The Impact,Advantages of Using Automated Teller Machine (ATM) in Nigeria Banking Industry

 The Impact,Advantages of Using Automated Teller Machine (ATM) in Nigeria Banking Industry

The business of banking is basically about efficient service delivery. Consequently, the introduction of facilities that enhance the delivery of banking services in a cost-effective manner is always a welcome development. This is what information technology (IT) is all about. As competition in the market place increase, and several modes of delivery for banking products and services, automated teller machine (ATM) has become an important issue, not only in retaining customers but also gaining a competitive advantage while maintaining and growing overall profitability.

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The introduction and implementation of new technologies in the Nigerian economy has always been known to come along various degrees of difficulties. Hence the introduction of the (ATM) in the banking sector of the economy could not have been an entirely different situation.
ATM like other technologies usually comes along with some limiting factors and individual problems. Despite these problems, it is universally agreed that the benefits derived from electronic payment cannot be over emphasized. Numerous studies have shown that electronic payment brings many benefits to users- convenience, security, record-keeping, low cost etc. Nigeria is largely a cash based economy with over 90% of funds residing outside the banking sector as against the developed world where the money in circulation is 4% and 9% in the UK and US respectively. The cash based economy is characterized by the psychology to physically hold and touch cash: a culture informed by ignorance, illiteracy and lack of security consciousness and appreciation of merits digital payment.
Consequently, the study of the factors affecting the successful adoption of this technology coupled with the technological, contextual and implementation process is very necessary in order to achieve optimum use of the opportunities presented by this innovation. This seminar therefore discusses the prospects of combating the challenges of ATM in our Nigerian Banks.

In Nigeria, Automated Teller Machine technology is becoming more common than it ever was. ATMs appear to be mainly provided by banks in Nigeria (Fasan, 2007). Yet, their widespread adoption by customers of banks is not clear, as it appears that peoples’ perception of the technology is diverse, which in turn affects their decision to actually use ATMs or not. ATMs are set up to provide 24 hour services to bank customers, who cannot expect to be able to transact with banks in the same period of time (Ugwu, 2008). Nevertheless, it is observed that banks still have many customers transacting with tellers within their doors, and queues are still not a thing of the past inside banks. It is consequently, important to discover why this is so, because as a technology, ATMs are supposed to make life easier and more efficient for the customers of banks.

The purpose of this research is to highlight the impacts, advantages of using Automated Teller Machine in our banking industry than in the use manual system of queuing in line to be served.

The main aim of this research is to highlight the issues that make people have phobia for this innovation and to show the advantages that abound in the use of this technology.

The exercise sought to provide insights into;
• The awareness of ATM
• Reasons for using ATM
• Level of usage
• Problems associated with usage
• Service demand for ATMs in terms of functions and features

The study is centered around the challenges and the issues that make people to be wary of the use of ATM. It covers the level of usage of ATM by the Nigerian Populace and the problems they encounter.

 The Emergence of Automated Teller Machine (ATM)

ATM or Cash points, first introduced in 1961 by City Bank of New York on a trial basis, allowed financial institutions provide their customers with a convenient way, round the clock, to carry out varying transactions which included withdrawal of funds, made deposits, check account balance, and later on included features to allow customers pay bills, etc. There was no need for a cashier to be present or for a customer to physically visit the financial institutions premises to carry out such transactions. (Amel, D. F., 1986).
ATM technology allows customers carry out the above-mentioned transactions using an ATM card, which could be a debit or a credit card. An ATM machine authenticates the card by reading and verifying the magnetic strip, card number, expiration date, and an already provided or pre-selected PIN number. Like with most technological advances, there is always a flaw which criminal-minded individuals identify and exploit to perpetuate fraud. Technology is being constantly evolved so that ATM transactions can be an enjoyable experience to its customers, especially if one has to pay for goods or services in cash by 1.00am in the morning and has no money. (Batiz-Lazo, B., & Barrie, A. 2005)

The Nigerian Experience

In Nigeria, the ATM was introduced in 1989 by the defunct Societe Generale Bank. Since then, ATMs appear to have spread their tentacles across Nigeria. The banking industry no doubt has witnessed advancement in technology just like any other sector; the use of the automated teller machine is one of these as it affects banking operations entirely. With the adoption of Self Service technology by the banks, ATMs have continued to service the populace; they offer convenience to customers and provide banking services well beyond the traditional service period. It therefore encourages a cashless society. Thus, eliminating the risk of loss of cash through theft or fire as witnessed in the past, creating a win-win scenario for parties concerned. (Karahanna, et al, 1999)
At inception, the few banks that had these machines restricted customers to accessing the machines from their banks alone. This cannot be said today, as technology solutions have been made available to the banks to enable users make withdrawals from ATMs of other banks. However, the usage of ATM in Nigeria is just advancing beyond withdrawals, checking of account balance and purchase of airtime, despite the craving for its multifunctional services (pay bills or make utility/tax payments, calls, stock transaction, purchasing tickets etc); these modern services are not popular among users as justified by the findings of this research. Some of the challenges encountered among others are:

ATM Fraud, Bank Charges on the use of ATM, Ease of use of ATM

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ATM Fraud

There are many different categories of ATM fraud. In general ATM fraud can include any deliberate ‘criminal’ technique which involves the use of an ATM to obtain something of value to the perpetrator. The most common types of ATM fraud include  Card Theft (e.g. Lebanese Loop) , PIN Compromise (e.g. Shoulder Surfing), Card Skimming, Cash Trapping, Transaction Reversal and Deposit Fraud. (Kennickell, et al. 1997).

Card Theft

Card theft is where the perpetrator physically obtains the consumer’s card at or in the vicinity of an ATM. The most common method of card theft is Card Trapping. The most popular method of trapping a card at the ATM is known as Lebanese Loop. (Freedman, D. A. 2005). A Lebanese Loop is designed to be entered within the card entry slot of the ATM card reader in such a way as it does not prevent the consumer from entering their card, but it does prevent the ATM card reader from ejecting or returning the card to the consumer. The perpetrator can subsequently remove the trapped card once the consumer has departed from the ATM with the belief that the ATM has captured or swallowed their card. Another variant of card trapping is known as the Algerian V trap. Other methods of card theft include card swapping where the consumer’s card is exchanged for a card of similar appearance. This distraction method is often executed at the time that the consumer’s card is being returned or ejected to the consumer following a transaction at the ATM.

PIN Compromise

PIN compromise methods range from the very technically sophisticated to the relatively easy technique known as shoulder surfing. Shoulder surfing involves the perpetrator standing close enough to the consumer to observe the numbers entered on the key pad. A more sophisticated method of observation or surveillance involves the use of a miniature camera which can either transmit the image of the PIN being entered or store the recording within the device. With the increase in the number of mobile phones with video capture capabilities, such phones are adapted to compromise PINs. Keyboard overlays are devices which are designed to look very like the genuine ATM key pad and are fixed on top of the genuine key pad. The Keyboard Overlay will record the numbers entered on the key pad but also permit the genuine keyboard to accept the PIN being entered. Similarly to the use of cameras, the keyboard overlay may transmit the information to a remote receiver or store the information locally. Sophisticated ATM Infrastructure Hacking, Architecture Hacking, Network Hacking, Social Engineering, Phishing and various other methods are also used to compromise PIN codes. (Freedman, D. A. 2005).

Card Skimming

Card skimming involves making a copy of the information encoded on the magnetic stripe of the card. There are various different types of skimming device designed to be used in different environments, from hand held devices through door access skimmers to miniature card entry slot skimmers. Hand held skimming devices are more commonly associated with card skimming in restaurants and other retail establishments. When used in the ATM environment the perpetrator will either use distraction techniques to temporarily obtain and copy the consumer’s card or sometimes pick the pocket of the consumer. Some ATMs are installed in a controlled environment whereby the consumer is required to swipe a card at the door of the ATM location to gain access. Skimming devices may be attached to or used as a replacement for a genuine door access device. ATM card entry slot skimmers have various shapes and sizes and also vary in sophistication. (Davis, F.1989). When installed correctly they allow normal operation of the ATM in that the consumer’s card is entered and returned correctly, however the magnetic stripe is copied by the skimming device. One of the most effective ATM skimming devices is known as the Sofia skimmer. The skills of the perpetrators in modifying the packaging of skimming devices makes them very difficult for the untrained observer to detect.

Cash Trapping

Cash trapping is the term used to describe attacks where the consumer’s cash is trapped and prevented from being presented or delivered to the consumer. The variety of trapping devices is significant, ranging from those which require insertion within the ATM’s cash dispenser through false fronts to well engineered electro-mechanical devices which simulate the removal of the cash by the consumer.
Transaction Reversal

Transaction reversal techniques involve highly skilled manipulation of the ATM during a transaction with the result that the host computer believes that the consumer did not receive their cash and thus re-credits or reverses the transaction. Other variants of transaction reversal involve either collusion with someone within the ATM network or detailed knowledge of the rules governing transaction processing. (Hardgrave, B. 2003)

The Existing System Prior to Proliferation of ATM in Nigerian Banks

The advance of ATM has changed the way people transact and relate with their banks, prior to this period collection of money from bank is an ordeal that one has endure, as the process is very stressful, time consuming, error prone, and highly inconvenience. After four o,clock in the day one cannot collect any money from ones account again. This led to carrying cash around in case of emergency, but with introduction Automated Teller Machine one can comfortably stroll to any ATM by in the night and collect whatever money he/she needs.
A field survey carried out by the researcher among various account owners revealed some interesting patterns. This report has been structured in three sections: the Non-User, the User and the General section, for the purpose of adequately capturing the peculiar issues involved here.

Method of Information Gathering

The techniques used for information gathering in this research work are as shown below:
i.    Questionnaires: this is a technique used in data collection, which involves the formulation of questions that the recipient will be able to answer without asking others. They are mostly used where there is a large number of people from whom the analyst requires information. The questionnaire was distributed among the various users, non users of ATM.
ii.    Interviewing: This technique is used for collection of data verification of data collected from other sources and also for encouraging the user to participate in the development of the new system. One of the most important reasons why interviewing is preferred in most cases is that it gives the analyst the opportunity to follow up certain answers.
iii.    Observation: This is the least commonly used technique, this is because it is time consuming. It involves close study of the existing system in a bid to find out ways of improving it, thus it was deployed and the reactions of the various users of the medium noted.
iv.    Internet: Resources were gathered from internet concerning the works done by other researchers and their suggestions for further improvement were examined and used where and when necessary.

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Research  Findings

The use of ATM is widely accepted by the populace as indicated by the result gotten from our respondents. Though only 39% of respondents use this service, over 80% of them were interested in using this service. However, there is a sample bias to leverage the survey on non users to further understand their unique peculiarities.
Further results show that:
Word of mouth spread the message of ATM services fastest (53.6%). This shows that a higher percentage of respondents got ATM service sensitization through referrals, inferring that concentration should be made on improvement of service provision by providers; seeing that the satisfaction of its users is a vital tool for its sensitization, acceptance, growth and usage.
A large percentage of respondents are willing to use ATM services (73.3%), stating their major reason to be convenience in banking. This is a pointer that more people will use ATMs if a maximum level of continuous convenience is guaranteed by providers. With a larger percentage of respondents’ willingness to use ATM services, it is apparent that this group of people need to be educated on how it works to enable them have a full grasp of the benefits they stand to enjoy with using ATMs.
26.7% of respondents would not want to use ATMs for reasons such as; service failure and charges attached to its usage (10%). A small percentage of respondents are not using it because they do not know what it is or how it works (3.4%), while 13.3% claim to be traditionalist in nature and thus not interested. With massive sensitization campaigns by the banks for all levels, this issue of ignorance in the use of ATMs will be addressed.
A handicap to the usage of ATMs is the locations of this services as quite a number of respondents(users) ascribed their not frequenting this service centres to the non availability of ATM Machines in their areas of abode, claiming that they only find them at commercially busy areas. To this effect, it is pertinent that ATMs should be stationed at residential areas for its easy access which would enhance convenient withdrawal of cash; the primary reason for its usage.
The majority of non users of this device show a willingness to use the ATM service, and this includes those that have never heard of it. There is a ray of hope here as this shows that something can be done to incorporate the non users of ATMs into Its usage; with an addressable market of over 72%.
It is also noteworthy that they all agreed (unanimously) that they were being swayed to the usage of ATMs for various reasons; as highlighted below. Of note also are the reasons given by those not interested in its usage.

Reasons for the Interest in ATM.

Over 70% of non users claim they would like to use ATM for its convenience.9% see it as a safe way to carry money around. 6.8% find it adventurous while the same percentage says it’s fashionable for use. And about 4% say they would only use it because their friends use it. Only about 2% say it’s hygienic and faster.
Of those not wanting to use ATM, About 43% said they were simply not interested. About 6% are just traditionalistic and thus not readily open to change. While the opinions of the rest fell within; fear of service failure (18%), high bank tariff rates(18%), not trusting the quality of such a service, not knowing what it is all about (6%), not knowing how it works (6%)
As there may appear to be different shades of opinion in the two graphs above it is obvious that people are willing to use ATM the more if they can be convinced of the convenient nature of ATMs, the cost effectiveness of ATMs – which would involve its service efficiency, what it’s all about and how it works.
 Reasons for using ATM

The need to have cash as-at-when-due sees over 75% of our respondents making use of the ATM machine for this single purpose. About 13% use this machine just to avoid the discomfort of a crowdy banking hall. A little over 6% of our respondents use this machine simply for weekend banking while 3% claimed that their company policies compelled them into the usage of ATMs. Consequently, the need for easy access to cash in an emergency or unforeseen situation especially in an African society like ours where relatives breeze in unannounced, amongst other reasons makes the use of ATM a must in the Nigerian society. Thus precipitating the need for the machine to be made available in strategic places where it can be maximized as is presently not the case.

 Reasons for Shunning ATM

For respondents who once stopped using ATM and picked it up again, their reasons stand as primarily; unreliable services (40%), while poor locations of ATMs, missing card and high cost of charge rates share 20% a-piece. This chart drives home the fact that though it is important to seek new clientele in the usage of ATM, equally important is the maintenance of the clientele already gotten as their satisfaction and opinion is crucial for company growth and acceptance.

The findings showed that attitudinal dispositions significantly influence the use of ATM. All the attitudinal constructs have strong influences on adoption and intention to use ATM. From the Analysis for the Relative Advantage construct, it was evident that the respondents believed that the information concerning their use of ATMs was secure, and their using ATM was safe. This supported Sheth’s (1981) proposition that lowered perceived risk increases the likelihood of consumer adoption. Also, the use of ATMs appeared to be convenient compared with using the teller in the banking hall. Complexity also has significant relationship with intention to use ATM. This result corroborates the findings of Cheung et al. (2000). Findings in relation to the complexity construct revealed that ATMs were quite simple to use, and were efficient (at least relative to transacting with a human cashier). According to Rogers (1995) the harder an innovation is to use, or perceived to use, the less likely that an adopter would use it. Therefore, as ATMs seemed to be easy to use, it means their use would be more widely adopted in the nearest future. This finding suggests that easy to use technologies should be put in place by banks in order to enhance usage. Compatibility is another factor that influences attitude and intention to use ATM. Given that individuals have already established personal banking norms, lifestyle, finance management system, and account monitoring mechanism prior to the advent of ATM, their acceptance or rejection of the technology will rely greatly on the extent to which it accommodates or rejects all or some of these past values. Previous studies have shown that some people have phobia for change, and will avoid change if they can. This might explain why more compatible ATM would be needed to be adopted by banks. Analysis for compatibility revealed that the use of ATM was compatible with the lifestyle of the respondents. It was also revealed that ATM’s use is widespread today not solely because of its usefulness but because of its compatibility with users’ previous values and its being a current practice. This supports previous studies that modern systems accept and adapt to innovation faster and easier than traditional systems (Blackwell et al., 1995). Hence, there was the possibility that there were those who would use ATM to be part of the trend.
In addition, the impression that there was privacy while using an ATM was not very strong, probably because ATMs were situated in public places (such as outside banking halls), and most ATMs were not enclosed in such a way that the user was alone with the ATM while transacting. Sometimes, there were long queues, or two or three people crowding close to someone using an ATM. This finding suggests that there was a need for privacy to be included in the provision of better ATM services by banks. This could also help in boosting security of private information concerning ATM use, such as pin numbers. In addition, it was not strongly felt that all the transactions with ATMs were all good experiences, which meant that at one time or the other, an adopter might experience a fault with the use of an ATM. It was not strongly felt that withdrawing from an ATM was less safe than withdrawing from a bank teller. This was probably due to the fact that after withdrawal of money, whether from an ATM or bank teller, it was possible for crime to be committed against the user after he/she had left the scene. This did not appear to stop the respondents from believing in the security of their ATM information such as pin numbers, passwords, etc, which is one of the strong reasons why ATMs are patronized today.
Findings on the Observability construct showed that the observations made by the respondents effectively convinced them to use ATMs which corroborate the theoretical underpinnings of the social learning theory that people learn from others by observing them (Rogers, 2003). Influence was apparently a factor for using ATM probably because users are likely to encourage others to do the same (Weiss, 1969; Shao, 2007). Another construct that influenced attitude supported in this study is trialability. Thus, potential ATM adopters will be more inclined to use it if they can try it out first. The Trialability construct only loaded into one factor. It showed that ATMs were tested or tried out usually before steady usage. Trying out ATM before conscious adoption and eventual use was more likely to inspire confidence in using it. This was significant because ATMs were located in public places, and a user might not want to appear in public as a novice while using it. Studies have shown that most people will not adopt an innovation without first personally testing it to see if it could fit into their needs and desires (Rogers, 1995).

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The nature of this survey is one that lends itself to a world of very interesting inferences, but due to the limitations by the sample size, the quest to satisfy this need to know more and further understand the usage patterns of ATMs and its influence on companies and the society in general is not fully assuaged, further underlining the need for a larger more effective sample size. Some of such inferences that cannot be made here are:
• The ratio of users to non user within account holders.
• The most patronized Bank on the usage of ATMs and why.
• The number of ATMs available nationwide and to what ratio it is distributed; to mention but a few.
Having said this, it is noteworthy that some very helpful deductions were made from this research survey such as:
• Awareness of and willingness to use ATM services
• Sources of awareness
• Reasons for using ATM
• Reasons users stop using ATMs; to mention but a few
In all, it is necessary to create awareness of ‘ATM’ in terms of literacy campaigns on its usage. Exposing the appealing nature of ATMs to the users, non users and non bankers alike would infuse an interest in banking that was hitherto unimagined. We look forward therefore to carrying out a more comprehensive survey on the use of ATMs and related issues in Nigeria.


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  1. ATM businesses always has a good scope in developing nations. The use of ATM will depend on the increase in standard of living of people and Globalization of that area. However, ATM threats are less encountered in developing countries.

  2. davies sanusi says:

    pls i will like to know where to learn on how to repair automated teller machines in nigeria.


    Am a research student
    My topic is

    I would like to know
    >the extent to which E-banking reduce costs
    >the extent to which the use of ATM affect service delivery
    >the relationship between the use of ATM and profitability of financial institutions


    Relevant reference books

  5. please i want the article on this page.


    i would like to know the types of layout we hav

  7. ATM services important in every human

  8. Please,I want to know how d automated teller machine is installed


    pls I what know were to studies ATM software programming

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