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This study investigates the effects of ATM on the performance of Nigerian banks. Available studies have concentrated on the significant dimensions of ATM (automated teller machine) service quality and its effect on customer satisfaction with a bias against ATM producers. This study examines the effect of Automated Teller Machine on the performance of the Nigeria bank in the banking industry in Nigeria. The objective of the study was to determine the contribution of ATM on the effectiveness of the banking sector, to determine the extent to which ATM has stimulate growth in the banking system and to examine the extent to which ATM has speedily improve bank profitability. The focus of this study is on three (3) banks to include Access bank, First Bank and Diamond bank. Primary data were source of data collection for this study, and the data were collected through the use of structured questionnaire.

The results indicate that less than the benefits, the deployment of ATMs terminals have averagely improved the performance of Nigerian banks because of the alarming rate of ATM fraud. Similarly, ATM service quality is less correlated to security and privacy of users and providers.



1.1Background 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. Mitroff [1] 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. Global competition in the banking sectors has forced management and executives to recognize that they must think differently about banking activities and management. As a global banking, the only way to succeed is to develop an effective global banking management system with personnel capable of designing and implementing transnational business strategies through the use of modern technology such as automated teller machines (ATMs).

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

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 [2].

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

Ogbuji, et al. [3] postulate that ATM allows a bank customer to conduct his/her bank 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 [4] indicate that the proliferation of the machines is giving more concern. As with every other technological breakthrough the ATMs have generated astronomical challenges and problems for the beneficiaries of financial services in Nigeria. Most users of ATM have encountered the problem of Scam. Apart from epileptic services rendered by the machines, faceless crooks steal from the accounts of hundred 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.

1.2 Statement of the problem

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 [5]. 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 have been without some challenges. There have been near lack of empirical research efforts on the effect of ATM on performance of the providers, using FCMB as case study. Arguably, the most revolutionary electronic innovation in this country has been the ATM. In Nigeria, 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. This calls for investigation which is in line with our aims and objectives.

1.3 Aims and Objectives of the study

The Aim of this study is on the effects of the automated teller machine on the performance of Nigerian banks.

The specific objectives are;

1.     To determine how the Automated Teller Machine (ATM) contribute immensely to effectiveness of banking sector.

2.     To determine to what extent an Automated Teller Machine stimulate growth of banking system.

3.     To find out the extent to which Automated Teller Machine speedily improve banking profitability.

4.     To determine Extent to which Automated Teller Machine ATM influence fraud in banking sector

1.4 Research Questions

1. How has Automated Teller Machine (ATM) contribute immensely to effectiveness of banking sector?

2. To what extent has Automated Teller Machine stimulate growth of banking system?

3. How does the Automated Teller Machine speedily improve banking profitability?

4. How does the Automated Teller Machine ATM influence fraud in banking sector.

1.5 Significance of the study

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

This research will be of great importance to the Banking industry and policy makers. It would also add to the existing literatures and general body of knowledge in the study area.

1.6 Scope and Limitations of the study

This work is limited to the effects of automated teller machine on the performance of Nigerian Banks.

1.7 Operational Definition of Terms

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

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

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

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