Effect of ATM Service Quality on Customers Satisfaction In case Of

Selected ATM Customers at CBE Addis Ababa Main Branch

New Generation University College

A Research Proposal Submitted to Department of Business
Administration for Partial Fulfillment of the Requirements for award of
master degree in Business Administration (MBA)

By: ALEMU LIYEW

ID: N G U / 2 2 / 3 2 0 5
Advisor: BERIHANU FIRISA (Mr.)

JULY 2023
Addis Ababa, Ethiopia
DECLARATION
I, Alemu Liyew, declare that the work included in this research proposal is my own work
carried out by me under the guidance of my advisors and Internet. The research proposal has
not been submitted for any other purpose to any other higher education institution/s.

I also declare that I have adhered to all principles of academic honesty and integrity and
have not misrepresented or fabricated or falsified any idea/data/fact/source in my research
proposal submission and the sources used are duly acknowledged. I understand that any
violation of academic integrity will be cause for disciplinary action by the University.

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  CERTIFICATE
This is to certify that the above statement made by the MBA candidate under my advisee is
correct to the best of my knowledge as an advisor. Hence, I attest the student can submit
the research proposal to the department for further evaluation by examiner/s.

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LIST OF ACRONYMS
ATM Automated Teller Machine

CBE Commercial Bank of Ethiopia

iii
LIST OF TABLES
Table 1: The decomposition of work plan 23
Table 2: Budget breakdown required for different activities 24

iv
LIST OF FIGURES
Figure 1: Conceptual framework designed based on different literatures 17
Figure 2: Likert psychometric scale 22

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 ABSTRACT

The objective of the study will to assess the effect of ATM banking service quality on
customer satisfaction in commercial bank of Ethiopia in Addis Ababa city Administration.
The study will use primary and secondary source of data. To study the relationship
between ATM service quality and customer satisfaction, a questionnaire designed as per
the categorized under five dimensions of the SERVEQUAL model (tangibility, reliability,
responsiveness, assurance and empathy) and customer satisfaction and the prepared
questionnaire will be distributed to customers of the CBE in selected branches of each
district in Addis Ababa city using convenient sampling method. In line with this, Likert
scale will be used to measure respondent’s knowledge and perception of ATM banking
service quality on customer satisfaction in commercial bank of Ethiopia in Addis Ababa
city Administration. The findings of this study will assist CBE and other branches
countrywide to formulate acceptable and better ATM service quality on customer
satisfaction in order to enhance and increase customer motivation and uplifting their
morale and have a positive attitude towards bank hence high satisfaction which results to
a high competitive advantage. The target population consists of 39,970 ATM customers of
CBE at Addis Ababa main branch. Non probability sampling will be used to obtain a
sample size of 396 respondents. The data will be analyze using the qualitatively and
quantitatively through the use of SPSS and then put on tables and figures. The research
questions will be answered from the data analyzes where conclusion will be made and then
recommendations. Data will be presents using pie charts, tables, graphs and figures.

Keywords: Service Quality, Customer Satisfaction, SERVQUAL Model

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Table of content
DECLARATION...............................................................................................................................................................................i

CERTIFICATE................................................................................................................................................................................ii

LIST OF ACRONYMS..................................................................................................................................................................iii

LIST OF TABLES..........................................................................................................................................................................iv

LIST OF FIGURES.........................................................................................................................................................................v

ABSTRACT.....................................................................................................................................................................................vi

1. INTRODUCTION......................................................................................................................................................................1

1.1. Background of the study............................................................................................................................................1

1.2. Statement of the problem...........................................................................................................................................2

1.3. Hypothesis of the study..............................................................................................................................................3

1.4. Objectives of the study...............................................................................................................................................4

1.4.1. General Objective...............................................................................................................................................4

1.4.2. Specific Objective..............................................................................................................................................4

1.5. Significance of the study............................................................................................................................................4

1.6. Delimitation of the Study...........................................................................................................................................5

1.7. Limitation of the Study..............................................................................................................................................5

1.8. Operational Definitions..............................................................................................................................................6

2. LITERATURE REVIEW.........................................................................................................................................................8

2.1. Theoretical Review....................................................................................................................................................8

2.1.1. Customer Satisfaction........................................................................................................................................8

2.1.2. Automated Teller Machines (ATM)..................................................................................................................8

2.1.3. Benefit of ATM banking service for customers and bank.................................................................................9

2.1.4. SERVQUAL.....................................................................................................................................................11

2.1.5. Relationship between service quality and customer satisfaction.....................................................................13

2.2. Empirical Review.....................................................................................................................................................14

2.3. Conceptual Framework............................................................................................................................................16

3. RESEARCH METHODOLOGY...........................................................................................................................................17

3.1. Research design........................................................................................................................................................17

3.2. Source of Data..........................................................................................................................................................17

3.2.1. Primary Data source.........................................................................................................................................17

3.2.2. Secondary Data source.....................................................................................................................................17

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 3.3. Data collection method.............................................................................................................................................18
3.4. Sampling Design......................................................................................................................................................19

3.4.1. Population of the study.....................................................................................................................................19

3.4.2. Sample size determination...............................................................................................................................19

3.4.3. Sampling Technique.........................................................................................................................................19

3.5. Method of Data Analysis..........................................................................................................................................20

3.6. Description and Measurements of Variables...........................................................................................................20

3.6.1. Model specification..........................................................................................................................................21

3.7. Data reliability..........................................................................................................................................................21

3.7.1 Validity.................................................................................................................................................................22

3.8. Ethical Consideration...............................................................................................................................................22

REFERENCES...............................................................................................................................................................................23

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 1. INTRODUCTION

1.1. Background of the study

Technology is making a great impact upon service companies in general and the financial
services sector. In order to provide efficient and effective services, Banks currently uses
latest technology, financial resource and human resource s to achieve its predetermined
goals and objectives. Among those resources, technology is one of a competitive advantage
for the banking industry to ease delivery of the intended service, to make timely decision,
exploit resources user friendly, achieve the objectives of the organization as planned and
contribute for the enhancement of the overall development (Wisdom, 2012).

Service is any activity or benefit that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may or may not
be tied to a physical product. Although services were performed by service providers and
consumers together, its quality results in perception and value assessment by the customer.
Customer Satisfaction is the ability of a good or service to meet or exceed buyer needs and
expectations. They also see quality as determined by the consumer rather than the producer
to be a necessary condition for customer’s satisfaction. Customer satisfaction provides an
indication of how successful an organization is at providing products/or services to the
market place (Sokefun 2011).

Banks currently uses latest technologies in order to stay on the competitive market.
Electronic banking is the delivery of banking products and services to the customer and
general public electronically through the use of electronic banking instrument or product
like Automated Teller Machine (ATM), mobile, internet (web) and Point of Sale (POS)
terminals among other. The most widely used electronic banking product is automated
teller machine (ATM). It enables customers to withdraw cash, transfer funds between
accounts & check account balance by using their cards (Leyuager, 2015).

The evolution of e-banking started from the use of Automatic Teller Machine (ATM) and
Finland is the first country in the world to have taken a lead in e-banking. E-banking has
been widely used in developed countries and in developing economies; however, the
spread of e-banking is much limited. Today, almost all banks are adopting electronic
banking as a means of enhancing service quality of banking services (Worku et al., 2016)

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ATM is a computerized machine that permits bank customers to gain access to their
accounts with a magnetically encoded plastic card and a code number. It enables the
customers to perform several banking operations without the help of a teller, such as to
withdraw cash, make transfer, pay bills, check account balance and pin change (Adeniran,
2014). ATM was invented in the early 1960s by John Shepherd-Barron who was a Scottish
national born in India. ATM was the first well known machines to provide electronic
access to customers (Sultan et al., 2009). From the banks perspective the main benefits of
electronic banking are cost savings, reaching new segments of the population, efficiency,
cross selling, third-party integration, and customer satisfaction (Gessese, 2018).

1.2. Statement of the problem

Service is “any activity or benefit that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may or may not
be tied to a physical product” (kottler, 2013; p128). Although services were performed by
service providers and consumers together, its quality results in perception and value
assessment by the customer (Rao; 2017). In today’s increasing competitive business
environment, service quality is essential for the success of any organization. Banks should
increase the quality of service constantly since there is no assurance that the current
outstanding service is also suitable for future. Consequently, banks should “develop new
strategy” to satisfy their customer and should provide quality service to distinguish
themselves from rivalries (Siddiqi; 2018).

In the past, customers‟ demand for banking services was driven basically by safety of their
money as well as interest accruing from such savings. However, the present-day
customers‟ demand has shifted from just safety of money to how banks deliver their
services. The reason is that the present-day customer requires efficient, fast and convenient
services (Kwashie, 2012).

E-banking allows customers to check accounts, transfer money and can have access to
numerous banking products and services. It has a vital role in the economy helping buyers
and sellers to make financial transaction through the exchange of goods and services
without physical contact. On other hand, e-banking enables banks to offer low-cost, high
value-added financial services and also benefit from the promotional opportunity to cross
sell products such as credit cards and loans (Prince, 2015).

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The study of Agarwal and Josh (2016) state factors which affect customer satisfaction in E-
banking service in commercial bank of Ethiopia, such as, frequent breakdown of ATM
service, lack of convenience of E-banking service, underdevelopment of technological
infrastructure, lack of suitable and regulatory frame work and interruption of network.
Thus it was concluded that among the E-banking service quality dimensions, reliability,
ease of use, accessibility, efficiency, responsiveness & cycle time have significant impact
on customer satisfaction whereas security & privacy has no significant impact on customer
satisfaction.

Gardachew (2010) found in his study that the banking industry in CBE is underdeveloped
and the study identified Key Challenges for E-Banking applications such as; low level of
internet penetration and poorly developed telecommunication infrastructure, lack of
suitable legal and regulatory framework for e-commerce and e-payment, high rates of
illiteracy, high cost of Internet, absence of financial networks that links different banks,
lack of reliable power supply, and Cyber security issues are the most important Challenges
for development of e-banking in Ethiopia.

Although a few related studies were conducted with effect of E-banking on customer
satisfaction, till now there is inconsistent conclusion. Thus, Fikerselassie (2017) proposed
for future study that need of examining E-banking and its effect on customer satisfaction in
order to generalize the findings to the Ethiopian economy and also the researcher stated the
methodological gap of his study that the sample used was not sufficient, hence making
generalization of the findings was very difficult. Likewise, Areeba et al. (2016)
recommended that further research should be carried out with increased sample size and
also bank specific research should be conducted to generate more clear results in order to
generalize the results of the study.

Therefore, in day to day activities the use of payment in card is increasing and due to
inconsistent conclusion, methodological gap and recommendations of previous researchers
for further study; this research mainly focuses on to know the relationship between ATM
service quality dimensions and Customer Satisfaction: The Case of CBE Addis Ababa
main branch.

1.3. Hypothesis of the study

H1: Tangibility of ATM services has positive and significant relationship with customer
satisfaction of commercial bank of Ethiopia Addis Ababa main branch.
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H2: Reliability of ATM services has positive and significant relationship with customer
satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

H3: Responsiveness of ATM services has positive and significant relationship with
customer satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

H4: Assurance of ATM services has positive and significant relationship with customer
satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

H5: Empathy of ATM services has positive and significant relationship with customer
satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

Sources Observations from previous studies and current experiences!

1.4. Objectives of the study

1.4.1. General Objective
The general objective of the study is to investigate the Relationship between ATM service
quality and customer satisfaction on CBE at Addis Ababa main branch.

1.4.2. Specific Objective

 To investigate the Relationship between ATM service tangibility and customer

satisfaction on commercial bank of Ethiopia Addis Ababa main branch.

 To investigate the Relationship between ATM service reliability and customer

satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

 To investigate the Relationship between ATM service responsiveness and customer

satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

 To investigate the Relationship between ATM service assurance and customer

satisfaction of commercial bank of Ethiopia Addis Ababa main branch.

 To investigate the Relationship between ATM service empathy and customer

satisfaction of commercial bank of Ethiopia Addis Ababa main branch.
1.5. Significance of the study
The study will help the management and other stakeholders of Commercial bank of
Ethiopia to understand how best they can customize the ATM services quality to meet the
needs of customers. The study will also help the researcher to acquire skills of carrying out

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 Research. The study will provide information regarding to customer satisfaction due to
use of ATM service quality situation of commercial bank of Ethiopia. As the use of ATM
service are increasing day to day, on the parts of the bank, it is important to have an idea
about what are their recommendations, how do they compare the ATM service quality of
this bank with that of any other banks etc. Thus, the finding of the study will be very useful
to the CBE to identify their positive and negative features and the customer feedback. The
bank management can take actions on the base of researcher to improve the services and
farther growth if the customers will select on the base of convince represent in the whole
population. Also with regard to other researchers, the study will act as a reference material
to other students pursuing studies in the similar subject.
This provides a general insight as to the contribution payment card system on
customer satisfaction. It can be a good indicator for managers to identify the gap between
management’s perception of service quality and that of their customers and taking actions
to close the gaps. It comes up with alternative solutions that enable the responsible body to
increase customer satisfaction and it serves as a stepping stone for those who want to
engage a study on the same issues.

1.6. Delimitation of the Study

The study is highly concentrated on measuring ATM service quality on customer
satisfaction in Commercial bank of Ethiopia by taking Addis Ababa main branch
customers. The researcher believes that it will be appropriate to conduct the study in large
scale. However, the limited time and other resources may not allow doing so. Hence, the
scope of this study is to focus on current CBE ATM users in Addis Ababa main branch.
With respect to the study value this research is focus on customer satisfaction as a
dependent variable and ATM service quality with its dimensions like Tangibility,
Responsiveness, Reliability, Assurance and empathy as independent variables and
customer satisfaction is the dependent variable that the study measure with the independent
variables.

1.7. Limitation of the Study

1. Thematically or conceptually to assess effect of ATM service quality on customers
satisfaction and the researcher exclude some service quality dimensions.

2. Geographically CBE branches located outer from Addis ababa not included in this study
because of budget related and COVID 19 effects.

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1.8. Operational Definitions

Customer satisfaction: It is defined as a function of the customer's expectations and

perceptions of performance according to the expectancy disconfirmation paradigm (Tse
and Welton, 1988).

Service quality: It can be defined as the difference between customer's expectation for
service performance prior to the service encounter and their perception of the service
received (Fenuga OJ, 2010).

SERVQUAL Model: Servqual model refers to the five dimensions of the service quality
that measure the customer’s expectations. The Servqual model classifies the elements or
components of service quality known as five critical service quality dimensions. Five
dimensions of service quality are reliability, assurance, tangibles, empathy, and
responsiveness (Parasuraman et al. 1988).

ATM: It is an electronic device which allows a bank’s customers to make cash withdrawal
and check their account balances at any time without the need of human teller. It is also an
innovative service delivery mode that offers diversified financial services like case
withdrawal, funds transfer, cash deposits, payment of utility and credit card bills and other
financial enquires (Fenuga OJ, 2010).

Tangibility: Tangibles represent the physical facilities, employees’ appearance,

equipment, machines, and information system. It focuses on facilitating materials and
physical facilities. For example, the organization maintains a clean environment, and staff
follows the appropriate dress code (Siddiqi, 2011).

Reliability: Reliability is an essential dimension of the Servqual model that confirms the
capacity to provide services exactly, on time, and credibly. Consistency is a critical factor
for providing assistance or product to the customers on time with error-free conditions.
You have to respect the commitment to give your service on time accurately as you
promised to them (Siddiqi, 2011).
Responsiveness: Responsiveness refers to the eagerness to assist customers with respect
and provide quick service to satisfy. This dimension focuses on the two essential factors,
including willingness and promptness. So, you have to ensure that the customer is getting
their service quickly without delay and make the customers feel that you are very interested

6
in helping them. Responsiveness will be defined by the length of time when customers wait
for the answer or solution (Siddiqi, 2011).

Assurance: It is creating trust and credibility for the customers. It depends on the
employee’s technical knowledge, practical communication skills, courtesy, credibility,
competency, and professionalism. Therefore, these skills will help the organization to gain
customer trust and credibility (Siddiqi, 2011).

Empathy: I stomers attentively to ensure caring s focus on the cu and distinguishing

service. It is an essential attitude in some countries in the world to serve every customer
individually. It is also a great process to satisfy customers psychologically and increase
confidence, trust, and loyalty. The company might lose its customers due to the lack of
empathy inside the employees; therefore, they need to ensure compassion (Siddiqi, 2011).

7
 2. LITERATURE REVIEW

2.1. Theoretical Review

The theoretical part of the review is focus on the theory and concept of the ATM service
quality and customer satisfaction.

2.1.1. Customer Satisfaction

Customer satisfaction is a key factor in development of customer’s desires for future

purchase (Hasan, et al, 2013). According to Ajiboye and Dunsin (2013), customers
satisfaction holds the potentials for increasing an organization‘s customer base, increases the
use of more volatile customer mix as well as the firm‘s reputation, thereby resulting in
competitive advantage secured through intelligent identification and satisfaction of
customer‘s needs better and sooner than competitors and sustenance of customer‘s
satisfaction through better products/services. Customer satisfaction with ATM banking is
therefore the feeling developed from an evaluation of the ATM banking use experience
whether the ATM banking performed relatively well or poorly against expectations
(Mwastika, 2016).
Customer satisfaction is also defined as the number of customers, or percentage of total
customers, whose reported experience with a firm, its products or its services (ratings)
exceeds specified satisfaction goals (Worku et al ,2016). Customer satisfaction is a feeling
of pleasure during the process of utilizing products or services of a firm. It is also defined
as constructed from cumulate process that the customer experiences particular products or
services. In the competitive banking industry, customer satisfaction is considered as the
essence of success (Sumya, 2016).

2.1.2. Automated Teller Machines (ATM)

The concept of ATM has been quite old and has been developing throughout the world.
Undoubtedly, a fair number of theoretical and empirical researches have been made
worldwide, because of increase in scale of ATMs and consequently to convert the economy
into a cashless one (Pohwa and Saxena, 2011).

Automated Teller Machine (ATM) is a machine where cash withdrawal can be made over
the machine without going in to the banking hall. It also sells recharge cards and transfer
funds; it can be accessed 24 hours or seven days with account balance enquiry (Fenuga,

8
2010).

The ATM is an innovative service delivery mode that offers diversified financial services
like cash withdrawal, funds transfer, cash deposits, payment of utility and credit card bills,
cheque book requests and other financial enquiries (Khan, 2010).

The ATM card helps the customer to be identified by a plastic ATM card with a magnetic
stripe or a plastic smartcard with a chip. The security is provided by the customer entering
a personal identification number (PIN). As a result of this, the number of bank customers
preferring to use self service delivery systems is on the increase. This preference is
attributed to increased autonomy in executing the transactions) (Meena, 2015).

Sowunmi et al. (2014) noted that Automated Teller Machine (ATM) is a cash dispenser
that enables bank customers to enjoy banking services without coming in contact with bank
tellers (cashier) and helps them to perform the duties of the cashier in term of payment
services.

Gabriel et al, (2015) noted that ATMs reduce the cost of servicing some customer demands
for instance the bank will make savings as a result of a reduction in the number of tellers in
the bank and reduction in overtime claims made by bank employees working late.
Productivity by bank staff is increased in that the ATM takes up some of the 19
functions that were previously only performed by the banker such as giving out cash,
statements, taking cash/cheque deposits and hence the bank staff can now concentrate more
in other areas that need improvement and one such area is the cheque sorting and clearing
department.

2.1.3. Benefit of ATM banking service for customers and bank

Automatic Teller Machines (ATMs) have been adopted and are still being adopted by banks
to offer considerable benefits to both banks and the customers.

Convenient to customers: ATMs provide convenience to the customers. Now-a-days

ATMs are located at convenient places such as within the bank premises (on site ATMs)
and away from the bank premises (off site ATMs) such as at the air ports, super markets,
fuel filling stations, shopping malls et cetera (Tague, 2010).
Speed transaction: According to Komal (2009) explain in his study that ATM services
enhance operations and customer satisfaction in terms of flexibility of time, add value in

9
terms of speedy handling of voluminous transactions which traditional services

unable to handle efficiently and appropriately. The machine can enable customers to
deposit and withdraw cash at more convenient time and places than during banking hours
at branch.
Save Cost: The term cost refers to all types of costs from financial costs, time costs,
energy costs etc. In all things considered, E- banking can provide a banking activity at the
lowest cost possible. Furthermore, it saves customers time in service delivery as alternative
to queuing in bank halls, customers can invest such time saved into other productive
activities (Ephream, 2016).

Safety: Tague (2010) observed that a plastic Automatic Teller Machine card linked to
bank account makes financial transactions a breeze by eliminating the waste of writing
cheques or the dangers of carrying large sums of cash.
ATMs enhance corporate image: E-banking products help to enhance the image of the
organization as a customer focused innovative organization. This was especially true in
early days when only the most innovative organizations were implementing this channel
(Shemsu, 2017).

ATM enables Banks to Expand Service easier: The recent trends to the customer favor
self-service to manage their financial and the customers increased their banking awareness
and the most important electronic channels is the ATM, which is one of the more prevalent
electronic channels, and most commonly used by customers where there is a easy to use for
diverse banking services (Zuhair, 2012).

ATMs Reduce Load on Other Channels: E-Channels are largely automatic, and it
undertake most of the routine activities such as account checking or bill payment may be
carried out using these channels. This usually results in load reduction on other delivery
channels, such as branches. In some countries, routine branch transactions such as cash /
cheque deposit related activities are also being automated, further reducing the workload of
branch staff, and enabling the time to be used for providing better quality customer
services (Shemsu, A. 2017).

ATM reduced paper work: ATM has reduced paper work because it does not require a
customer to fill cash withdrawal slips or cheques in order to withdraw money. This is
supported by William, 2005 findings that application of technology in banking has offered

10
opportunities for the reduction of both paper and people.

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Cost Reduction: Gabriel et al, (2015) noted that ATMs reduce the cost of servicing some
customer demands for instance the bank will make savings as a result of a reduction in the
number of tellers in the bank and reduction in overtime claims made by bank employees
working late.

ATM Increases Revenues: Electronic banking, like ATM, internet, mobile banking etc.
has changed the traditional retail banking business model in many ways, for example by
making it possible for banks to allow the production and delivery of financial services to be
separated into different businesses. This means that banks can sell and manage services
offered by other banks to increase their revenues. This is an especially attractive possibility
for smaller banks with a limited product range (Shah, 2009).

2.1.4. SERVQUAL

During the past few years, SERQUAL has become the most commonly used technique for
evaluating service quality. Perceived service quality is associated with consumer judgment
about a service provider’s overall excellence. This judgment is the result of the distinction
between what a customer believes a service provider should offer in terms of expectations
and his/her perception of the actual performance of the service. Service quality has been
defined as the difference between a customer‟s expectation of a service and his/her
perception of the service‟s performance. SERVQUAL stands for service quality and is a
service quality measuring tool or model that is used to measure the gap between customer
expectation and experience. When expectations are not meet, customers tend to get
dissatisfied with the quality of satisfied and further still when expectation are exceeded, the
quality of service is perceived to be exceptional (Simon, 2016).

The service quality model of Parasuraman et al. (1988) suggested a five dimensional
structure of perceived service quality tangibles, reliability, responsiveness, empathy and
security as the instruments for measuring the service quality.

2.1.4.1. Tangibles as a SERVQUAL dimension

The tangibles involve the firm’s representatives, physical facilities, materials, and
equipment as well as communication materials. Furthermore, Physical environmental
conditions appeared as a clear evidence of the care and attention paid for the details offered
by the service provider (Fitzsimmons & Fitzsimmons, 2001).

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2.1.4.2. Reliability as a SERVQUAL dimension

Reliability depends on handling customer service issues, performs the services right the
first time; offers services on time, and maintain a record of error-free. Moreover, they
define reliability as the most significant factor in conventional service (Parasuraman et al.,
1988). Reliability also consists of the right order fulfillment; accurate records; accurate
quote; right in the bill; Results are more accurate than commissions; keep the promise of
service. He also mentions that reliability is the most significant factor in banking services
(Yang et al., 2004).

2.1.4.3. Responsiveness as a SERVQUAL dimension

Responsiveness is defined as "the willingness to help customers and provide prompt

service"(Parasuraman et al., 1988). Furthermore, Johnston (1997) defines responsiveness
such as speed and timeliness of service delivery. This consists of processing speed and
service capabilities to respond promptly to customer service requests, and wait a short and
queuing time.

2.1.4.4. Empathy as a SERVQUAL dimension

Parasuraman et al. (1985) defined empathy as a caring and individual attention that the
firm provides to its clients. It contains giving individual attention to employees who
understand the needs of their customers and customer facilities during business hours.
Furthermore, Ananth et al. (2011) demonstrates empathy in their research of private sector
banks, provide individual attention and easy operation time; give personal attention, and
understand the specific needs of customers.

2.1.4.5. Security as a SERVQUAL dimension

Security refers to the safety and security of customer transactions with the bank including a
privacy policy. Security is ensued when the service becomes safe, and the customer
information gets protection (Parasuraman et al., 2005; Zeithamlet al., 2002).

12
2.1.5. Relationship between service quality and customer satisfaction

The customer satisfaction is determined by the ATM service quality rendered by the ATM
stakeholders (Bashir, 2014). The concept customer retention has received a considerable
attention from a few decades in both areas as academic and industry. In the dynamic
market environment, customer retention is seen as much important factor to compete in the
market. Banks deals very closely to their customers, find, and fulfill their needs. Due to the
technological advancement, banks are offering technology based services to the customers,
the aim is to have a competitive advantage in satisfying their customer needs and hence to
retain their customers (Hasan et al, 2013).

According to Negi (2009) the idea of linking service quality and customer satisfaction has
existed for a long time. He carried a study to investigate the relevance of customer-
perceived service quality in determining customer overall satisfaction in the context of
mobile services (telecommunication) and he found out that reliability and network quality
(an additional factor) are the key factors in evaluating overall service quality but also
highlighted that tangibles, empathy and assurance should not be neglected when evaluating
perceived service quality and customer satisfaction. This study was based only on a
specific service industry (mobile service) and we think it is very important to identify and
evaluate those factors which contribute significantly to determination of customer-
perceived service quality and overall satisfaction.

Fen & Lian (2005) found that both service quality and customer satisfaction have a
positive effect on customer’s re-patronage intentions showing that both service quality and
customer satisfaction have a crucial role to play in the success and survival of any business
in the competitive market. This study proved a close link between service quality and
customer satisfaction.

Su et al., (2002) carried a study to find out the link between service quality and customer
satisfaction, from their study, they came up with the conclusion that, there exist a great
dependency between both constructs and that an increase in one is likely to lead to an
increase in another. Also, they pointed out that service quality is more abstract than
customer satisfaction because, customer satisfaction reflects the customer’s feelings about
many encounters and experiences with service firm while service quality may be affected
by perceptions of value (benefit relative to cost) or by the experiences of others that may
not be as good.
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2.2. Empirical Review

Many studies have been conducted on ATM service and its impact on customer satisfaction
in the banking sector.

The study of (Lemma Belay, 2016) while studied the effect of ATM service quality on
customer satisfaction in Ethiopian commercial Banks in Debremarkos town. The study
used Statistical tools such as mean, standard deviation, correlation, and multiple regression
models. The study indicated that except assurance, tangibility, reliability, responsiveness
and empathy have positive and significant effect on customer satisfaction and the
customers were mostly satisfied with the responsiveness dimensions of ATM service
quality

The study of Tirhas et al, (2017) on Assessment of Customer Satisfaction on Automated

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

Adeniran & Junaidu (2014) measured the satisfaction of customers as regards to ATM
services. The research was carried through across-sectional survey design which
questioned respondents on ATM services. The population of study mainly constituted of
customers of United Bank for Africa within Sokoto metropolis. The sample in this study
consisted of 100 respondents who are users of the ATM services. The data collected was
analyzed by use of multiple logistic regression analysis. The findings revealed that, the
impact of ATM services in terms of their perceived ease of use, transaction cost and
service security is positive and significant. However, the result also indicates that the
impact of ATM services in terms of availability of money is positive but insignificant.

14
Idowu & Oluwaseun (2015) measured customer satisfaction as regards to ATM services.
The research was carried through survey design which questioned respondents on ATM
services. The population of study mainly constituted of customers of United Bank for
Africa within Lagos. The sample in this study consisted of 200 respondents who are users
of the ATM services. The data collected was analyzed by use of multiple logistic
regression analysis and Pearson correlation. The findings revealed that, necessary input to
the bank management to increase customers‟ satisfaction through improving ATM service
quality. The focus should not be on ATM service quality dimensions only. This aspect
should be augmented and integrated with other aspects of the service quality of banks for
satisfaction of customers. This research concentrated on determinants of ATM service
quality and its impact on consumer loyalty. Notwithstanding, the exploration did not
examine the relationship between consumer loyalty and customer retention.

According to study conducted by Hadija (2018) concluded that all dimensions

(convenience, reliability, responsiveness, security, cost and efficient operation) were found
to have strong influence on customer satisfaction, except only privacy was found to have a
negative relationship with overall customer satisfaction. It is evident that convenience,
reliability, efficient operation, security, privacy, cost and responsiveness are not the only
dimensions that influence customers‟ satisfaction, other factors that contribute to
customers‟ satisfaction include trust, value and image of the bank

Akpan, (2016), revealed that service qualities are antecedents to customer satisfaction and
the higher the level of service quality, the higher the satisfaction its offers. The study
investigated the influence of ATM Service quality on customer satisfaction in the banking
sector of Nigeria. Similarly, Danlami and Mayowa (2014) carried out an empirical
investigation of Automated Teller Machine (ATMs) and customer’s satisfaction in Nigeria.
The study findings revealed that there is a significant relationship between ATM usage and
customer satisfaction.

The study of Gessese (2018) assessed the factors (dimensions) affecting customers
satisfaction in Automated Teller Machines (ATMs) service of Commercial Bank of
Ethiopia. The findings of this study revealed that a positive and significant relationship
between reliability, tangibility, Assurance and accessibility with customer satisfaction on
CBE‟s ATM. Despite responsiveness which is positively related but not significant.

15
Abebe (2013) conducted exploratory study on entitled” ATM service quality and
customers’ satisfaction in Ethiopian banks”, Zemen , Dashen, and Commercial Bank of
Ethiopia in Addis Ababa were study’s target population from them 150 respondents were
selected through quota sampling method . Study results shown that majority of the
customers are satisfied with ATM banking service regarding accuracy and ease of use. But
some of the customers felt that ATM service of their banks have to be improved for their
utmost satisfaction regarding convenience and responsiveness.

2.3. Conceptual Framework

Parasuraman et al. (1988) introduced a 22-item scale, called SERVQUAL, for measuring
service quality; the model has been widely adopted across industries. The thrust of
SERVQUAL lies with its five dimensions of service quality that are accomplished by
indirect (or objective) comparisons between pre-purchase expectations and post-purchase
perceptions of company performance. The figure below depicts the dependent and
independent variables of the research and the relationship among them. The independent
variables are service quality dimensions: Tangibility, Responsiveness, Reliability,
Assurance and Empathy. Customer satisfaction is the dependent variable that the study
measure with the independent variables.

Service quality dimensions

Figure 1: Conceptual framework designed based on different literatures

Source: Parasuraman et al., 1988

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 3. RESEARCH METHODOLOGY

3.1. Research design

The research design adopted is a quan
titative survey type. A survey based quantitative design is appropriate to test empirically the
relationship between ATM service quality and customer satisfaction. Explanatory research
design that helps the researcher to identify the nature of the relationship between the ATM
service quality (independent variables) and customer satisfaction (the dependent variables)
commercial banks of Ethiopia in Addis Ababa city. An explanatory research design aids the
researcher to determine and explain the characteristics of dependent as well as independent
variables (Saunders, et al., 2009). Thus, the researcher plans to use the new version of SPSS
version 25.00 to process the collected data. The results will be reported in explanatory
fashion along with statistical data. The analysis during the explanatory research will base
on deductive reasoning which is a logical argument based on hard evidence.

3.2. Source of Data

This study will use primary and secondary source of data. For the successful completion of
the study, both primary and secondary sources of data will be used. Primary data will be
gathered from ATM users through structured questionnaires whereas secondary data
sources will be obtained from different research paper as references which will not be used
in analysis.

3.2.1. Primary Data source

The researcher will use the primary data. Primary data are information received directly
from the respondent based on the researcher needs. Primary source of data will be chosen
because it provides first-hand information to the researcher of this study. It is original, it
will be collected for a specific purpose and it is used to solve a specific problem.
3.2.2. Secondary Data source
In order to understand different related literatures conducted in the area secondary data
would be used to this study. So these secondary data will be collected from different
published and unpublished documents like Article Khan, Mubbsher Munawar; Fasih,
Mariam, Impact of service quality on customer satisfaction and customer loyalty:
Evidence from banking sector Pakistan Journal of Commerce and Social Sciences
(PJCSS) like different books on Total Quality Managements. In addition to these

17
documents, this study also used publications and reports produced by CBE. Different web
sites which have pervious researches were used as an additional source of secondary data
for this study like Addis Ababa university repository.

3.3. Data collection method

Two major data collection instruments namely structured questionnaire and key informant
interviews will use to collect the necessary data.

i. Questionnaire

The questionnaire is the main tool used to gather the necessary data from the target
respondents. It will design for collecting data for the target population from whom the data
will obtain. The purpose of the questionnaire will to collect demographic information,
general information about ATM service and academic excellence, and to collect certain
practices of knowledge management in relation with academic excellence. It will also uses
to assess the impact of these practices with that of academic excellence. The questionnaire
includes both closed ended and open ended question items. The survey will conduct by the
researcher himself.

Questionnaire is a series of questions asked by the researcher to get responses from the
respondent to obtain information about ATM service quality and its effect on customer
satisfaction. When properly constructed and responsibly administered, questionnaires
become an essential instrument (Roopa, 2012). The questionnaires measure five
dimensions of ATM service quality and its effect on customer satisfaction. The
convenience dimension have contained (11 items); efficient operation (14 items); security
and privacy (5 items); reliability (6 items); responsiveness (4 items); and customer
satisfaction (6 items). All instruments have 46 items will be constructed by using a Five-
point Likert scale (1: Strongly Disagree, 2: disagree, 3: Neutral, 4: Agree and 5: strongly
Agree).

Ii Semi- structured interview (Key informant interview)

The semi-structured interview is used for this study because it is the most common type of
interview used in qualitative research. According to Dawson (2009) there are different
types of interviews. These are unstructured, semi-structured and structured. It enables the
researcher to get specific information and also flexible to raise other information.

18
3.4. Sampling Design
A sample design is the framework, or road map, that serves as the basis for the selection of
a survey sample and affects many other important aspects of a survey as well.

3.4.1. Population of the study

A population can be defined as all people with the characteristics that one wishes to study.
The unit of analysis may be a person, individual, organization, country, object, or any other
entity that researchers wish to draw scientific inferences about (Kelley et al., 2003).
Accordingly, the target populations of the study will the customer of Commercial bank of
Ethiopia that is located in Addis Ababa main branch. There are 39,970 ATM customers in
Commercial Bank of Ethiopia Addis Ababa main branches. ( Abreham manager Digital
channels Business Adama District, January 10,2022)

3.4.2. Sample size determination

The current study will be used Yamane (1967) formula to determine the sample size since
there is homogeneities among the targeted population. A 95% confidence level will be
supposed for this formula to determine the sample size at e =0.05. The sample size is
determined by the following formula.
Where: n is sample size, N is total population size and e is the level of precision or margin
error.

N
n = 1+Ne 2

39970
n = 1+39970(0.052)
n = 396
Therefore, 396 customers will be selected based on the above formula.

3.4.3. Sampling Technique

Developing a sampling frame was difficult as it requires banks to make available

confidential information about their customers. This is something they would not do. Since
there is no sampling frame, non-probability sampling will be used. In other word, limited

19
resources or the inability to specify a sampling frame may dictate the use of one or a
number of non-probability sampling techniques (Saunders, 2009). The researcher will
apply a convenient sampling technique to select sample respondents. The reason of
applying convenient sampling technique is the population of the study is large and it is
impossible to include every individual and their convenient accessibility and proximity of
customer to the researcher while gathering data.

3.5. Method of Data Analysis

The analysis will be carries out after collecting the necessary data from the primary
sources. The researcher will use quantitative data analysis method. Accordingly, the study
identified a total of six (6) variables including one dependent, five independent variables
based on the previous study on similar topic. The dependent variable is Customer
Satisfaction (CS) and the independent variables are tangibility, reliability, responsiveness,
assurance and empathy.
After clearly identifying the dependent and the independent variables, the researcher will
use correlation analysis to show the relationship between the dependent and independent
variables. The data will be analyzes by using SPSS version 25. As per the requirements of
the study reliability test will be conducted. A descriptive method will be uses to present
and interpret the data collected on various dimensions of the appraisal system. In addition
to this, multiple regressions will be employed to investigate the relationship between
dependent and independent variables.

3.6. Description and Measurements of Variables

Definition: A Likert scale is a one-dimensional scale that researchers use to collect
respondents’ attitudes and opinions. Researchers often use this psychometric scale to
understand the views and perspectives towards a brand, product, or target market. When
responding to an item on the Likert Scale, the user responds based explicitly on their
agreement or disagreement level. These scales allow determining the level of agreement or
disagreement of the respondents. To analyze the data it is usually coded as follows. 1 =
strongly disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 = strongly agree.

20
 Figure 2: Likert psychometric scale

3.6.1. Model specification

Multiple linear regression models will implement to assess the effect of independent
variable (service quality) on dependent variable (customer satisfaction). The general form
of multiple linear regression models is as follows:
Yi = α + β1X1+β2X2+ + β5X5+e
Where, Yi = Dependent variable
β= a vector of estimated coefficient of the explanatory variables
X= a vector of explanatory variables
e = disturbance term
α = constant
The model specification of customer satisfaction function in matrix notation is estimated by:
Cs = α + β1X1+β2X2+ ……… + β5X5+e
Where, Cs = Customer satisfaction
X1 = Perceived Responsiveness
X2 = Perceived Assurance
X3 = Perceived Tangibility
X4 = Perceived Empathy and
X5 = Perceived Reliability are the explanatory variables.
The value of y is regression coefficient, when X=0. And β1, β2, β3, β4, and β5 is the
regression coefficient of (X1, X2, X3, X4, and X5 which indicates the amount of change in
Yi given a unit change in Xi and finally X is the value of independent variable.

3.7. Data reliability

The questionnaires will be tested for reliability by using Cronbach’s coefficient alpha to
determine the internal consistency of the items. The reliability will make sure by testing the
instruments for the reliability of values (Alpha values) as recommended by (Cronbach’s,

21
1946). Alpha test for reliability will be used to establish the reliability of the research
instrument. This method assists analysts in removing irrelevant variables. It also helps
evaluating the reliability of the measurement by Cronbach’s Alpha coefficient. Variables
which have item total correlation less than 0.7 will be removed.

3.7.1 Validity
Validity of research can be explained as an extent at which requirements of scientific
research method have been followed during the process of generating research
findings. Oliver (2010) considers validity to be a compulsory requirement for all types of
studies. There are different forms of research validity and main ones are specified by
Cohen et al (2007) as content validity, criterion-related validity, construct validity, internal
validity, external validity, concurrent validity and face validity.

Questionnaire prepared for this study initially developed by Parasuraman, et al. (1988)
Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality and they
check the validity of each item. And also the study adopt questionnaire from former study
that will be check the validity of the questionnaire. In addition to this, here the researcher
decided the type of validity is content validity, the researcher will check the validity of the
questionnaire with a person who is specialized in the area of service quality and customer
satisfaction.

3.8. Ethical Consideration

For the purpose of the study, firstly the permission asked from the department of
Management and Business Administration to collect data, the questionnaire will be
approved by the advisor, explanation of the objective and significant of the study will be
given to the respondents, confidentiality and privacy of the respondents are will be taken
into account by avoiding names and other personal identification information. A formal
letter will be sent to CBE in Addis Ababa city by researcher from Yardstic international
university to show and inform the management of the organization and respondent about
the researcher’s interest to conduct a study in their institution. The researcher will be
ensured that information received from respondents will be treated with a high level of care
and confidentiality.

22
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