AUTO MA TIC TELLER MACHINES (ATM) AND SERVICE DELIVERY. A CASE STUDY OF - .

BY CHESIRE K. JOHN BED/10068/52/DF

A RESEARCH REPORT SUBMITTED TO THE CONTINUING AND DISTANCE STUDIES IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE A WARD OF A BACHELORS DEGREE IN SPECIAL NEEDS EDUCATION OF KAMPALA INTERNATIONAL UNIVERSITY

NOVEMBER, 2008 DECLARATION

I, Chesire K. John, declare that this work has been produced based on my knowledge and ability and has never been presented to any University for any award.

Signature .~;;i ... .. Date ...... 13-?-...... 02...... CHESIRE K. JOHN APPROVAL

This work has been submitted with the approval of the University supervisor.

Mr. Wilberforce Tindyebwa Date:__,_13=------=0j::.--1_-___,o:3'.,.__,,..._ ____

11 DEDICATION

I dedicate this work to my Wife; Peris Kibet, Children; Denis, Joshua, Abigael, Mercy and Karen.

iii ACKNOWLEDGEMENT

First and foremost I want to thank God for granting me an opportunity, strength and good health to pursue this vital degree in Special Needs Education course.

I wish to pass my heart most gratitude to all my lecturers of Kampala International University, particularly my personal supervisor Mr Wilberforce Tindyebwa who gave me professional guidance, advice and total supervision throughout the long process of collecting and putting up data up to its presentation.

I also want to acknowledge the entire employees of Crane Bank Ltd who tirelessly provided the researcher with vital information relevant to the project.

Lastly I record my thanks to every participant for that moral support in the period of the research and study.

God the almighty bless you abundantly.

IV TABLE OF CONTENT

DECLARATION ...... i APPROVAL ...... ii DEICATION ...... iii ACKNOWLEDGEMENT ...... iv TABLE OF CONTENT ...... v LIST OF TABLES ...... viii ABSTRACT ...... ••...... •..•...... •.....•...... •...... •...... viii

CHAPTER ONE ...... 1 1.0 Introduction ...... I 1.2 Statement of the problem .....•...... •...... 3 1.3 GENERAL OBJECTIVES ...... 3 1.4 SPECIFIC OBJECTIVES ...... •...... 3 I. 5 research questions ...... 3 1. 6 scope of the study ...... •...... •...... •...•...... •...... •...... •...... 3 1.6.1 Context scope ...... 3 1.6.2 Geographical scope ...... •...... •...... 4 1.6.3 Time scope ...... •...... 4 1.7 significance ofijustification of the study ...... 4

CHAPTER TWO LITERATURE REVIEW ...... 5 2.1 Opening statement ...... 5 2.2 Automated Teller Machines on service delivery ...... 5 2.2.1 Ban Automation ...... •...... •...... •...... 5 2.2.2 Advantages of ATMs to banks and customers...... •....•...•...... 6 2.2.3 Disadvantages of ATMs to Bank and customers ...... 7 2.2.4 Effectiveness of ATMs ...... •.•...... •...... •••...... •...... •...... •...•...... •...... •...... 9 2.2.5 Roles of ATMs in banking industry ..•...... •...... 9 2.2.5. l Improving operational efficiency ...... •...•...... •...... •...... 9

V 2.2.5.2 Barriers to entry ...... 9 2.2. 6 A TM Hardware and Software ...... •...... •.....•...... 9 2.2.7 ATM Security ..•...•...... •..•...... •..•.....•...... •..•...... 10 2.3 The concept of service delivery ...... •...... •...... •...... 11 2.3.1 Whatisservicedelivery? ...... 11 3 .3 .2 Provision of qua] ity services ...... •...... •.... 11 2.3.3 Customer service ...... •...... •...•...... •...... •...... 12 2.1. I Customer satisfaction ...... 12 2. I .1. I Reliability .....•...... •...... •...•..•...... •...... •...•...•...... •...... 12 2. I. I .2 Credibility ....•...... •...... •...... 12 2. I .1.3 Responsibility ...... •...... •...... •...... 13 2.1. 1.4 Attractiveness ...•...... •...... •...... •...... •....•...... 13 2. I .2 What do customers value most? ...... 13 2. 1.3 The National Electronic Switch .•..••...... •...... •...... •...... •...... •...... 13

CHAPTER THREE RESEARCH METHODOLOGY ...... 15 3. I Introduction ...... 15 3 .2 Research design ...... •...... •...... •...... •...... 15 3.3 Sampling design ...... •...... •...... 15 3 .3. I Study population ...... •...... •...... 15 3.3.2 Sample size ..•...... •...... •...... •...... •.....•...... •...... •...... 15 3.3.3 Sampling methods ...... 16 3.4 Data collection ...... 16 3.4. I Source of data...... •...... •....•...... •...... •....•...... •...... •...... 16 3. 4 .2 Data collection instruments ...... •...... 16 3.5 Data analysis and presentation ...... ••...•...... •.....•...... •...•...... •...... 16 3. 5. I Data analysis and presentation ...... •.....•...... •...... •...... 16

CHAPTER FOUR ...... 18 PRESENTATION, INTERPRETATION AND ANALYSIS OF FINDINGS ...... 18 4.0 Introduction ...... •...... •....•...... •...... •...... •...... •...... 18

VI 4.2.2 Findings on the effectiveness of automated teller machines •...... •...... •.....•...... 18 4.2.3 RELIABILITY OF ATM SERVICES ...... 19 4.2.4 Findings on Factors that affect Service Delivery ••...... •..•...•...... •..•..• 20 4 .2. 4.1 Response to Customers complaints by Nile Bank...... 20 4.2.4.2 Customer Dissatisfaction at Cash Source Points due to poor ATM Services ...... 21 4.2.55 Cared Retention by ATM Machines...... 22

CHAPTER FIVE ...... 25 CONCLUSION AND RECOMMENDATIONS ...... •...... 25 5. 0 Summary .•...... •...•...... •...•...•...•...... 25 5. I Recommendations ...... •...... •...... 26

5 .3 Areas for further research ....•...... •..•...... 26

REFERENCES ...... •....•...... •...... •...... 27 Appendix I: Questionnaire ...... 28 Appendix II: Interview Guide...... •...... •...•...... 30

Vil LIST OF TABLES

Table 1: Showing the selected size of80 ...... 16 Table 2: Showing if ATM services are effective ...... 18 Table 3: Showing the rate of reliability of ATM services ...... 19 Table 4: Shows the promptness of the bank's response to customers' complaints about ATM services ...... 20 Table 5: Showing the cause of customer dissatisfaction with ATM services ...... 21 Table 6: showing the causes of long lines for ATM services ...... 22 Table 7: Showing causes ofretention of customers cards by A TM ...... 23 Table 8: Depicting the average reported cases of machine failure from four branches of Crane bank for last 5 months (October 2005 - February 2007) ...... 24

viii ABSTRACT

This research examined the financial institutions that accept deposits from customers and give loans to customers. In Uganda, commercial banks have increased their services by introducing automated teller machines (ATMs). Automated Teller Machine (ATM) banking system is the latest system adopted by bank world wide to foster and improve on service delivery within the banking industry. Crane Bank has installed these machines in order to serve its customers very effectively and efficiently and to reduce on time being wasted in banking halls.

The methodology used to obtain data in this research study is the cross-sectional method which covered four branches of Crane bank Uganda Limited within Kampala city with a sample size of 80 respondents. The data collected is from primary source and qualitative in nature which were obtained by use of questionnaires, interviews and observations, this was supplemented with secondary source.

Automated Teller Machine banking system has improved service delivery with in the banking industry. This study shows the effectiveness and the reliability of ATM banking system. It also shows the factors that lead dissatisfaction of customers like insufficient funds in the machines, card retention and congestion and how respondents to those complaints

Automated Teller Machine outlets should be increase to over come the problems of congestion. The bank should also provide hard card jackets to protect ATM cards from damages which cause card retention. Crane bank should always provide sufficient money in the machines to avoid disappointments. This research work is intended to help customers on how effective and efficient ATM banking system is, and also to help banks how they can improve on ATM services.

IX CHAPTER ONE

1.0 Introduction The word bank is derived from the Italian word "Banca", which means bench. Currently the term bank is generally understood as an institution that holds a banking license. Banking licenses are granted by financial supervision authorities or central banks and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. Among these financial institutions include commercial banks. A commercial bank is a type of financial intermediary that raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits and time deposits. It makes loans to businesses and individual customers. It also buys corporate bonds and government bonds. Its primary liabilities are deposits and primary assets are loans and bonds. There are so many commercial banks in Uganda including Centenary Rural Development Bank, Crane Bank, Allied Bank of Baroda and among others

Although the type of services offered by a bank depend upon the type of bank and the country, the services provided by Crane Bank Uganda ltd include directly taking deposits from customers and issue checking and savings accounts, lends out money to companies and individuals, storage of valuables like land titles, particulars like people's wills and issues credit cards, debit cards and ATM services on which the researcher has concentrated.

ATM services started with CITIBANK in 1977 in USA, and it's been in use all over the world since then, In Uganda Crane bank introduced ATM banking system in 2000 and in November 2002 had over 500000 on-line banking customers. The bank records 310000 visits to its ATM a week and in a busy season the number exceeds 50000 a week, said the managing director of Crane bank (New vision, 14 November 2007). An Automated Teller Machine (ATM) is one of the latest banking techniques in commercial banks in Uganda. ATMs are specialized computer terminals, which are continuously on line to the bank's central computer to provide the number of facilities.

They are very efficient and provide services like cash withdraws, cash deposits and giving the current balances one has on his or her account (Helen stock: American Banker Nov 23 1999, vol 164, No. 225).

In modern ATMs, customers authenticate themselves by using a plastic card with a magnetic stripe, which encodes the customers account number, and by entering a numeric pass code called a PIN (personal identification number). Typically, if the number is entered incorrectly several times in a row, most ATMs will retain the card as a security precaution to prevent an unauthorized user from working out the PIN by pure guesswork. Earliest versions accepted a single-use token or voucher, and the latest ATM and store customer data on a smart card. (www.bamboo.web.com).

Crane bank is among the first national banks in Uganda which introduced automated machine into operating system and automated products like ATM, credit I debt cards, money transfer and of recent Bankom. This aimed at serving the customers better more efficiently and effectively.

Before the introduction of ATM, customers used to spend 30-20 minutes to either deposit or withdraw money to and from bank respectively. However, after the introduction of ATMs, customers spend a maximum of 5 minutes (annual management conference report, November 1995).

The introduction of ATMs has paved way for faster service delivery, such as record keeping an electronic money transfer. Services are rapidly growing and increasingly important in today's global economy. The evidence appeared in 1999 when fortune magazine published its global 500 list of the largest companies within the world. Because services are customer driven pleasing the customer is more important than ever in order

2 to reap the benefits of competitiveness, banks have over the centuries improved and developed, new products and services with new computerized trend, banks have also followed suit in provision of value added banking through Automation of banking.

1.2 Statement of the problem The banking sector in Uganda in attempt to improve on service delivery has introduced the ATM banking systems. But little research has been conducted on the ATM banking service delivery therefore this study seeks to find out the effectiveness of ATM banking services in Kampala city Uganda.

1.3 General Objectives To find out The Automatic teller machine (ATM) banking system and service delivery.

1.4 Specific Objectives

1. To find out the effectiveness of ATMs in service delivery.

11. To find out the problems people/customers face while usmg the ATM services. iii. To make policy on how to improve ATM banking services. 1.5 research questions (i) To what extent is ATM banking system in Crane Bank effective? (ii) What are some of the problems faced by Crane bank customers in their ATM banking systems? (iii) What are some of the solutions to the ATM banking system of Crane bank?

1.6 Scope of the study 1.6.1 Context scope The topic of the study was Automated Teller Machine as independent variable and service delivery as the dependent variable.

3 1.6.2 Geographical scope The researcher covered four Crane Bank branches within Kampala city (Jinja road, branch, Luwumu street branch, Parliament avenue branch).

1.6.3 Time scope The researcher focused on the period of around one year, specifically the researcher looked at the period from slightly before 2006 to 2007.

1. 7 significance of i justification of the study The findings of this study will help Crane Bank and its clients to assess the benefits and dangers of using the ATMs.

As for the bank, when Crane Bank gests a chance of accessing the findings, it will help it to improve on its services. This study is also intended to help the people who are using or intend to use ATM services to appreciate the effectiveness of these ATMs.

Crane Bank will use the conclusions and recommendations of this study to improve on its service delivery and customer care. It will be a starting point for those who would like to carry further research on this study.

4 CHAPTER TWO LITERATURE REVIEW

2.1 Opening statement The chapter discussed the related literature review of the study; most of the writers who ever wrote about the research study were mention in the chapter

2.2 Automated Teller Machines on service delivery An ATM (Automatic or Automated Teller Machine) is a computerized machine designed to dispense cash to bank customers without need of human interaction. The ATM can also take deposits, transfer money between bank accounts and provide other basic financial services. (www.wikipedia.org. lcom)

2.2.1 Ban Automation Bank automation is a situation where banks like any other businesses move away from the manual way of handling activities to a more sophisticated way of working by using machines to handle most of the work in the organization. (Helen Stock: American Banker November 1999).

The importance of bank automation according to the reported from United States Bureau of statistics 2001 , bank automation (A1M) help bank customers to carry out human assistance.

The application of bank automation has paved a way of real time banking. The concept behind the real time banking is that every teller has immediate access to all customers' accounts. This means that a customer is able to withdraw or inquire about his account at any bank's branches. (Clifton 1998).

Companies have developed a dislike for manual work as a source of customer services particularly when it comes to withdrawing and depositing cash and other transactions. ATM banking system is less time consuming and less expensive and it is surprising that

5 banks have attempted to reduce the volume of work by means of installing ATM outlets that have improved on service delivery, said Helen Stock.

2.2.2 Advantages of A TMs to banks and customers There are so many advantages associated with A1Ms and they include the following; The survey discovered that ATMs are desirable dispensers and transistors of any required service in the market. "They are the solution to the Ugandan situation, where the law does not permit 24 hour banking. The fast service eases the inconvenience of queues". V. Mohan said. (New Vision December 6, 2001).

From the customer point of view, they have an overwhelming advantage in that they dispense cash. ATMs are the dominant technology into which retail banks have powered the highest investment; therefore the capital investment cycle will determine how fast banks can move in the direction to maximize service delivery to customers with this new trend of bank automation. ( www.search.Ipupdater.com)

According to Global Media (allA.frica.com), ATMs do a lot more than dispense cash to customers. A customer can inquire on how much mortgages he can get in the bank, the status of his loan repayment, insurance deals and the status of his savings account.

ATMs are arriving as shopping malls for example shopping malls like Uchumi now use credit cards. Barclays Bank uses Visa cards to ease shopping for their customers abroad. The charges for using ATMs have become more accepted by the general public and turned ATMs from cash dispensers into generators.

According to recent article in petroleum market magazine, there is a number of safety benefits associated with ATMs. For your customer, an ATM inside your establishment provides a well-lit and comfortable banking environment. ATMs can allow depositors to withdraw cash at more convenient times and places during banking hours at branches.

6 ATM allows you to reduce check fraud and draw additional customers to your commercial or retail location. You can also advertise for valuable commercial clients on yore ATM network. The surcharges from every ATM transaction create a non interest income stream for revenue. You may also deliver other items of value through the ATM for individual revenue.

The ATM is no longer tied to the bank branch, but appearing more frequently in shopping centers as a standalone service. Crane bank for example has many stand-alone outlets. For instance in Jinja road, Wandegeya, road and others. The increase in number of remote ATMs has a lot to do with the changing economic environment and a range of established and newly emerging technologies. (Bank technology News International: The Authority on Financial System worldwide: June 2000).

Cash is just the beginning of what an ATM can provide. ATMs now have the capacity to dispense phone cards, postage stamp, event tickets and other items of value. An A TM can generate additional revenue for your business by providing opportunities for comparing and on-screen advertising. Electronic Trade ATM is continually finding new ways to increase the profit potential of merchant-owned ATMs. (Cash system digiteller: ATM advantage).

2.2.3 Disadvantages of ATMs to Bank and custome1·s ATMs are costly to maintain as there is constant break down, which may be due to so many factors making it hard for the customers to access services and leaving them dissatisfied, (The New Vision Thursday, November 14, 2002).

Every time customers use ATMs there is a communication link that opens to the customers accounts, but some times this link fails and the ATM goes off and this leaves the customer dissatisfied (New Vision November 14, 2002).

7 According to the report appeanng on Al!Africa.com, there are many "phantom withdrawals" from ATMs, which banks often claim are the result of fraud by customers. Many experts describe phantom withdrawals to the criminal activity of dishonest insiders. There have also been a number of incidents of fraud where criminals have used fake machines or have attached fake keypads or card readers to existing machines. These have been used to record customers' PINs and bank account details in order to gain unauthorized access to their accounts, said Ross Anderson, a leading cryptography. (17th December 2007).

Automated Teller Machines do not give money in smaller denominations like coins of Shs. 500, but give denomination like Shs. 5000 on words, which is a weakness. In case the customers account balance falls below Shs. 5000, then he or she can no longer access his / her funds, said the marketing manager of Crane Bank Uganda (New Vision August 16th 2004).

Automated Teller machines also expose the bank funds to a risk of being stolen by robbers in that should therefore be no security provided, then the machine can be broken down and all the money carried away, said E. Tumusime Mutebile in the speech at the opening in up of Barclays bank at 18 th April 2001.

Further more, in case the ATM card together with the personal identification number are stolen, then the customers account can be left with nothing by the thief given that the machine can not prohibit any one else other than the owner from withdrawing the money. ATM also is at a risk, where thieves make a circuit from ATM to ATM. Heather W, made this remark when her money was stolen from Israel and the US bank statement showed she had withdraw big amounts of money yet she had not been to Israel (Bank Technology News International, February/ March 2000).

8 2.2.4 Effectiveness of A TMs Banks both private and public face severe competitiveness pressures and turbulent in their sphere of operation. Use of ATM has led to the development of information system in banking industry, which has given banks competitive advantage in the market place. These systems used information technology to develop new products, services and process and capabilities that enhance the bank efforts in the quest for efficient service delivery (Gandy, March 2000). For example Crane bank Uganda has launched a new thematic campaign in which it is repositioning as an empowering partner to its customers through the introduction of ATMs to serve customers more effectively and efficiently, said Crane bank managing director 16th August 2004.

2.2.5 Roles of ATMs in banking industry Automated Teller Machines in banking industry serve to improve operational efficiency, promote organization innovation and build strategic information technology resources, Automation of bank system services the following roles.

2.2.5.1 Imprnving operational efficiency According to Emmanuel Tumusime's speech at Munyonyo 18th November 2001, ATM banking system has improved the banking process by allowing commercial banks to cut the cost drastically and improve the quality and service delivery.

2.2.5.2 Baniers to entry By introducing ATMs in banking industry, banks erect barriers to entry of new firms by making it very expensive for new banks to join the industry. This also makes a particular bank like Crane bank to have competitive advantage over banks into the industry through provision of extra value to customer

2.2.6 A TM Hardware and Software ATM contains secure crypto-processor, generally within an IBM PC compatible host computer in a secure enclosure. The security of the machine relies mostly on the integrity

9 of the secure crypto-processor; the host software often runs on a commodity operating system.

In store, ATMs typically connected directly to their ATM transaction processor via a modern over a dedicated telephone line, although ten move towards internet connections is underway. In addition, ATMs are moving away from customer circuit boarders (most of which are based on Intel 8086 architectures) and into fully-fledged PCs with commodities operating systems such as windows 2000 and Linux. An example of this is Banrisul, the largest bank in the Southern Brazil, which has replaced the MS-DOS operating system in its Automatic Teller Machines with Linux. Other platforms include windows 98 bundled with Java. The newest ATMs use Windows XP or windows XP embedded.

2.2. 7 A TM Security Early ATM security focused on making the ATMs invulnerable to physical attack; they were effectively safes with dispenser mechanisms. A number of attacks on ATMs resulted, with thieves attempting to steal entire ATMs by ram-raiding, said Fawcett 1999.

Modern ATM physical security concentrates on denying the use of the money inside the machine to a thief, by means of techniques such as dye markers and smoke canisters. This change in emphasis has meant that ATMs are now frequently found free-standing in places like shops, rather than mounted into walls he said.

Another trend in ATM security leverages the existing security ofa retail establishment. In this scenario, the fortified cash dispenser is replaced with nothing more than a paper-tape printer. The customers request a withdrawal from the machine, which dispenses on money, but merely prints a receipt. The customer then takes this receipt to a nearby sales clerk, who then exchanges it for cash from the till. Report from institute of banks September 1999.

IO ATM transactions are usually encrypted with DES but most transaction processors will require the use of the more secure Triple DES in the near future. There are also many "phantom withdrawals" from ATMs, which banks often claim are the result of fraud by customers. Many experts ascribe phantom withdrawals to the criminal activity of dishonest insiders. Ross Anderson, a leading cryptography researcher, has been involved in investigating many cases of phantom withdrawals, and has been responsible for exposing several errors in banking security.

There have also been a number of incidents of fraud where criminals have used fake machines or have attached fake keypads or card readers to existing machines. These have then been used to record customers Pins and bank account details in order to gain unauthorized access to their accounts.

A bank is always liable when a customer's money is stolen from an ATM, but there have been complaints that banks have made it difficult to recover money lost in this way. In some cases, bank fraud occurs at ATMs whereby the bank accidentally stocks the ATM with bills in the wrong denomination. Therefore giving the customer more money than should be dispensed. Individuals who unknowingly use such ATMs probably never tried, but those who withdraw a second time are usually prosecuted.

2.3 The concept of service delivery 2.3. I What is service delivery? This is the process of providing service to the clients. Services are rapidly growing and increasingly important part of today's global economy. Because services are customers driven, pleasing a customer is more important than ever, it comprises of provision of quality service, customer satisfaction and value for money. (LoboefM: 1997).

3.3.2 Provision of quality services This tresses that "no matter what business you are in, you can not improve on the rewards you offer to your customers until you know what they like and dislike about the business you are doing. Customers judge quality in terms of reliability, assurance,

11 tangibility and responsiveness, which is the willingness to provide prompt services and to help customers (Kreitner. R. 2001 ).

2.3.3 Customer service This is the philosophy in which all employees feel and act accountable for creating customers satisfaction. Accounting to customer service concept, all employees in the organization are accountable (Tom Reilly: 1996).

2.1.l Customer satisfaction More formally, we can define customer satisfaction as a ratio between performance and customers expectations. If you under perform and fall short of their expectations you have dissatisfied the customers. The bank can use the following factors to determine customers satisfaction. (Tome Reilly: 1995).

2.1.1.1 Reliability This is the offering of a service that will make the customers feel good about while solving their problems. For example ATMs are expected to serve customers 24 hours and therefore customers soul be served 24 hours (Banking Technology, the authority on financial systems worldwide February 2000).

2.1.1.2 Credibility This can be reflected in some one's trust, assurance, integrity and security. Thus bankers must say what they mean and mean what they say otherwise customers will go away. Generally customers who fail to get facilities from suppliers automatically go away dissatisfied. Crane bank now helps its customers in paying their water bills, DSTV and electricity bills by use of Crane Banker's source which is a real time saver; a one stop solution.

12 2.1.1.3 Responsibility When a customer has a need, a bank or a firm should meet it immediately. Banks should be easily accessible and available to their customers, 24 hours for the case of ATMs.

2.1.1.4 Attractiveness A sense, which is attractive, measures the warmth of feeling thus making people feel wanted. It's said that no customer wants to go to a place where people are not active and unattractive. People would like to try in place where there is color and life.

2.1.2 What do customers value most? Through your performance, you affect the profitability of your company and the stability of your future. Value adding, customer serving companies have discovered that when it comes serving customers, the more services you offer the less important price becomes in the decision making. Customers value most quality, durability, price, performance and support services (Tom Reily I 996).

2. 1.3 The National Electronic Switch Another recent development in the payment system is the ongoing implementation of an electronic SWITCH that enables banks to share their Automated Teller Machines ( ATMs) with other banks in the industry. The switch is another facility which facilitate customer payments for utilities (electricity, water and telephone services), or loading of airtime on mobile phones, and payment for purchases using debit cards, which is technically refeITed to as Electronic Funds Transfer at Point of Sale (EFTPOS). has already been introduced to Bankom, private companies, which set up and operate the electronic switch customers of banks, which are connected to the electronic switch, are able to access ATM and related services at any ATM of any bank that it is a member of the electronic switch.

We also expect the implementation of the switch infrastructure to significantly increase the use of payment cards in the country. All banks are obliged to use the switch so as to enhance the use of cards on the POS (Point of Sale) as Debit Cards. In this regard,

13 Bankom must work closely with supermarkets, petrol stations and other outlets to install point of sale machines throughout the country.

ATM cardholders will be some years to come be able to use the ATM services provided by different local commercial banks, according to a report appearing on AllAfrica.com.

Kwame Ahadzi, Allied Bank International Uganda Ltd. Managing Director on 17 December 2003 said an ATM switch that would enable customers of different banks to withdraw money from the machine of any bank in Uganda. This is one of the steps which have been taken by local banks to popularize the banking practice among the population. So as to increase their customers bases, Ahadzi said, "Electronic banking has become one of the safest kinds of banking in our modern times, because its reliable, fast and easy to monitor by the bankers". Locally registered firms, including Bankom Ltd. And Euronet Ltd, are working on the new system, which will be self-regulatory, according to AllAfrica.com.

Banks currently offering ATM services m Uganda include Crane Bank, Standard Chartered Bank, Barclays Bank, Centenary Rural Development Bank, Stanbic Bank, Allied Bank, Bank of Baroda, And .

From the literature review above, we can clearly observe that Automated Teller Machines (ATMs) are a very important contribution towards the creation of service delivery, more so by the numerous advantages they add towards the services rendered to customers, though they are also a danger to customers satisfaction, by the view of the number of weaknesses associated with relying upon them by both the customer and the bank. Therefore, ATM banking system is paramount undertaking because any bank can not survive today competitive edge without embracing modern technology and that is why Crane Bank is not an exceptional.

14 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction This chapter discussed how the study was conducted. It describes and justified the research design, source of data, study population, sample methods and size, data collection instruments and data analysis and interpretation.

3.2 Research design During the research study the researcher used cross-sectional method. To get the relationship between ATMs and service delivery in banking industry, both quantitative and qualitative data were used.

3.3 Sampling design 3.3.1 Study population The study population included the customers of Crane Bank (U) Limited within Kampala City at four selected ATM - source cash out lets.

3.3.2 Sample size The sample size targeted was eighty (80) customers of Crane Bank from the four (4) branches. These provided the required data for drawing valid conclusions since ATM banking system also directly affects them. The four branches include; Luwumu street branch, Parliament Avenue branch, Wandegeya branch and Jinja road main branch.

15 Table I: Showing the selected size of 80

Bank branch Sample size

Jinja Road 20

Wandegeya Branch 20

Luwumu street branch 20

Parliament Avenue 20

Total sample size 80

Primary source

3.3.3 Sampling methods Purposive sampling method was used to select the sample of 80 respondents from four branches of Crane bank with in Kampala city.

3.4 Data collection 3.4.1 Source of data The researcher used pnmary source to collect data; pnmary data was obtained by distributing self questionnaires to respondents at four different Crane Bank branches in Kampala as indicated above.

3.4.2 Data collection instruments Self administered questionnaires were used and the researcher faced one respondent at a time asking him/ her questions in relation to the subject of study.

3.5 Data analysis and presentation 3.5. I Data analysis and presentation Both qualitative and quantitative analytical techniques were used in the analysis of the data like percentage analysis. The data was collected, sorted, edited and coded for

16 consistency and completeness. The quantitative data was tallied, frequencies and percentages calculated and tabulated.

17 CHAPTER FOUR PRESENTATION, INTERPRETATION AND ANALYSIS OF FINDINGS

4.0 Introduction This chapter contains the presentation, interpretation and analysis of research findings based on the objectives of the study. The researcher based on empirical data to establish the relationship between ATM banking system and service delivery. The findings are presented in tables and interpreted using frequencies and percentages. The researcher examined the questionnaires collected from the customers of Crane Bank. The researcher used a sample size of eighty respondents whose findings were to present the rest of the sampling design of Crane Bank (U) Ltd. 80 questionnaires were filled and returned.

4.2.2 Findings on the effectiveness of automated teller machines As customers were asked whether ATM banking system is effective in terms of time saving, accessibility, some agreed others disagreed while complaining on long lines as the table shows blow.

Table 2: Showing if A TM services are effective

Option Frequency Percentage Strong agree 14 18 Agree 20 25 Strongly disagree 16 20 Disagree 30 37 Total 80 100%

Source: Primary data

18 From table 2 above the majority of respondents (37%) disagreed on the effectiveness of ATM services, 20% strongly disagreed, 25 disagreed, and 25 agreed while the minority 18% agreed, indicating that to some people ATMs are effective while to others they are not so effective.

4.2.3 Reliability of A TM Services Much as ATMs are reliable in terms of customer satisfaction, some customers still complaining that some times they go to withdraw their money in the nearby machines and find that the machines are not in use or no sufficient funds. But some customers when asked whether ATMs are reliable very much agreed as shown in the table below.

Table 3: Showing the rate of reliability of A TM services

Ratings Frequency Percentage Very much 10 12 Much 15 19 Low 35 44 Very low 20 25

Total 80 100%

Source: Primary data

Table 3 above shows that respondents rated the reliability of ATM services as being low, giving the majority percentage of 44%, 25% of respondents rated the reliability of ATMs as being very low, and 19% said it is high while 12% rated it as very high. This shows that management of Crane Bank should make sure that machines are on stand by to serve customers any time they want their money.

19 4.2.4 Findings on Factors that affect Service Delivery The researcher found out that there are many factors affecting customers of Crane Bank who use ATM services which include; the level of response to customers' complaints, poor customer care, machine breakdown, long lines and insufficient funds in ATM machines.

4.2.4.1 Response to Customers Complaints by Nile Bank

Crane bank has improved on their customer care compared to last two years where by had put ATM machines in places without their bank branches like in Wandegeya so people could not get assistance. But now at least where there is an ATM there is bank where the customer can access the assistance very easily.

Table 4: Shows the promptness of the bank's response to customers' complaints about A TM services

Ratings Frequency Percentage Very much 0 - Much 20 25 Low 49 61 Very low 11 14 Total 80 100%

Source: Primary data

Table 4 above shows Crane bank often responds to customers complaints about ATM services due to the fact that majority respondents ( 61 % ) of the total respondents of 80 supported it. 25% and that less often respond to their ATM-related complaints, 14% responded that bank more often attend their complaints while none of the respondents who complained that Crane bank does not attend their complaints.

20 4.2.4.2 Customer Dissatisfaction at Cash Source points due to Poor ATM Services The researcher found that when customers go to withdraw or deposit their money they find insufficient funds or their cards get captured and yet in most cases they find the bank employees to attend their problems apart from the security personnel who can not perfect assist them or who can assist them with a pay. This trend is shown in table below.

Table 5: Showing the cause of customer dissatisfaction with A TM services

Option F1·equency Percentage Poor customer care 16 20 Poor ATM services 25 31 Delayed response to customers' complaints 39 49

Total 80 100%

Source: Primary data From table above the researcher ha got that delayed response to customers complaints represented by majority percentage ( 49%) is the major cause for customer dissatisfaction with crane Bank ATM services, followed by poor ATM services with 31% and poor customer care (20%) as the least impact on customer dissatisfaction with the bank services.

4.2.4.2 Long Line at ATM Banking Points

This happens mostly during lunch hours and during when people going home from work in some cases the end of the mouth after they have got their salaries. Some time long lines are caused by limited number of machines as illustrated in the table below.

21 Table 6: showing the canses of long lines for A TM services

Response category Frequency. No Percentage respondents

Limited number of ATMS 36 45

Seasonal payment 42 52

Slow running of ATM 2 3

Other

Total 80 100

Sources: primary

From table 6 above, 52% of respondents caused by seasonal payments were the major cause of long queues from ATM services. $5% is caused by limited number of ATMS while 3% by slow running of ATM.

4.2.55 Cared Retention by A TM Machines

Card retention is where ATM machines retains customers' card due to a number of reasons which include pressing wrong PlN number more than three times, cards which are damaged may be captured by the machine and also cards may than three times, cards which are damaged may be captured by the machine and also cards may be captured due to the instruction given to machine by the baker as show below.

22 Table 7: Showing causes of retention of customers cards by ATM

Response category Frequency Percentage

Wrong PIN number 25 31

Poor positioning card

Damage of cards 50 63

Others 5 6

Total 80 100%

Source: Primary data

From the table above the results reflect that 63% of retaining of customers cards by ATMs is due to damage cards, 31% is due to wrong PIN number pressed, 3 times while 6% caused by other factors.

4.2.4.5 Machine break down

Some times ATM machines fail to operate due to a number of problems which include poor use of clients, poor monitoring and maintenance by the bank management which could be done regularly to make the machines to work effectively.

23 Table 8: Depicting the average reported cases of machine failure from four branches of Crane bank for last 5 months (October 2005 - February 2007)

Branch No. of complaints registered Percentage

Jinja Road (main) 106 11.4

Wandegeya 152 16.3

Luwumu street 496 53.3

Parliament avenue 176 18.9

Total 930 100%

Source: Primary data

From the table above Luwumu branch registered the highest complaints lb machine failure with 53.3% followed by parliament avenue branch (19.9%) then Wandegeya 16.3% the lastly the Jinja Road main 11.4% which registered the least complaints. This machine failure is sue to lack of customer guidance at different branches.

24 CHAPTER FIVE

CONCLUSION AND RECOMMENDATIONS

5.0 Summary

The research indicated that ATM banking system has improved on the service delivery within banking industry and has played a positive role in creating saving behavior within the population.

TI1e research also showed that there is an improving service delivery and customer satisfaction due to the introduction of ATM services within the banking industry. However, many customers are complaining on ATM problems like machine failure and continuous card captivity as well as long queues especially during Lunch hours which has left bank customers dissatisfied. ATM banking has increased on service delivery at Crane Bank. However the continuous break down of these ATMs has led to dissatisfaction of customers. To increase on the ATM service Crane Bank should always monitor its source cash outlets to overcome this problem and also ensures training of customers on how to use those ATM cards. If all these done, the relationship between ATM banking system and service delivery will improve more.

The researcher on the effectiveness of ATM service revealed that ATM services are ineffective given the majority percentage of the respondents (37%) disagreed when asked whether ATM services are effective, therefore ATM services are unreliable. However, this cannot discourage people from using ATM services since they are the best alternative on withdrawing and depositing cash twenty-four (24) hours.

From the research, it was discovered that, ATM banking system has got a lot of disadvantages over disadvantages. Crane bank (U) Limited is generally satisfying its customers with all possible means. Its true that customers of Crane Bank are facing problems with ATM services but that should not discourage them from using Crane Bank

ATM services due to the fact that all banks with ATMs experience those problems after all Crane Bank responds quickly to customers' complaints.

25 5.1 Recommendations

From the findings, it was found that, Crane bank still needs to improve on its ATM services offered to its customers to over come the weaknesses which might be used by the competitors as their opportunities and also customers should be responsible on ATM services as suggested below.

Customers should always keep their cards in the manner that they can not get damages which was observed from the findings as the main cause of card retention. Crane bank should always provide hard card jackets so as to avoid card damages.

Crane bank should increase on the number of source cash outlets to reverse the problem of long lines so that to ensure quick service delivery to its customers and this will lead to time saving by customers. The benefits that occur to Crane bank as a result of automation of its banking systems in terms of service delivery: Crane bank should put in the facilities in areas that are convenient to every customer. Thus if ATMs are conveniently located, they will help the bank to acquire more customers.

Crane bank should always monitor its machines and make repair and maintenance of faulty ones to avoid inconveniences to its customers. This will improve on the reliability of the machines because most customers reported that ATMs are not very reliable

5.3 Areas for further research

• Further researchers in similar research topic should research on other banks and other banking system used within the banking industry. • They should also research on the challenges faced by A TM users and make assessment on the relationship between ATM banking system and service delivery. • Future researchers should strive to find out whether training and sensitization customers on various bank automation modes determine the level of service delivery.

26 REFERENCES

Laboef M. (1997): How to win customers and to keep them in life; Berekley publishing New York. Emmanuel Tumusiime Mutebile Governor bank of Uganda. ' A speech report at the opening of Barclays bank ofMunyonyo 8th April 2001 by" Ross Anderson, 'A report on phantom-withdrawal appearing on allAfrica.com (17th December 2003)'

Helen Stock, ' American bankers; volume 164, November 1999' A report from United States Bureau of Statistics on the importance of Bank Automation (2001).

Richard Byaruhanga the managing director Crane bank (A report in New Vision 14 November 2005). New Vision, Monday August 16, 2004. - (Crane Bank Utility Source)

www.crm2day.com, creating customer loyalty

www. search/pupdater. comautomated teller machines

Working paper (2003 I 04) on customers and ATM in modern banking published by Bank of Uganda

Frank Cerne, 'Bank Technology News International (February I March 2000)

Uganda Institute of Bankers report (September 1996, p. 26)

Tom Reilly, 1996, what customer value most

Gandy (March 200) efficient services Delivery

Kreitner R, 2001 - Quality services

27 APPENDICES

Appendix I: Questionnaire

Dear respondent

This study is intended to provide data on ATM banking system and service delivery in banking industry.

I kindly request you assist me and fill this questionnaires, it is purely academic and all the information provided will be treated with utmost confidentiality. Tick the appropriate answer of your choice 1. Do you agree the ATM services are effective? Strongly agree D Agree D Strongly D Disagree D

2. How do you rate reliability of your bank's ATM service Verymuch D Much Low □Very low □ □

.,~ . Does your bank respond to your complaints about ATM services promptly? Never D Less often D Often D More often □ 4. what makes you dissatisfied with this bank's ATM service Poor customer care Poor ATM services □ Delayed response to □ Customers □ □ 5. What do you think causes long lines on ATM services Limited number of ATM Seasonal payment □ Slow running of ATM □ □ 28 Others

6. What are your recommendations on the Automatic□ teller machine banking system?

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11. ·····•···········································•······· ············ ...... ······ ... ············ ...... ······ ......

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29 Appendix II: Interview Guide

I. Do you agree that ATM services are effective?

2. How do you rate reliability of your bank's ATM services?

3. Does your bank respond to your complaints about ATM service promptly?

4. what makes you dissatisfied with this Bank's ATM services

5. what do you think cause long lines for ATM services

6. What are your recommendations to the Automatic teller machine banking

systems?

30