Satisfaction Management in Public Sector Banks: An Empirical Investigation of ATM Service

Ajitabh Dash Assistant Professor Department of Management, Modern Engineering and Management Studies, Balasore, Odisha, India Bhagaban Das Professor, Department of Business Management, Fakir Mohan University, Balasore, Odisha, India

Abstract Technology is rapidly changing the way personal financial services are designed and delivered to the customers. Service quality is a concept that arise considerable interest and debate among the researchers due to the difficulties in both defining and measuring it with no overall consensus emerging on either. Customer satisfaction and service quality are often treated together as functions of customers perceptions and expectations and research has shown that high service quality contribute significantly to profitability. To remain profitable and strong in the market, retaining current customers and attracting potential customers has no alternative. The banks found themselves at the forefront of technology adoption for the past few decades and ATM (Automated Teller Machine) is the first well known machines to provide electronic access to customers. Under this backdrop, the present study focuses on the perception and satisfaction of customers regarding the utility of ATM services. A structured questionnaire was administered on 145 ATM card-holders at branches of different banks in Balasore and Bhadrak districts of Odisha. Factor analysis is used to explore underlying factors associated with customer satisfaction with ATM services. This study provides an insight to the factors those have the most effect on customer satisfaction level and will become much useful to bankers in framing their future policies in the state and outside. Key Words: Technology, ATM, Banking services, and Customer Satisfaction

1.1 Introduction The explosion in the use of technology by the banking sector has been tremendous since its inception. The emergence of electronic transactions over the past three decades has radically changed the banking landscape and offers remarkable opportunities for growth and development through improved business efficiency. But with advent of technology a customer has one-to-one interaction with the bankers via a mechanistic medium, and in such a situation it is essential on the part of bank to provide high quality services over the automated system of operation. So, in contrast to traditional banking, modern banking involves non-human interactions between customers and online bank information system. However, customer satisfaction and retention are the key requirements in this situation. In this context, the present study will provide the background of the research area. 1.2 Objective of the study The study has following two objectives only: a) b) To examine the factors affecting the choice of an ATM service. To study the most important dimensions of ATM service-quality offered by public sector banks that affects the satisfaction level of customers in Odisha.

1.3 Rationale of the Study Customer satisfaction gives an indication of how successful the organization is for its products or services in the market. Because it is said that customer is the king. All activities of the banks are directed towards customer satisfaction which leads to customer retention: a key factor for achieving the goal of banking business. From this study the selected banks will know their customers satisfaction level from using ATM cards. It will also help them to understand whether their policy is right or not to retain the customers. Some recommendations are made on the basis of the measurement of satisfaction for better ATM services in future. 1.4 ATM and its Evolution ATM, an abbreviation of automated teller machine was the first well known machine to provide electronic access to customers. It acts as a teller in a bank who takes and gives money over the counter. With the emergence of automated teller machine, banks are able to serve customers outside the banking hall because those are placed inside or near the banks and also outside the banks such as; shopping malls, restaurants, airports, railway stations, bus-stops, cinema halls or any places that people may gather. ATM is designed to manage the most important function of bank such as; cash withdrawal, balance enquiry, bill payment, cash and cheque deposit, saving and credit account. With manifestation of ATMs, some limitation of time and geographic location has been resolved. In India, HSBC set the trend and set up the first ATM machine in 1987. Since then, they have become a common sight in many of our metros as well as in rural areas. These machines have gained prominence as a delivery channel for banking transactions. Banks with lower market share also perceive this technology as a means to increase the market share by attracting more and more customers through this new channel of delivery. However, the service quality in this new channel of delivery needs thorough analysis to find out the determinants for its success and growth useful guidelines for bankers can be extracted. The paper is organized as follows. In the next section, a literature review is presented to draw a logical linkage of current research with previous ones. Later on, research methodology is clearly delineated so that the readers can easily evaluate the novelty of the research. Next section presents research results and critical analysis of that to make the readers more involved with the research findings. Then the paper is finished with a concluding remarks and scope for further research. 1.5 Review of Literature Literature review indicates different dimensions of ATM service quality. Lovelock (2000) identified secure and convenient location, adequate number of ATM, user-friendly system, and functionality of ATM. Davies et al., (1996) examined the factors that influence customers satisfaction about ATM service quality. These factors include costs involved in the use of ATM, and efficient functioning of ATM. Joseph and Stone (2003) examined the United States customers perception of ATM quality and found that user-friendly, convenient locations, secure positions, and the numbers of ATM provided by the banks are essential dimensions of ATM service quality. In a case study of Botswana, Mobarek (2007) established speed of operation, and waiting time as the important predictors of ATM service quality. Researchers have divergent views about the use and effectiveness of ATMs. Stemper (1990) stressed the positive dimension of ATMs based on freedom of transaction. Effective service delivery in ATM system guarantees quality excellence and superior
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performance and provide autonomy to the customers (Lovelock, 2000). Yavas et al., (2004) argued that customers focused ATM delivery system that fulfills their needs and maximize operational performance are essential dimensions for bank to achieve and sustain competitive advantage. Dilijonas et al., (2009) examined the essential aspects of ATM service quality in Baltic States. They identified essential resources (adequate number of ATMs, convenient and secure location and user-friendly system); important dimensions of operation of ATM (maximum speed, minimum errors, high uptime, cash backup); and value-based aspects (quality service at reasonable cost, and maximum offering to cover maximum needs of customers) as vital facets. Based on the prior studies, Al-Hawari et al. (2006) compiled a list of five major items about ATM service quality that include convenient and secured locations, functions of ATM, adequate number of machines and user-friendliness of the systems and procedures. An empirical study found that these items constitute important aspects of ATM service quality. Islam et al., (2005) examined the satisfaction level of ATM card holders of a leading bank (HBSC) in Bangladesh. The study found significant relationship of ATM service quality with customers satisfaction. The study identified that location, personnel response, quality of currency notes, promptness of card delivery and performance of ATM were positively and significantly related to customer satisfaction. The security, frequent breakdown of machine, and insufficient number of ATM were major contributors of customers dissatisfaction. In another study in Bangladesh, Shamsdouha et al., (2005) found that 24 hours service, accuracy, and convenient locations were the main predictors of customer satisfaction. The study also indicated lack of privacy in executing the transaction, fear of safety and complexity of the machine were the major cause of concern for the customers. Joseph and Stone (2003), through focus group study in the United States, found that easy access to location, user-friendly ATM, and security are important factors that influence majority of bank customers perception of ATM service quality. Patrcio et al., (2003) undertook a qualitative study of a Portuguese bank regarding customers use of multi channel offerings. The study identified accessibility and speed of operation as strong predictors of customers satisfaction, whereas security dimension and technical failures were main causes of dissatisfaction. Previous researchers have found that reliability feature of ATM is essential to consumers use of electronic channels of banking (Liao & Cheung, 2002; Polatoglu & Ekin, 2001). Rugimbana and Iversen (1994) studied the perceived attributes of ATM service quality and their marketing implication. They found that convenience, reliability, and ease of use are important aspects, whereas complexity and unreliability (risk) were causes of dissatisfaction. Lebanc (1990), in a study of ATM users in Canada, established that major reasons for using ATM were accessibility, freedom to do banking at all times, and to avoid waiting lines. The study also found the users apprehension about the risk associated with its use and complexity of the machine in executing the transaction. Moutinho (1992) examined relationship of dimensions of usage rate and performance expectation with customers prolonged satisfaction with ATM services. The results indicated that usage rate had a negative association with customer perceived prolonged satisfaction whereas performance expectations found to have positive and significant predictor of customers prolonged satisfaction. Moutinho and Brownlie (1989) found that accessibility and location of ATMs significantly affect users satisfaction. The research found that customers were willing to accept new offerings through ATMs. Waiting in queue to use the ATM was the major cause of dissatisfaction among the users. Literature provides support to the idea that pleasant experience of automated services provides enhanced value to the customers and attracted them to undertake improved business with their banks (Zhu et al., 2002).Simultaneously, the researchers have concluded that technology-based services are likely to give sense of incompetence to customers, isolate them, and increase passiveness (Grabner- Krauter & Kalusha, 2003; Reichhield & Schefter, 2000). In addition, the pattern of adoption of technology and its use may differ across organizations and cultures (Phillips et al., 1994). Howcroft (1991) noted that dissatisfaction among customers is associated with frequent interruptions and breakdown of ATMs. Intense competition and technology-based new services are shaping customers loyalty. These have resulted into switching of banks by customers based on competitive services (Lewis & Bingham, 1991). Meller (1993) found that location of ATMs, increasing number of ATMs, and diversified service offering are associated with switching of banks. Researchers contend that service quality has a direct link with customer satisfaction (Parasuraman et al., 1988). Strong evidence exists in literature about customers satisfaction from ATM services (Leblanc, 1990). Literature finds a large number of studies that highlight the satisfaction of customers with ATMs (Moutinho & Brownlie, 1989, Wan et al., 2005; Komal & Singh, 2009; Mobarek, 2007). Some studies have also identified customers dissatisfaction with ATM service quality dimensions. Large numbers of customers are resistant to this new mode of service delivery and prefer more personalized service (Murdock &Franz,
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1983). The researchers noted that customers do not like ATMs because of impersonality, vision problem, fear of technology and reluctance to change and adopt new mode of delivery of service (Stemper, 1990). 1.6 Methodology Sampling and Data Collection One of the primary concerns of this paper is to identify the important parameters affecting the service quality of ATMs. To determine the dimensions of ATM services and their relationships with the overall service quality, a questionnaire survey was conducted over 145 customers who hold ATM cards from public sector banks at various ATM counters in Balasore and Bhadrak towns using random sampling method. A questionnaire was used to collect the data. The questionnaires were administered by courier, e-mail, and personal delivery. A five-point Likert scale was used to elicit responses to the questionnaire. The questionnaire is pretested and revised through back translation process for minor change in wordings. Tests Used for Data Analysis SPSS (Statistical Package for Social Sciences) version 20.0 was used to compute and analyze the data. The statistical tests used in the analysis of data included descriptive statistics, testing of multicollinearity and normality of data, reliability analysis, correlation analysis, factor analysis, and regression analysis. 1.7 Analysis and Findings In the present study, the factor analysis is used to remove the redundant (highly correlated) variables from the survey data and to reduce the number of variables into definite number of dimensions/ factors associated with customer satisfaction at ATM. The factor analysis is performed using the principal component extraction method with Varimax rotation. In order to establish strength of the factor analysis solution, the Kaiser-Mayer-Oklin (KMO) and Barletts test was first computed and given in table-1. Table-1 KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square Df Sig. .646 582.829 91 .000

From the above table, it is found that the value of KMO statistics is greater than 0.5, indicating that factor analysis can be employed for the given set of data. Then for the further investigation, five factors having eigen-values greater than one were extracted. The Eigen-value of the five factors along with their cumulative percentage of the variance is shown in Table -2. Table-2 Total Variance Explained Initial Eigen values Component Total 1 2 3 4 3.202 2.144 1.519 1.282 % of Variance 22.871 15.317 10.853 9.160 Cumulative % 22.871 38.188 49.041 58.201

1.025

7.322

65.524

Extraction Method: Principal Component Analysis.

The result of the factor analysis using principal component method shows that 65.524% of the total variance is explained by classifying these 14 variables into 5 components or factors. The percentage of the total variance which is used as an index to determine how well the factor solution accounts for what the variables together represent. The first factor F1 is the most important factor which explains 22.871% of variance before rotation. The second factor F2 is the second major factor which explains about 15.317% of the variance of the variables. The third factor F3 explains about 10.853% of the variation. Likewise the fourth factor F4 explains about 9.160% of the variation. Finally the fifth factor F5 explains about 7.332% of the variations. Table -3 gives the factor loading of the variables under each of the five extracted factors. In order to interpret the results, a cutoff point of 0.5 is decided for each variable to group them into factors by forming a rotated component matrix. Table-3 Rotated Component Matrix Components 1 ATMs are equipped with user friendly technology ATM counters has an attractive decorations ATM transactions ensure proper safety and security ATMs dispense proper denominator of currency Money dispensed at ATM is of good quality ATMs are located in a suitable location Distribution network of the ATMs are satisfactory ATMs extend Continuous service to the customers ATMs extend wide Variety of transactions to the customers Withdrawal limit of your ATM is satisfactory your ATM adopts innovative service delivery system ATMs perform accurate and error free record keeping When there is a problem, banks shows sincere interest in solving it doing transaction with your ATM is fast and time saving
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.a a. Rotation converged in 7 iterations.

2 .195 -.008 -.236 .078 -.298 .212 .007 -.037 -.054 .778 .761 .027 -.199 .713

3 .764 -.057 .510 -.027 .759 .070 .025 -.045 -.408 .298 -.232 .058 -.134 .239

4 -.037 -.146 .223 -.083 .010 .221 .155 .568 .536 -.272 .260 .102 -.734 -.237

5 .101 .186 -.227 -.013 .099 .097 -.270 .203 .089 -.026 .156 .925 .648 -.103

-.281 .808 .286 .761 .060 .808 .721 .402 -.110 -.244 .168 .038 .069 -.065

The first factor F1 having four significant factor loadings can be named as customers Convenience as it includes, attractive decorum(0.808), distribution of proper denomination of currency(0.761), appropriate location(0.808) and distribution network of ATMs(0.721). The second factor F2 having three significant factor loadings can be named as Reliability as it includes, withdrawal limit (0.778), innovative service delivery (0.761) and time saving operation (0.713). The third factor F3 having three significant factor loadings stands for Safety as it includes safety and security in transaction (0.764), proper quality of the money dispensed (0.510) and user friendly technology (0.759). The fourth factor F4 having two significant factor loadings
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stands for efficiency as it includes continuous (0.568) as well as wide variety (0.536) of service to the customers. Finally the fifth factor F5 having two significant factor loadings can be named as Accuracy as it includes accurate record keeping (0.925) and prompt problem solving (0.648). 1.8 Conclusion The findings of the study show that the first extracted factor namely convenience (as it accounts for 22.87% of the total variance) is the most important factor to be taken care of by a bank at its ATM outlets for its customers satisfaction. Likewise reliability, (accounting for 15.31% of the total variance) is the second major factor influencing the customers satisfaction at an ATM outlet. Next to reliability, safety and security (with 10.85% of the total variance) is the third major factor followed by efficiency and accuracy with 9.16% and 7.32% respectively of the total variance are to be taken care of by a bank when devising strategy for customer satisfaction for ATM service. 1.9 Recommendations Based on the study conducted, it is felt necessary to place suggestions given by the customers during course of the interview. The number of ATM booths should be increased. Banks are advised to open number of ATM booths in rural areas of the state for convenience of customers. The daily withdrawal limit in ATM counters may be increased by the banks. Safety and security of ATM transactions should become stiffer. Banks should make arrangements to resolve the problems quickly and promptly that customer faces in ATM transactions. 1.10 Limitations and Scope of Further Research This research has some limitations. The sample size is very small and thus the result cannot be generalized. The study is done in two towns of Odisha across the very specific service recipients. It is possible to extend the study by including more towns and a comparative picture may be drawn. Similar study can also be done in other service areas of banks. References
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