ADDIS ABABA UNIVERSITY COLLEGE OF BUSINESS AND

ECONOMICS DEPARTMENT OF ACCOUNTING AND

FINANCE.

RESEARCH PAPER FOR PARTIALFULFILLMENT OF THE

REQUIREMENT FOR BACHELOR OF ART (BA) DEGREE IN
ACCOUNTING AND FINANCE

ASSESSMENT OF THE APPLICATION OF VISA PAYMENT

CARD SERVICE IN ETHIOPIAN COMMERCIAL BANKS
CASE OF DEBIRE MARKOS BRANCH
VVBRANCH
BY: LAMESGIN LINGERH………………UGR/0261/12.
ADVISER...SINTAYEHU D, (instructor)

DECEMBER,31, 2021
DEBIRE MARKOS, ETHIOPIA

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 ABSTRACT

T
he research conducted under the topic visa payment card service in Ethiopian
commercial banks in the case of debremarkos branch. This research is to identify visa
payments service .visa payment card is used to provide cardholders with convenience
and security and can be used at merchants and automated teller machines (ATMs) around the
world. The account number and cardholder's name are embossed or printed on the front of a Visa
card. The main aim of this research is to assess the role of visa card service in commercial bank
of Ethiopia on economic development. The objectives of this study is find out the solution that
affecting the role of visa card service in commercial bank of Ethiopia on economic
developments. The researchers were spent much time for data collection by using Primary and
secondary source of data. The primary data were collected through questionnaires and
structured interview. Secondary data were collected through manual of organization. And the
data analysis would be carried out based on tabulation and percentage descriptive analysis
method. This study will be assess the roles of CBE on economic development include,
inconsistency in service quality, lack of team spirit and shortage of skilled manpower, inflation,
poor saving culture, frequent network and power failure, lack of effective management,
carelessness of employees, conflict of duties, lack of effective job training, lack of service quality,
problem of effective E-payment service, lack of effective bank regulation, lack of communication
between managers and employees and significances of the study .

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TABLE OF CONTENTS

Title page no
CHAPTER ONE..............................................................................................................................1
INTRODUCTION...........................................................................................................................1
1. Background of the Study.............................................................................................................1
2. Statement of the Problem.............................................................................................................2
3. Basic research questions..............................................................................................................4
4. Objective of the Study................................................................................................................4
4.1. General Objective.................................................................................................................4
4.2 Specific Objective..................................................................................................................4
5. Significance of the Study.............................................................................................................4
6. Scope of the Study.......................................................................................................................5
7. Limitations of the Study..............................................................................................................5
CHAPTER TWO.............................................................................................................................5
REVIEW OF RELATED LITERATUR.........................................................................................5
2.1. History of Payment Card......................................................................................................5
2. 2.Types of Payment Cards.......................................................................................................6
2.2.1.Debit Cards.....................................................................................................................6
2.2.2. Credit Cards...................................................................................................................6
2.2. 3.ATM Card......................................................................................................................7
2.2.4. Magnetic Stripe (Mag-Stripe) Card...............................................................................7
2.2.5 Chip Based (Smart) card.................................................................................................7
2.2. Benefits of using Payment Cards..............................................................................................8
2.3. The Application of ATM..........................................................................................................8
2.4. Electronic funds Transfer (EFT) at Point of Sale (POS)..........................................................9
2.5. How credit cards work............................................................................................................10
2.6. Empirical Review...................................................................................................................13
2.7. Research Gap..........................................................................................................................15
CHAPTER THREE.......................................................................................................................16
Research Design and Methodology...............................................................................................16
3.1. Research methods.................................................................................................................16
3.2 Population and sample frame...................................................................................................16
3.3. Sampling Techniques..............................................................................................................17
3.4. Types of data collected...........................................................................................................17
3.5. Methods of Data Collection....................................................................................................17

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3.6. Data Analysis Method............................................................................................................17
3.7. Organization of the Papers......................................................................................................17
3.8 Time schedule..........................................................................................................................18
3.9. Budget schedule......................................................................................................................18
Reference.......................................................................................................................................20

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 CHAPTER ONE

INTRODUCTION

1. Background of the Study

In the history of mankind several mechanism of payments are observed ranging from traditional
barter system to the modern day electronic payments. Moreover considering the inconvenience
of long process it takes to follow the traditional way of effecting payments first modern card was
introduced in the 1950s by dinner club. (http://usa.visa.com/cardpresent.html#anchor4)

Payment card system can provide several benefits for the card holder, for the bank as well as for
the overall economic activities of a country. The card holder can be benefited from the safe and
convenient nature of using cards for payments. Moreover it makes life easy for those who want
to travel abroad as they are not expected to carry paper money with them. It can also reduce risks
as well as costs related to cash management from the bank point of view it attracts more
customers and there by incorporates a new way of increasing bank funds and their income
earning potential.
Above all the benefit of using payment card is immense for the general economic development
of a country. Among others it reduces of cash note printing costs and its distributions, enhances
bank deposits and encourages personal savings. It would also make transactions faster and lower
the associated costs with it.
In today’s globalized world the advancement of information technology enables banks to
conduct their business in an efficient and effective way. For instance, the Point of Sales (POS)
service, a service in which the merchant is able to accept VISA in the world. These new ways
of effecting payments through cards have been developed over the years in the advanced
countries and they have also developed a good infrastructure that enables these new services to
function properly.
In the underdeveloped countries even if the banking industry began to use new ways of effecting
payments the services given by the bank is still lagging behind when compared to the developed
world.

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Likewise banking business in Ethiopia dates back to 1905, the application and usage of modern
payment cards can be considered as a recent phenomenon.
An Automatic Teller Machine card in Ethiopia was introduced first by in 2001 and Dashen Bank
is pioneer in Ethiopia to introduce VISA brands payment card service which entitles customers
to use ATM (Automatic Teller Machine) to withdraw cash and to purchase goods and services
from merchant locations using POS (Point of Sales Terminals).
Currently more than 17 commercial banks in Ethiopia are using ATM (Automatic Teller
Machine) and POS (Point of Sales Terminals) according to National Bank of Ethiopia.(Addis
Zemennews paper)

2. Statement of the Problem

Unlike the developed countries, banking industry in Ethiopia is under developed. But nowadays
the banking industry is improving. Over the decade a number of private owned banks stated to
operate in the banking sector. The increase demand of Export and import business and the
growth of domestic trade necessitate the banks to employ new ways of banking system and
implementing new technologies that are being used in the rest of the world.
It is generally believed that e-banking service offers a wide range of advantages for both the
bank and the customers. For example, Daniel (1999) and Mol’s (1998) claim that compared to
ordinary banking system electronic banking is providing the competitive advantage by lowering
the cost and providing best satisfaction of customer needs. ATMs provide bank customers with
24 hour access to banking products/services; they are easy to use and are faster than human
tellers in the banking halls. ATM systems are believed to have improved the operational
efficiency of banks and customer service in the banking sector (Banker and Kauffman, 1988;
Glaser, 1988; Lederman, 1990).
However, Ayo, C. K., Adewoye, J. O. & Oni, A. A. (2010): Aminu and Arhin (2011), showed
that irrespective of all these attributes of the ATM service delivery, bank customers still
underutilized the ATM service capacity by queuing in the banking halls to make cash
withdrawals even when the amount may be withdrawn from the ATM and it has become a source
of worry to users and providers (banks), because the function it was meant to provide has been
seriously eroded. ATM behavior can change during what is called stand in time, where the bank
dispensing the cash is unable to access databases that contain account information (possibly for

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database maintenance), that is, when there is network problem. ATMs at times can also deduct
money from the account without actually dispensing money; According to Eth-switch annual
report (2016/17), on the average 42% of the ATM transactions processed by Eths which had
been declined by Issuer Banks in the 2016/17 fiscal year and the major reasons of the declined
transactions were attributable to three reasons which are considered as technically controllable
by Issuer Banks. Those are time out, issuer inoperative and do not honor. For instance, While a
card holder using an ATM card of other banks ATM machine to withdraw cash, sudden system
failure may deter the machine from dispensing cash even though the system deduct money from
customer‘s account that will create frustration and disappointment. Moreover, according to Eth-
switch internal procedure,
it takes on average eight up to thirteen days to re-credit such account. These, among others, are
the annoyance of these money dispensing machines.
Despite the above challenges, ECB is expanding on the availability of ATM services in many
parts of the country. As a result the number of ECB ATM service customers is increasing
enormously over the past few years, most importantly in Ethiopian contry. Given this growth in
the number of ATM customers, the level of customers ‘satisfaction with the bank‘s ATM
services has a serious implication on the overall customers ‘satisfaction, customer retention and
profitability. So far, the bank has not developed a framework to assess the level of ATM
customers ‘satisfaction and the challenges they face. Understanding the level of customer‘s
satisfaction and the problems they experience is vital to improve the quality of ATM services
and hence boost customer‘s satisfaction.
ATM service and customer satisfaction were undertaken at early adoption of the ATM were only
few banks give the service, using their own ATM and before introduction of centralized switch
system (Eth-switch), that allow all cardholders of any bank existed in the country to enjoy ATM
service including cash with drawl from any ATM, irrespective of the bank. In view of this, it
makes it difficult to accept that customers respond to ATM use is the same in as early adoption
and after introduction of a centralized switch system, hence the need to investigate into that.
Beside this, most of the studies conducted in our country relied on quantitative method
developed by researchers in other countries as a result, little is known about the level of ATM
service customer‘s satisfaction and the factors contributing to their dissatisfaction based on
qualitative and quantitative methods.

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There are some major steps taken by the public owned banks and private banks in terms of
introducing new technologies to satisfy customers’ need and to meet the requirements of the
repeatedly expanding domestic and international trade.
Although this technology is one step in the banking industry, there are constraints and challenges
in the application of payment card system. In order to trace these problems the researcher raises
the following research question.

3. Basic research questions

• Is the application of the Card Payment System, at Ethiopian Commercial Banks effective?
• What are the impacts of the Ethio-Telecom internet service on
Commercial Payment System?

• What is the satisfaction level of commercial bank’s customers concerning payment card
service?

4. Objective of the Study

4.1. General Objective

To the best knowledge of the research there are few or no research are conducted or the comment
topic in case of commercial bank of Ethiopia Debre Marko’s Branch.

4.2 Specific Objective

1. To Assess the impact of the internet services provided by the commercial banks using the
payment card.
2. To assess the awareness of cardholders towards payment card.

3. To assess the expectations of customers concerning payment card service.

5. Significance of the Study

The overall effect of electronic payment is not limited to these specific banks only. A number of
banks start to use this kind of service. Therefore the study is significant in terms of identifying

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the major problems of electronic payment in the banking industry and it helps as reference for
further research on this area of the study.

6. Scope of the Study

Due to several constraints the study was limited to only 4 selected commercial banks. These are
Commercial Bank of Ethiopia (CBE), Dashen Bank (S.C), awash international Bank (S.C), and
United Bank (S.C). These banks were selected as they are pioneers in the card payment system
and have significant difference in the number of card holders of customers comparing from other
commercial banks.
The study has focused on head offices and nearby branches in Addis Ababa the above banks this
is because the student researchers’ believe that they can represent the whole branches found in
Addis Ababa.

7. Limitations of the Study

Most of information regarding payment cards is confidential since banks held their card holder
information secretly. So the researcher is limited to the information that we can find formally and
informally.
Time and resource are major constraints to cover the majority of customers view in relation to
payment card service

CHAPTER TWO

REVIEW OF RELATED LITERATUR

2.1. History of Payment Card

The concept of payment card come to existence in the late 1940’s and early 1950’s in the United
States. In mid-September 1958, Bank of America launched its pioneering bank America credit
card program in Fresno, California, with an initial mailing of 60,000 unsolicited credit cards. The
original idea was the brain child of Bofa in-house product development think tank and customer
research group .America credit card was developed in response to people’s high demand for
bank loan to purchase household items. Considering the inconvenience of the long process it

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takes to follow the traditional loan processing system, a credit officer in one of the bank’s in
New York, has introduced a way of making approvals of loans in advance i.e., before the
customer selects what to buy the approved loan serves as a special currency which the merchant
need to agree to consumer and puts a special currency in his/her account, customer spends the
special currency with the acceptable merchant, the merchant deposits the special currency to the
customer’s bank, consumer pays loan to the bank in installments. In the early 1950’s the special
currency is changed into the first modern bank card by dinner club. Dinner club is a charge card
company formed in 1950 by frank X and it become the first independent credit card company in
the world that established on idea of self sufficient company producing credit cards for travel and
entertainment. However, the usefulness of the card was still limited by the local nature of the
agreement between merchants and banks. This problem forced banks to create association and
try to manage usage of a bank’s card at any merchant location. This leads to the emergence of
card association like VISA, MasterCard and American express in addition to dinner club.

2. 2.Types of Payment Cards

Payment card can be divided or deference it from others as followed:-

2.2.1. Debit Cards

A debit card is a plastic card that provides the card holder electronic access to his/her bank
account(s) at a financial institution. It relay a message to the cardholder’s bank to withdraw cash
from a designated account in favor of the payee’s designated bank account. The card can be used
as an alternative payment method to cash when making purchases. It can function only when the
card holder has sufficient balance in his/her deposit account to process a transaction.

2.2.2. Credit Cards

A credit card is a plastic card which provides a certain level of credit privilege for the card
holder. In the case of credit cards the system will access the card holder’s pre-authorized line of
credit rather than a deposit account. With credit card, real time authorization of a transaction is
not required. Outstanding balances are required to be settled once in a month. This settlement
can be either partial or full, in accordance with the agreement between the card holder and the
bank.

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 2.2. 3.ATM Card
ATM card is a kind of plastic card which allows a card holder with money from his bank account
through automated teller machine. This card can be used also for other banking services like
deposit and transfer to any other account by using the ATM machine.

2.2.4. Magnetic Stripe (Mag-Stripe) Card

A magnetic stripe card is a plastic card having a thin stripe (tape) on the top that maintains card
holder data. When the tape is swiped in a POS terminal or ATMs the transaction will be initiated,
then the device takes the data from the tape and process the transaction.

2.2.5 Chip Based (Smart) card

Smart card is also a plastic card that contains a computer chip on it to record more data than the
magnetic stripe tape. The chip is computer devices that can keep secretes process data and
interact with the accepting device. That is, it can communicate with the accepting devices rather
than only initiating the transaction.
The payment associations are urging their member financial institutions to fully change their
system to work with smart cards. They have developed a procedure called EMV to effectively
achieve the transaction. EMV stands for Euro pay, master card and VISA – the three large
worldwide card associations. Recently Euro pay is merged with Master Card.
The transition is required due to the following major reasons.
3. It becomes easy for fraudsters to copy data from magnetic stripe tape. As a result fraud is on
the increase.

4. The storage capacity is used to record account information. Hence there is little scope
available to add more data for other purposes.

5. Unlike the magnetic stripe tape the chip has a computing capacity.

Following the requirement of the transaction, banks currently start issuing cards that contain
both-magnetic strip tape and chip. However, as a result of the benefits of using smart card and
the above indicated initiative taken by the card association, smart card are believed to be the
future in the payment card industry. According to the plan of the card associations all member
banks worldwide are expected to be EMV compliant by the year 2010. (www.hdfcbank.com)/Jill
Goebel

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 2.2. Benefits of using Payment Cards.
According to (usa.visa.com) Payment card system can provide a number of benefits to the
(issuing banks and card holders) as well as for the overall economy. The card holder can be
benefited from the safe and convenient nature of using cards for payment. Moreover, payment
cards can make life easy for people who went to travel abroad. The merchants who accept cards
for payment will able to increase sales and can manage to reduce risks as well as costs related to
cash management. Safe (EMV compliant, Requiring PIN always) convenient
6. Serves both at ATM and POS terminal

7. Provides freedom of 24x7 access to one’s account

Issuing banks can attract more customers and there by incorporate a new stream to their income
earning potential.
The positive impacts of payment card infrastructure for economic development for immense.
Among the many benefits, the basic ones are the following.
8. Reduce printing, mailing and financial handling costs associated with processing transaction
and its related distribution

9. Improve operational efficiency and profitability of the issuing banks

10. Increasing the potential for hard currency generation

11. Ensure continuity of service to card holders in emergency or disaster situations

(www.cemea).

2.3. The Application of ATM

Automated teller machine (ATM) is used by banks to expand the service they offer to client.
Through this technological innovation, banks are able to strengthen their strategies of customer
relationship management.

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According to an industry leader in electronic banking solution, banks were once hesitant to use
automated teller machine. However, due to the increasing demands of clients, the added value
these machines can give the company was later recognized. Today, senior banks demand
accessible ATM locations to better fulfill the needs of their clients.

Through ATM machines, banks are able to offer their clients remote services such as bill
transfer, cash withdrawal, bill payment, and balance and billing inquiries on a daily basis. The
more advanced ATM machine is even capable of showing video-recorded assistance instructions
to help make the transactions of banks clients even easier and more convenient.
Aside from these added conveniences, banks also use ATM machines to expand their clientele.
Because of further innovation in ATMS, such as the incorporation of the Braille system on
machine keys, banks are better able to serve visually impaired clients.
However, banks are still facing additional demands from clients. Even though some ATMs in the
United states already provide Braille-coded keys to assist visually impaired people, others still
insist that this not enough. Blind advocates in Pennsylvania demand that banks also equip their
ATMs with voice functionality, because only a fraction of the blind populace are able to
understand Braille. Special interest group dedicated to the visually impaired filed a case against
two banks to punish this demand.
With the ever-rising demands of banks clients, one can only expect ATMs to improve by adding
even more features. ATMs have become effective tools used by banks to maintain the loyalty of
their clients. Though this machine, banks are able to fulfill the needs of their clients in even the
most remote areas. ATMs provide detailed information on ATMs, Banks ATMs, ATMs for sale,
Portable ATMs and more ATMs in affiliated with Global money transfers (http://banks.com.)
(Raj Jain)

2.4. Electronic funds Transfer (EFT) at Point of Sale (POS)

According to (www.moneyminded.com.au) EFT/POS involves the use of plastic cards in
terminals on merchant’s premises. It actually comprises two distinct mechanisms:
12. Debit-card transactions: - These were a new form of value-transfer, whereby an account
holder authenticated by the presentation of a token (a data-bearing card) and the keying of a PIN,

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uses a terminal and network to authorize the transfer of value from their account to that of a
merchant.

13. Credit-card transactions: these represent the automated capture of data about purchase
against a revolving credit account, replacing what has hitherto been ‘flick-flack’-generated hard
copy vouchers.

Home Banking
This term is used for a variety of related methods whereby a payer uses an electronic device in
the home or workplace to imitate payment to a payee. In addition to a computer technology, it
can be performed using the telephone and interactive voice response (IVR);
Stored-value Cards
This is a form of automation of cash, in which the tokens are not physically (like notes and
coins), but electronic. It is targeted at circumstances in which the card-holder is present at a point
of sale or services there are several variants:
Early (and highly insecure) form includes punched cards, edge-nicked cards and magnetic-stripe
cards. Much more secure approaches are emerging which use chip-cards to store and pass tokens.
In more sophisticated implementations, the chip-cards is able to not only store and pass value-
tokens. But also perform the functions of a debit-card and credit-card. This is often referred to an
electronic purse or wallet.

Electronic cash
This is another form of automation of cash into electronic form. It addresses circumstances in
which the payer is not present at the point of sale or service, but has electronic communication
facilities available. It is connected to the internet, or to some other manifestation of the emergent
global information infrastructure, such as cable-TV instillation with enhanced capabilities
(http://www.anu.edu.au ((Rodger’s)).

2.5. How credit cards work

A credit card issuing company, such as a bank or credit union, would enter into agreements with
merchants for them to accept their credit cards. Merchants often advertise which cards they

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accept by displaying acceptance marks – generally derived from logos – or may communicate
this orally, as in "We take (brands X, Y, and Z)" or "We don't take credit cards".

The credit card issuer would issue a credit card to a customer at the time or after an account has
been approved by the credit provider, which need not be the same entity as the card issuer. The
cardholders can then use it to make purchases at merchants accepting that card. When a purchase
is made, the cardholder agrees to pay the card issuer. The cardholder indicates consent to pay by
signing a receipt with a record of the card details and indicating the amount to be paid or by
entering a personal identification number (PIN). Also, many merchants now accept verbal
authorizations via telephone and electronic authorization using the Internet, known as a card not
present transaction (CNP).

Electronic verification systems allow merchants to verify in a few seconds that the card is valid
and the cardholder has sufficient credit to cover the purchase, allowing the verification to happen
at time of purchase. The verification is performed using a credit card payment terminal or point-
of-sale (POS) system with a communications link to the merchant's acquiring bank. Data from
the card is obtained from a magnetic stripe or chip on the card; the latter system is called Chip
and PIN in the United Kingdom and Ireland, and is implemented as an EMV card.

For card not present transactions where the card is not shown (e.g., e-commerce, mail order, and
telephone sales), merchants additionally verify that the customer is in physical possession of the
card and is the authorized user by asking for additional information such as the security code
printed on the back of the card, date of expiry, and billing address.

Each month, the cardholder is sent a statement indicating the purchases made with the card, any
outstanding fees, and the total amount owed. In the US, after receiving the statement, the
cardholder may dispute any charges that he or she thinks are incorrect (see 15 U.S.C. § 1643,
which limits cardholder liability for unauthorized use of a credit card to $50). The Fair Credit
Billing Act gives details of the US regulations. The cardholder must pay a defined minimum
portion of the amount owed by a due date, or may choose to pay a higher amount. The credit
issuer charges interest on the unpaid balance if the billed amount is not paid in full (typically at a
much higher rate than most other forms of debt). In addition, if the cardholder fails to make at

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least the minimum payment by the due date, the issuer may impose a "late fee" and/or other
penalties. To help mitigate this, some financial institutions can arrange for automatic payments
to be deducted from the cardholder's bank account, thus avoiding such penalties altogether, as
long as the cardholder has sufficient funds.

Many banks now also offer the option of electronic statements, either in lieu of or in addition to
physical statements, which can be viewed at any time by the cardholder via the issuer's online
banking website. Notification of the availability of a new statement is generally sent to the
cardholder's email address. If the card issuer has chosen to allow it, the cardholder may have
other options for payment besides a physical check, such as an electronic transfer of funds from a
checking account. Depending on the issuer, the cardholder may also be able to make multiple
payments during a single statement period, possibly enabling him or her to utilize the credit limit
on the card several times.

Advertising, solicitation, application and approval

Credit card advertising regulations in the US include the Schumer box disclosure requirements.
A large fraction of junk mail consists of credit card offers created from lists provided by the
major credit reporting agencies. In the United States, the three major US credit bureaus (Equifax,
Trans Union and Experian) allow consumers to opt out from related credit card solicitation offers
via its Opt out Pre Screen program.

Interest charges

Credit card issuers usually waive interest charges if the balance is paid in full each month, but
typically will charge full interest on the entire outstanding balance from the date of each
purchase if the total balance is not paid.

For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there
would be no interest charged. If, however, even $1.00 of the total amount remained unpaid,
interest would be charged on the $1,000 from the date of purchase until the payment is received.
The precise manner in which interest is charged is usually detailed in a cardholder agreement
which may be summarized on the back of the monthly statement. The general calculation

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formula most financial institutions use to determine the amount of interest to be charged is
APR/100 x ADB/365 x number of days revolved. Take the annual percentage rate (APR) and
divide by 100 then multiply to the amount of the average daily balance (ADB) divided by 365
and then take this total and multiply by the total number of days the amount revolved before
payment was made on the account. Financial institutions refer to interest charged back to the
original time of the transaction and up to the time a payment was made, if not in full, as a
residual retail finance charge (RRFC). Thus after an amount has revolved and a payment has
been made, the user of the card will still receive interest charges on their statement after paying
the next statement in full (in fact the statement may only have a charge for interest that collected
up until the date the full balance was paid, i.e. when the balance stopped revolving).

The credit card may simply serve as a form of revolving credit, or it may become a complicated
financial instrument with multiple balance segments each at a different interest rate, possibly
with a single umbrella credit limit, or with separate credit limits applicable to the various balance
segments. Usually this compartmentalization is the result of special incentive offers from the
issuing bank, to encourage balance transfers from cards of other issuers. In the event that several
interest rates apply to various balance segments, payment allocation is generally at the discretion
of the issuing bank, and payments will therefore usually be allocated towards the lowest rate
balances until paid in full before any money is paid towards higher rate balances. Interest rates
can vary considerably from card to card, and the interest rate on a particular card may jump
dramatically if the card user is late with a payment on that card or any other credit instrument, or
even if the issuing bank decides to raise its revenue.

2.6. Empirical Review

Few studies have been conducted on the application of visa payment cards service and its
reputation in Ethiopian commercial banks, with a number of such studies specifically focusing
on ATM usage and the level of satisfaction of banks ‘customers.

According to Lemma Belay (2016) while studied the effect of ATM service quality on customer
satisfaction in Ethiopian commercial Banks in Debremarkos town using proportional stratified
and simple random sampling technique and cross-sectional data collected from 190 customers of
Ethiopian commercial banks, in Debremarkos town. The study used Statistical tools such as

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mean, standard deviation, correlation, and multiple regression models. The study indicated that
except assurance, tangibility, reliability, responsiveness and empathy have positive and
significant effect on customer satisfaction and the customers were mostly satisfied with the
responsiveness dimensions of ATM service quality.

Tirhas et al, (2017) Assessment the application of visa payment cards service and its reputation
in Ethiopian commercial banks in debremarkos, Ethiopia ‘in debremarkos town using systematic
sampling. Since the customers approach the ATM machine in different time, the researcher was
identified the skipping interval and consider those customers approach the machine in that
interval. The study used descriptive research method. This study found that Promptness of card
delivery, number transaction, quality of note and conveniently located were extremely satisfied
the customer. The study also indicates lack of privacy in executing the transaction, reduction in
balance without cash payment; Cards get blocked of ATMs and fear of safety was the major
cause of concern for the customers.

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

Charles Mwatsika (2016) ― Assessment the application of visa payment cards service and its
reputation in Ethiopian commercial banks; the study conducted on data collected from ATM card
users. The study adopted the importance performance approach (Fishbein and Ajzen, 1975) to
measure customer satisfaction. Measurement of satisfaction was based on performance only.
Descriptive and correlation analysis used to answer research questions. The result shows that all
service quality dimensions significantly correlate with customer satisfaction and responsiveness
was the list performing service quality dimension. The result further showed that, reliability is

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the most important dimension followed by responsiveness, empathy, assurance and tangibles are
the least important dimension.

With direct interview accompanied with surveys to collect data from a sample of 186 customers
were chosen in a random and convenient manner who are using the Bank ATM, Software
Package for Social Science (SPSS version 16.0), PhongNham, Chi Phan (2015) examined the
Impact of service quality on customer satisfaction of automated teller machine service: case
study of a private commercial joint stock bank in Vietnam. The study applies SERVPERF
framework to analyze the data collected from a questionnaire survey and found that Assurance
and Tangibles factors significantly impact on the customer satisfaction

2.7. Research Gap

The empirical evidences made available in the country such as Tirhas et.al, (2017), Lemma
(2016) and Gezahegn (2015) were done before introduction of centralized switch system
(Ethswitch), that allow all cardholders of any bank existed in the country to enjoy ATM service
including cash withdrawal from any ATM, irrespective of the bank and some of the studies were
conducted outside of the capital city were few users are available and less infrastructure as
compared to Addis which didn‘t reflect the true picture of ATM service rendered in the capital
city.

Besides, this study differs from Tirhas et.al, (2017) methodologically with the study conducted
by at debremarkos town on Commercial bank. They used quantitative data, personal observation
and very few sample size (40). The variables they used to measure customer‘s satisfaction
toward ATM were only five attributes (promptness of card delivery, number of transactions, the
quality of notes currency, conveniently and language and information content) which is different
from the researches attributes.

Despite various studies conducted in different countries on the title ― Assessment the
application of visa payment cards service and its reputation in Ethiopian commercial banks; it
may not be appropriate to consider the findings for our countries. Understanding the scenario in
other country may throw some light on the topic however it cannot be applicable fully. This is
due to the fact customer preferences and satisfaction level based on the demography, culture,
affordability, IT penetration varies from country to country. Thus, there is a significant gap
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relating to research as to Assessment the application of visa payment cards service and its
reputation in Ethiopian commercial banks. Therefore the proposed study aims to fill up this
research gap by studying the impact of ATM on customer satisfaction in the case of Ethiopian
commercial banks.

CHAPTER THREE

Research Design and Methodology

3.1. Research methods

In order to attain the desired objective, descriptive research has been applied. This is because the
student researcher believes that the populations are homogenous and no need of experimental
research.

3.2 Population and sample frame

The Population of the study will be all branches of Banks operate in markos town. Based
sampling on two branches card holders will be selected.
The population of the study will be all branches of Banks operate in markos town. Based on four
branches card holders will be selected. Currently there are 16,000 cardholders in commercial
bank of Ethiopia and 12,210 cardholders in Dashen bank (commercial bank of Ethiopia 2019 and
Dashen bank 2019).
for the purpose of making the research successful and achieve the desired goal as well as
address those card holders known by the banks, researcher of the study has randomly selected 20
from each bank a total of 100 samples respondents. This is because the populations are
homogenous, expected that the same problem faces with regard to payment card service and to
give equal weight for card holders.
Employee: - electronic banking department heads of the banks were addressed through
interview.

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 3.3. Sampling Techniques
When the researcher conducted this research, probability method was used to take samples and
used the following sampling techniques and found out samples.
1/From the card holder’s population samples will be selected by using simple random
sampling this is because the population are homogenous.
2/ the researcher used electronic banking department heads of the banks. This is because the
researcher believes that these peoples are more related to the banks’ payment card system.

3.4. Types of data collected

The researcher used two major sources of information; primary and secondary data sources.
Primary data was gathered from the original sources (bank individuals and customers) using
interviews and questionnaire to answer the basic questions of this study. Secondary data was
collected from the company documents, manuals, annual reports and magazines.

3.5. Methods of Data Collection

Among different kinds of data collection instruments, the researcher of this study used interview
for selected employee of the banks and also constructed questionnaires and distributed to
selected users of ATMs and POS service of the banks.

3.6. Data Analysis Method

The researcher of this study summarized the response of the sample population by grouping
similar responses together in order to avoid repetition of ideas. Percentage was used in order to
analyze data and .computed the raw data in each scale by dividing into total number of response
and multiplied it by 100.

3.7. Organization of the Papers

The paper is organized into five chapters. The first chapter consists of background of the study,
statement of the problem, objective of the study, its significance, and scope and limitation. The
second chapter is devoted to discuss the literature reviews that are relevant with the main
objective of the study. the third chapter is for about research design and methodology. The forth

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chapter briefly discusses the trend of VISA payment card and its application in Ethiopia. Some
conclusion remark and recommendation will be made in the five chapters.

3.8 Time schedule

NO A C T I V I T Y OCT NOV DEC JAN FEB MAR APR MAY JUNE

1 T o p i c s e c t i o n 18

2 Preparation of proposal 11

3 Collection of useful materia l 6 5 1

4 D a t a c o l l e c t i o n 7 3 5

5 Data analysis and writing the final researc h x x

6 Submission of research x x

7 Presentation of final research xx

3.9. Budget schedule

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cThe study will contain the following different types of expenditures that will incur in the whole
course of research.

N O I t e m Quantity Per unit (birr) Total cost(birr)

P a p e r 2 5 1 2 5
Equipment and stationary

P e n 3 1 0 3 0
p e n c i l 1 5 5
B i n d e r 2 5 1 0
F l a s h 1 2 0 0 2 0 0
Miscellaneous 5 1 5 6 5
T o t a l c o s t 3 7 2 3 6 3 3 5
Transportation 4 1 0 4 0
I n t e r n e t 3 5 1 5
P r i n t e r 2 5 1 2 5
Personal cost

T y p i s t 2 5 2 5 0
T o t a l c o s t 5 7 1 8 1 3 0
c o n t i n g e n c y 5 2 1 0

Over all total cost 9 8 2 5 6 4 7 5

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Reference
Asfaw Alemu,(2007) Introduction to banking.
Award, E (2003), electronic commerce vision to fulfillment. Prentice-hall, India
Elias M .Awad (2004) Electric commerce. Prentice hall of India private lited co. India
Robert, toy, 2001: E-business a beginners guide. Prentice-hall, India
News paper Ethiopia herald,. July 12, 2011
News paper Addis Zemen october16 2014
Unpublished documents in the company are marketing and finance department.
Websites
http://www.anu.edu.au/people/Roger.Clarke/EC/EPMMintro.htm
http://www.banks.comm/index.php?tipid=elctronic payment.
htt://www.cema .visabusinessschool.com/Kathie Lewis
http://www.combanketh.et/
http://www.dahenbanksc.com
http://www.en.wikipedia.org/wiki/payment_card/ Raj Jain
http://www.hdfcbank.com/personal/credit_card/credit-card/ Jill Goebel
(wwwmoneyminded.com.au) EFT/POS

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