrements of saving is due to its accessibility to
withdraw money at any conditions and anywhere they go which urgently requires money but not
as such important aspects even. When they were using normal or conventional banking system
they should go to the banking hall to withdraw cash on the fixed amount for their weekly or
monthly basis. By using ATM service, they withdraw cash intermittently as the requirement not
on the fixed as per month basis for “Asbeza”. This may increase the amount of withdrawal from
the saving account, especially for employees which gains fixed salary income.

Figure 1 the extent on which the Impact of ATM on the of customers saving
From the table above, 37% of the sampled respondent indicated that Automated Teller Machine
could an impact on saving rate of customers to an average and 30% could develop with high
extent. This would indicate that banks staff are also aware of various challenges and fraud
confronting the ATM facility. In fact, observation in the ATM points of most banks reveals that
most customers experienced several cases of issues using ATM Machines either the machines
will not dispense cash, or withdrawal transaction when cash is not dispensed or cards get stuck
into them and so on. These challenges have made ATM users to dissatisfy about the facility.
Therefore, it can be deduced that ATM has averagely improve banking industry profitability.
Table 4.9 problems during ATM service

Problems of ATM services Number of respondent Percentage

Network interruption 27 67.5
Card retention 8 20
Limited amount withdrawal 5 12.5
Total 40 100%

Source; own survey results, 2011 EC

The question focuses on the problems which faces the customers during the ATM services and
mainly focuses on network interruption, card retention and limited amount withdrawal rate
Among the total respondents 67.5% were said that the network interruption due to the power
interruption is the main challenge which prohibits regular services, 20% said the card retention
as a hindrance and 12.5% responded that the limited amount of cash withdrawal per a day is the
main constraint in using ATM services.. As the result indicates that the network disruption takes
the lion share in reducing the satisfaction of customers on the services offered by the banking
institutes which deployed the e-banking systems. At the country level power interruption is
frequent and observable in anywhere that may have great problems in the ATM services. So, the
CBE should install the automatic generator to immediately counteract the problem and maximize
the satisfaction of their customers

Table 4.10 Reliability of ATM service

Measuring reliability of ATM Number of respondent Percentage

Highly reliable 28 70
Reliable 3 7.5
Not reliable 4 10
Neutral 5 12.5
Total 40 100%

Source; own survey result, 2011 EC

The above table 4.10 indicates that, out of the total respondents 70% said that the system was
highly reliable and 7.5 % reliable and only 910% were said not reliable but the rest 12.5% were
said neutral. Hence, CBE, and the government should give great emphasis to increase the
confidentiality and trust on e-banking system users and developing policies which builds sound
intercommunication with the customers’ and banking sectors

Table 4.11 fraud in using ATM service

Assessing frauds in ATM Number of respondent Percentage

Yes 6 15
No 34 85
Total 40 100%

Source; own survey results, 2011 EC

The above table 4.11, which aimed to assess the possible fraud which encountered the customers
on the ATM services 85% of the respondents, assured that they haven’t been faced with any
fraud in the system and the remained 15 % said they face with some frauds in using the ATM
services. Even though the result indicates the level of fraudity is not high in the ATM service
system, it demands great attention of the bankers/managers or concerned body to take continuous
measures properly and timely to increase the confidentiality of the system and new technology-
based banking industries in general.

Table 4.12 Safety of ATM Service

Assessing safety in ATM Number of respondent Percentage

Safe 29 72.5
Not safe 11 27.5
Total 40 100%

Source; own survey results, 2011 EC

The survey report on the safety case of the ATM services by the customers is rated as 72.5% said
the system was safe and only 27.5% responded that the system lacks trustiness. It still shows the
need of further intuitive work of banking industry to fully convince and reaffirm the trustiness or
safety of this e-banking system. Commercial Bank of Ethiopia should try to improve and look-up
in detail the system to develop and encourage the customers on their ATM services by
developing the awareness on the users and by means to modify the working system.

Table 4.13 Extent to which ATM speedily improves banking profitability

Extent to which ATM imorove Number of respondent Percentage

profitability
Very low extent 5 12.5
Low extent 8 20
Average extent 19 47.5
High extent 4 10
Very high extent 4 10
Total 40 100%

Source; own survey result, 2011EC

The analysis whether Automated Teller Machine increase banking sector efficiency in table
above reveals that 12.5% of the sample respondents indicate very low extent, 10% of the sample
state high extent while the 47.5% of the respondent say average extent, 20% low extent and none
of the respondent indicate 10% very low extent. It could be deduced from the table that
Automated Teller Machine contributes to the effectiveness of banking sector because of majority
(47.5%) of the respondent were say averagely extent improve bank profitability.

CHAPTER FIVE
 5. CONCLUSION AND RECOMENDATION

5.1 Conclusions

The analysis of the result indicates that ATM could have both positive and negative impacts in
saving rate of the customers, while few respondents reveal that saving rate could increase by
using ATM. In general as the analysis indicates, using ATM could have an impact on the saving/
withdrawal rate of customers in CBE.

Majority of the customer were said that after using the ATM services their saving rate decreased
due to its accessibility and frequent withdrawal of cash for their requirement rather than field
withdraw of money for their monthly expense for various aspect. These respondents have
explicitly interested by using ATM services because they can access the required amount at
anywhere like marketing, recreation and other places for the immediate need than holding the
hard cashes on their pocket or bag. In general, this result reveals the ATM services have its own
negative influences on the saving rate.

Though it is very effective emerging technologies that can better work and guided to promote
banking sector growth, it has an impact on the saving and withdrawal rate. The Automated Teller
Machine has enable bank management and investors aware of some of the techniques being used
by their foreign counterpart in achieving competitive advantage. Observation in the ATM points
of most banks reveals that most customers experienced several cases of issues using ATM
Machines. These challenges have made ATM users to dissatisfy about the facility. Therefore, it
can be deduced that ATM has averagely might impact on improving the banking industry. In
view of the findings and problems associated with the use and introduction of Automated Teller
Machine in banking industry which significantly influence economic growth, promote trading
system, national income, and general welfare of the people.

5.2 Recommendations

The following recommendations are suggested:

  The government or the banking industry should work closely and hard with customers to
improve the saving mechanisms and device a way to enhance the customers attitude
towards the saving benefit
 The banking industry, CBE, and the government should give great emphasis to increase
confidentiality and trust on e-banking system users and developing policies which builds
sound intercommunication with the customers and banking sectors.

 Government should protect financial institution to improve in performance and activities.

 Banking managers and government should properly implement strategy that will
encourage the customers and public in using ATM which will improve saving rate.
 Further detailed studies should be conducted that encompasses all aspects of impact of
ATM services on the customer saving/withdrawal rate.

REFERENCE
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Machine (ATM) as a Channel for Delivering Banking Services in Nigeria. International
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http://www.combanketh.et/EPayment/CardBanking.aspx

APPENDIX
 METTU UNIVERSITY

FACULITY OF BUSINESS AND ECONOMICS

DEPARETEMENT OF ACCOUNTING AND FINANCE

Questionnaires to be filled by customer of commercial bank of Ethiopia (Mettu branch)

The main intention of this questioner is to collect the relevant data to assess the effects of ATM
service on customer saving/withdrawal rate in the commercial bank of Ethiopia (Mettu branch).
The response that you are going to give is only use for academic purpose.

THANK YOU IN ADVANCE FOR YOUR TIME SACRIFICE!

Instruction:

 No need of writing your name

 Circle your choice

Respected Sir/Madam,

Part I. Personal information of the respondent

1. Sex: A) Male B) Female

2. Your years of service: A) Greater than 3 B) less than 5 C) Greater than 5

3. Education statues: A) Below diploma B) Diploma C) Degree and above

Part II. Over all information

1. Do you have ATM cards from CBE? A) Yes B) No

2. If yes, what type of service you use by your ATM visa card?

A) Cash withdrawal B) Balance checking C) Fund transfer D) Mini-statement

E) Others
3. Are you satisfied enough by services delivered by ATM?

A) Strongly enough B) Enough C) Neutral D) Not enough

4. How often do you visit (in month) withdrawal?

A) 1-2 times B) 3-4 times C) 5 times D) >5 times

5. How often do you visit your client bank after having ATM card for cash withdrawal?

A) 1-3 times B) 3-4 times C) 5 times D) >5 times

6. Do you have observed any difference in your saving/withdrawal rate before and after using the
ATM machine?

A) Saving rate increase B) Saving rate decrease C) No difference D) If you have any
comments specify it ______

7. What kinds of problems do you face during ATM service?

A) Network interruption B) Card retention C) Limited amount withdrawal rate D) If

Other specify it______

8. How do you think the reliability of ATM service?

A) Highly reliable B) Reliable C) Neutral D) Not reliable

9. Do you have faced with any fraud in using ATM service? A) Yes B) No

10. Do you think the ATM service is safe?

A) Very safe B) Safe C) Not safe and trust full

11. Extent to which ATM Speedily improves banking profitability?

A) Very low extent B) Low extent C) Average extent D) High extent E) Very high extent

12. Extent to which ATM influence fraud in banking sector

A) Very low extent B) Low extent C) Average extent D) High extent E) Very high extent
13. If you have any additional comments on electronic banking ATM machine……?

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