CHAPTER I

INTRODUCTION

1. Background of the Study

Telecommunication play an important role in any economy because the transactions from one
place to globally existed without role of telecommunication. It also includes planning,
influencing, organizing, instructing, promoting business, interpersonal relationship and
information exchange. Telecommunication helps in performing political, economic, social and
technological activities. The level of service quality was based on provider in which point the
customer satisfaction fulfill. The company points of contact determined through cumulative
experience by the customers. New innovation in technology and globalization increase the fierce
competition among financial institutions specially banks. The banking sector faces some
challenges from customer demand and competition in banking sector. The banking sector
provides economically service to satisfy and attained the customers. The telecommunication
sector provides the facility of selling and buying through online transaction (Parasuraman, 2021).

The banking sector is considered as a fundamental backbone of economy for development. It

simplifies the production of goods and services by providing loan/liquidity for development of
new industries as well as cash deposit and withdrawn facilities. Technology has been
significantly transforming the banking activities. So, banks have been using technology like
Automated Teller Machines (ATMs), internet banking, and mobile banking to reduce cost and
enhance efficiency, productivity, and customer convenience/satisfaction. In this context, the
technological facilities provided by banks are required for the systematic study (Research) and
sustainability of banking activities (Joshi, 2019).

Service quality has been determined as an analytical factor of success for the firms through
which they can formulate their competitive advantage. Many researchers have studied about
service quality to find out its dimensions including tangibility, reliability, responsiveness,
assurance and empathy (Parasuraman & Berry, 2019). The service quality accompanies services
of Internet banking to encourage the customers toward the usage of online banking services
(Raza & Hassan, 2020). The services of Internet banking, which should be offered necessarily,

1
include ease of use, perceived usefulness, reliability, accessibility, security, privacy and
responsiveness (Liao & Cheung, 20021).

Technology has been significantly transforming the banking activities. So, banks have been
using technology like Automated Teller Machines (ATMs), internet banking, and ATM service
to reduce cost and enhance efficiency, productivity, and customer convenience/satisfaction. In
this context, the technological facilities provided by banks are required for the systematic study
(Research) and sustainability of banking activities.

In 2022 Kelley demonstrated that the role of technology in service organization reduce the cost
of operations and remove the uncertainty. Financial institutions provide ATM (automated teller
machine) to the customers which are the need of general public and easy access to general public
without any human resources like cashier, Clark and manager. ATM performed such functions
like cash with drawl, cash transfer, cash inquiry and payment of utility bills (Khan, 2020).
Competitiveness of banks provides high quality service. Competitiveness archived, when
analyzing the problem speedily, quickly response and quality service to make sure the service
fulfills the customer satisfaction. Customer loyalty helpful to gain high market shares compare to
their competitors.

Customer satisfaction is important for business success. Satisfaction depends on product and
service quality. Banking sector provides various services to customers for higher customer
satisfaction. In present competitive environment, customer satisfaction is an important element to
win the competitors. Bank management should identify the service quality dimensions to satisfy
their customers by research and development programs. The banking industry is highly
competitive. Banks are not only competing among each other; but also with non-banking and
financial institutions (Kaynak & Kucukemiroglu, 2022).

Customer satisfaction is predetermined by how the expectations of the customer are met (Kotler
& Keller, 2024). Customer satisfaction is directly connected to customers’ needs. The degree to
which these needs are fulfilled determines the enjoyment in the case of conformity or
disappointment from discrepancy (Hill, Allen, & Rachel, 2019). Consumer behavior is also

2
regular researchable phenomena.

Service quality has been determined as an analytical factor of success for the firms through
which they can formulate their competitive advantage. The service quality accompanies services
of Internet banking to encourage the customers toward the usage of online banking services
(Raza & Hassan, 2020). The services of Internet banking, which should be offered necessarily,
include ease of use, perceived usefulness, reliability, accessibility, security, privacy and
responsiveness (Liao & Cheung, 2021).

2. Statement of the Problem

A.T.M. of the bank on some religious festivals not fulfill the need of customers through regular
service. Sometimes availability of cash in the A.T.M. is not sufficient according to the customers
need. Technical problem occurs in the A.T.M. machine after closing of bank and customers face
some difficulties. The locations of A.T.M. are away from the populated area of city. So, the
A.T.M. users do not feel safe during transection.

The quality of currency notes not according to the market. Some notes are rough conditions and
not easily exist in current condition of the market. Privacy of pay in slip not meets the standard
of the society. After using ATM chances of theft because that place filled with people and a
simple man did not distinguish between general public and thief. Insufficient availability of
currency notes in ATM machine also main hurdles in customer satisfaction (Caruana, 2023).

In the present competitive banking environment, Nepalese banks are trying to provide more and
more facilities to their customers. Technological service quality is improving to attract and retain
the customers. ATM is a highly using technology in banking sector. Is ATM service successful
to satisfy the bank customers’ needs ? What is the condition of customer ? Satisfaction on ATM
banking ? These types of questions are answered by research activity. Prior study in India shows
the ATM services have positive impact on the customer satisfaction (Singh, 2022). Nepalese
banking sector are using ATM services. Customers are satisfied or not by the ATM services ?
This phenomenon is researchable in Nepal. For this study following research questions are
extracted;

3
 • What is the relationship between service quality dimensions and customer satisfaction?
• What is the impact of ATM service on customer satisfaction ?

3. Objectives of the study

• To examine the relationship between service quality dimensions (security, reliability,
convenience, price and responsiveness) with satisfaction of customer in Nepali banking
system.
• To analyze the impact of ATM service on customer satisfaction.

4. Significance of the study

The research study of ATMs provides the guidelines to managers of the banks to facilitate the
customer with quality service because the efficiency of banks relies on customer satisfaction.
Every bank desired to achieve maximum market share as compared to other banks. This research
study provides recommendations how to improve the service according to the customer
expectations. The customers can be satisfying by providing reliability of account accuracy. The
price of transaction as compare to other banks reasonable in that’s way customer loyalty
increase. The procedure of transaction should be simple as compare to competitors. The research
provides guidelines to the mangers how to remove weak points. After’s corrective actions
approximately customer satisfaction increase.

5. Literature Review
This chapter deals with the review of various literatures relevant to this study. The review
focuses on various influencing factors that affect customer satisfaction from ATM services. In
this chapter, the conceptual review is first presented followed by the review of various related
articles, books, research paper, journals and previous thesis similar to the research topic. The
succeeding section of this chapter then presents the research gap pertinent to the research to
better understand the factors that may influence ATM service of banks.

4
5.1 Theoretical Review
There are many definitions of customer satisfaction based on different aspects; such as, Kotler
and Keller (2024) defined “satisfaction can also be a person’s feelings of pleasure or
disappointment that results from comparing a product’s perceived performance or outcome with
their expectations”. Chander et al. (2022) expressed that “consumer’s level of satisfaction is
determined by his or her cumulative experience at the point of contact with the supplier”. These
two definitions examined the concept of customer satisfaction under the gap between pre-
purchase and post-purchase or the gap between previous performance and current one.

Customer satisfaction determinants are likely to be different by the nature of businesses.

Satisfied customers are also likely to tell others of their favorable experiences and thus engage in
positive word-of-mouth advertising (File, 2020). Strong linkages have been apparent between
service quality dimensions and overall customer satisfaction (Anderson & Sullivan, 2021).
Customer satisfaction is widely recognized as a key influencing factor in the formation of
consumers’ future purchase intentions (Taylor & Baker, 2019). Variables included in the
research are relational performance,core performance, tangibility, competitive rates, enabling,
future intentions and customer satisfaction. (Fornell, Johnson, Anderson, Cha, & Bryant, 2024)
performance, features and core performance, exist in retail banking, and these have a strong
influence on customer satisfaction. High-quality service and customer satisfaction often result in
more repeat purchases and market share improvements.

Identification of problem includes the dimensions of A.T.M. service quality effect on customer
satisfaction. Dimensions involve the overall performance of A.T.M. service, reasonable charges,
complaint book availability, locations aspects, quality of notes, sufficient numbers of A.T.M.
machines, pay in slip/deposit envelopes availability, cash withdrawals (correctness), cash
shortage, invertor/power, backup/generator availability, safety issue, service quality, security
issue, behavior of A.T.M. personal guard, privacy issues and proper delivery of A.T.M. cards.

To analyze the relationship between ATM service and customer satisfaction. The purpose of the
study to calculate the customer satisfaction through A.T.M. service quality which has the
dimensions as price, reliability, responsiveness, convenience and security. There was too much

5
research work has not been done in Nepal in specially context of service quality of A.T.M. and
customer satisfaction. Khan (2020) has conducted a study on “An Empirical Study of Automated
Teller Machine (A.T.M.) service quality and customer satisfaction in Pakistani Banks”. Khan
(2020) considers the five dimensions such as security and privacy, coefficient operations,
convenience, responsiveness and reliability. The efficiency and effectiveness in automated teller
machines service effecting customer satisfaction. It includes that availability of ATM machine to
geographical location and delivery of complaint book, number of ATMs and errors in
withdrawals, the problem in currency notes, and reaction of security guard, service and pay slip.
Furthermore, the number of ATM machine are less as compare to quantity of customers.
Generally, the banking system establishes in urban areas so the rural areas customer face
problem in service. Errors occurs in cash with drawls due to some technical and other transection
problems .in cause of wrong pin code ATM card did not be recover after three attempts .so the
security guard attitude with customer unethical.

Love (2019) identified the dimensions of ATM service quality such as secure and convenient
location, adequate number of ATM, user-friendly system, and functionality of ATM. Joseph and
Stone (2023), through focus group study in the USA, found that easy access to location, user-
friendly ATM and security are important factors that influence majority of bank customer’s
perception of ATM service quality. McAndrews (2023) identified that secure and convenient
location, adequate number of ATM, user-friendly system and functionality of ATM play
important role in customer’s satisfaction. Singh (2022) identified the variables as; location of
ATM/proximity to your residence/office, availability of cash, time to process request,number of
ATMs in locality, response to the query, availability of desired forms, availability of cheque drop
boxes, queues at ATM/time required doing a transaction, printed statement of transaction, cash
deposit facility, availability of networked (shared) ATMs and fee charged for using other bank’s
ATMs.

Service quality can contribute to customer satisfaction. However, Karim and Oyefolahan (2020)
showed that service quality and customer satisfaction are through independent, but are closely
related. An increase in one is likely to lead to an increase in another. These authors also
mentioned that delivery of the service, physical dimensions, staff interaction with customers, and

6
trustworthy processes and procedures positively affect the quality of services in any business. In
another research conducted on a sample of 1000 retail banking customers and found that
customer satisfaction plays the role of a mediator between service quality and customer loyalty
(Caruana, 2020). Furthermore, it shows that all the service quality Attributes are positively
related to customer satisfaction and customer satisfaction is positively related to customer loyalty
(Siddiqi, 2022). There are two basic concepts at the bottom of customer satisfaction surveys: the
expectations, which represent what customers expect from the service, and the perceptions,
which represent what customer receive. Expectations are evaluated by the customers through the
indication of a level of importance; perceptions, instead, are evaluated by a judgment of
satisfaction.

Many researchers have observed that satisfaction is a sense of feeling which comes from a
procedure of interpreting and judging what is received as a result of expectation as an inclusion
of wishes and requirements coupled with the purchase and purchase choice (Bharwana, Bashir,
&Mohsin, 2024). Customer satisfaction plays a major role in customer loyalty, but it does not
always guarantee customer loyalty. Therefore, the business should focus on enhancing customer
perceptions of service quality, satisfaction, perceived value, and corporate image (Hua,
Kandampully, & Juwaheer, 2024). Customer satisfaction is an outcome of a matching between
customer’s expectation about the product (value and quality) itself and services they received
from the businesses under the friendly surrounding business facilities and environment.

5.2 Review of Previous Studies

Sharma, Mittal & Bagga (2019) carried out a research on customer satisfaction on ATM
machine. The aim of this study is to investigate the degree to which ATM services have
promoted customer satisfaction. Analytical design was applied in the research. The diversity and
number of computer users has increased rapidly. The users include administrative assistants,
salesmen, insurance adjusters, health care workers, teachers, home makers, engineers,
accountants, and managers. Majority of these users are engaged in tasks that rapidly vary on a
daily, monthly, and yearly basis. Consequently, the software needs of computer users are
frequently change, complex, and diverse. This trend suggests that professional software
developers are unlikely to meet all the needs of the users on a direct basis, attributed to slow

7
development processes and limited domain knowledge. This trend has prompted the emergence
of ATM approaches that seek to solve the problem.

Goet (2020) intended to examine the relationship between reasonability of fee charged, choice of
ATM, usage of service and post purchase behavior and customer satisfaction. The research has
used primary sources of data. A well-structured questionnaire was designed to collect data from
200 respondents using purposive sampling technique. The data was analyzed using correlation.
The findings revealed that there was a positive and significant relationship between reasonability
of fee charged, choice of ATM, usage of service and post purchase behavior and customer
satisfaction. The research is a fresh study in the field of banking sector in Nepalese context.
There is an implication of research in the banking sector.

Similarly, Octaviani, Zulfahmi and Paratiwi (2020) determine the quality of ATM care services
to the satisfaction of customers who use ATM maintenance services. and determine the service
model for ATM maintenance services that can provide satisfaction to customers. The research
method uses quantitative and descriptive analysis. Quantitative analysis is a process of finding
knowledge that uses data in the form of numbers as a tool to analyze information about what you
want to know and descriptive analysis is an analysis carried out to assess the characteristics of a
data. Research variables are service quality and level of satisfaction of customers who use ATM
maintenance services. Methods of collecting data using primary data obtained directly by
distributing questionnaires to a number of respondents, namely banks - ATM maintenance
service users. Data analysis uses multiple linear regression analysis. From the calculation results,
the correlation between service quality and customer satisfaction is 0.825. While for the
relationship between service quality variables with significant customer satisfaction or cannot be
seen from the probability number (sig) of 0.00 which is smaller than 0.05. The provision says if
the probability number is 0.05 then there is a significant relationship between the two verbs.

Itani (2021) examined the factors affecting customer satisfaction from ATM service variables
namely reasonability of fee charged, frequency of problem faced, choice of ATM, usage of
services and post purchase behavior in the context of Nepalese commercial banks. The study is
based on the primary source of data. The main source of primary data is the structured

8
questionnaire and the study was carried out in Kathmandu valley by distributing 220
questionnaires through field survey. Of them, 184 respondent’s opinions have been used as
major source for the study of factors affecting customer satisfaction from ATM services in
Nepalese commercial banks. 5 commercial banks were selected out of 27 private sector
commercial banks. Different statistical tools like mean, standard deviation, correlation analysis
and regression analysis are used for the primary data analysis. The study reveals that the factors
from ATM services greatly influence customer satisfaction level in Nepalese commercial banks.

The result indicates that the reasonability of fee charged as the most important factor affecting
customer satisfaction level from ATM service in Nepalese commercial banks while cash
withdrawal is the most useful ATM services provided by the Nepalese commercial banks.
Likewise, machine out of order the most frequently faced problem in Nepalese commercial
banks. The study further showed that ATM users found limit on daily withdrawal as
inconveniency while using ATM and also found that it was costly to withdraw from another
bank ATM outlets in Nepalese commercial banks. The study also reveals that the reasonability of
fee charged, choice of ATM, usage of services and post purchase behavior factors from ATM
services have positive and significant relationship with customer satisfaction in Nepalese
commercial banks.

Alexis and Chen (2022) revealed that ATM as one type of Electronic banking systems have
become a strategic technology in the banking sector by delivering banking products/services and
are expected to offer competitive advantages to banks investing in ATM technology over those
that do not. In Rwanda, the cash-based system is now gradually being replaced by the card-based
system and this requires banks to improve ATM service quality to satisfy customers. The aim of
this paper was to conduct empirical evidence from ATM card holders of five selected
commercial banks in Rwanda to analyze the relationship between ATM service quality and
customer satisfaction. To achieve this objective, a structured questionnaire was used to collect
primary data of 250 ATM users in five commercial banks from Kigali, capital city of Rwanda
(Bank of Kigali, Cogebanque, Equity Bank, Banque Populaire du Rwanda Limited and
Ecobank). The questionnaire consists mainly of 32 constructs observed under seven ATM
service quality dimensions (Reliability, Responsiveness, Assurance, Empathy, Tangibles, ease of

9
use and Convenience) and a five-point rating scale was adopted as the scale for the statements
formulated in the questionnaire. Findings showed that 70.8% of respondents were under or equal
to 35 years old which presents a range of youths in Rwanda. From the results, 70% of
respondents claimed that they have never been educated on utilization of ATMs. Using SPSS,
customer satisfaction has shown a strong correlation with all seven ATM service quality. The
multiple regression results identified ease of use as the most important dimension on customer
satisfaction and it was followed by convenience, empathy and Tangibles. Therefore, it is
suggested that banks could improve their customer satisfaction ratings by educating customers to
use ATM and not forget other important improvements in automated teller machine banking
services.

5.3 Research Gap

The study has been conducted by many researchers but customer satisfaction is also related to
profitability of bank. Not only bank service, image or location that influences customer to select
the bank but financial indicators also helps to attract them. If bank is in good position and
earning good profit that it is beneficial to customers who are shareholders of company or are
involved with bank. These people were also benefitted because they were get some portion from
bank. This research has been carried out taking security, reliability, convenience, price and
responsiveness as an independent variable to measure the effect on customers satisfaction on
ATM service. However, there are various studies found on ATM service and customer
satisfaction but these studies could not cover these variables which are covered in this study.
Similarly, this study has covered Kathmandu valley. There are no any research found in
Kathmandu valley. Hence, this research has tried to fulfill the research. Thus, the study was
fulfilling the gap that considers financial aspects as well.

6. Research Methodology
Research methodology provides a basic framework for conducting the study in order to attain the
predetermined objectives of the study. A study on automated teller machine service quality and
customer satisfaction in Nepali banks where researcher conduct research on different bank's
ATM card users in Nepal. The researcher identifies that the quality service effect on customer
satisfaction. The population of the study includes the male and female ATM card users.

10
The study follows descriptive research design considering its aims of describing the relationship
between various factors of ATM services and customer satisfaction. Descriptive research aims at
accurately and systematically describing a population, situation or phenomenon.

Data were collected using convenience sampling method. Questionnaires were distributed at
ATM center with selected three hundred (300) respondents by the researcher. Demographic
characteristics and their experience about ATM service quality were collected through a
structured questionnaire.

6.1 Research Design

The research measured the effect of ATM service quality on customer satisfaction in Kathmandu
valley. This study has followed descriptive research design since the findings of the research
have been carried out by quantitative analysis and based on primary survey. The data has been
collected by formulating a set of questionnaire and distributing it to the respondents who are
taking facilities of bank and have transaction with bank. Descriptive analysis has used to explain
the demographic characteristics and satisfaction level of respondents. Correlations and multiple
linear regression analysis were used to test the hypothesis. For testing reliability of questionnaire
Cronbach’s alpha was used. Normally, measurements with Cronbach’s alpha higher than 0.6 is
used.

The findings and results was being completely based on the data and facts provided by the
sampled respondents. The primary data is collected from the sample size of 300 respondents. The
research design of the study is analytical and descriptive. The descriptive and inferential analysis
of quantitative data is conducted and presented in a tabular form using various statistical tools
like correlation, ANOVA, Regression and so on. SPSS and Microsoft Excel have been used to
analyze and interpret data. The reliability of the data has been analyzed by using Cronbach's
Alpha technique.

6.2 Population and Sample Size

Population refers to the total unit of study. In this research, population total ATM card users in

11
Kathmandu are taken as population which are 98, 55,221 ATM card users (NRB report as on
Mid-January, 2023). It is almost impossible to address the total population of the study. Hence,
for this study a total sample size of 300 ATM card users were taken. These respondents were
selected by using convenience sampling methods. The respondents were having account in
commercial banks.

The population of ATM card users in Kathmandu are 98, 55, 221 ATM card users (NRB report
as on Mid-January, 2023). To determine the sample size, Slovene’s Formula has been used.

6.3 Data Collection Procedure

The primary data for the study was collected from the 300 customers from 26 commercial banks
of Nepal. The relevant questionnaire was distributed among the respondents to collect the data.
The questionnaire was close-ended i.e. it was restricting the respondents within the alternatives
given. The Research was both self and research administered in self- administered, the
questionnaire was given to the respondents to be filled by them and in researcher administer, the
questionnaire was delivered to every respondent personally and dealt with every query of
respondents.

7. Limitations of the Study

Since the research is done for the academic purpose and had to be completed within a given time
frame, the major limitations encountered while conducting this study were time constraints and
unavailability of few data. Following were the additional limitations of this study:
1. There are many other financial and economic factors that may affects customer
satisfaction but research only considers few.
2. This research is based on primary data so the respondent's biasness might result in the
survey.
3. The sample is limited to Kathmandu Valley only, so result cannot be generalized.

8. Organization of the Study

The report on the study ATM Service and Customer Satisfaction as per the requirement of the
thesis for Bachelor of Business Studies (BBS) 4th year programme. The study has three pillar

12
supported by five years of data. Each chapter centers of specific objectives. They are as follows:

Chapter – I: Introduction
This chapter describes the background of the study, Statement of the problem, Objectives of the
study, Significance of the study, literature review and research methodology, limitations of the
study and Organization of the Study.

Chapter – II: Results and Analysis

This chapter analyses the data related with study and presents the findings of the study and also
command briefly on them. Data processing, data analysis and interpretation are given in this
chapter and there is use of diagram.

Chapter – III: Summary and Conclusions

This chapter is devoted to the conclusions of the research, conclusion derived on the basis of data
analyzed.

13