Automated Teller Machine System and Service Quality in Commercial Banks in Kigali, Rwanda

ABSTRACT The unreliable quality of services is greatly affecting the performance of commercial banks in Rwanda. Complaints by customers of delays in cheques between banks, time wastage in long queues, errors as a result of manual work and fraudulent cases have been common in 2014 and 2015. The poor service quality saw several commercial banks in Rwanda embracing the technology of Automated Teller Machine (ATMs), however, several of them have reported poor service delivery. The purpose of this study was to determine the relationship between ATM System and service quality of in commercial banks in Kigali, Rwanda. The objectives that guided the study included: i) to examine the effect of actual ease of use of ATM System on the service quality of commercial Banks in Kigali; ii) to determine the effect of transaction cost of ATM System on the service quality of commercial banks in Kigali; and iii) to determine the effect of security of ATM System on the service quality of commercial banks in Kigali. This study employed descriptive cross sectional design. This study’s target population included 10,781 bank customers and 11 bank managers. The sample size of 288 was determined using Cochran (1963) formula. The actual participation was 239 representing 83%. Questionnaires and interviews were the two main data collection instruments used. Quantitative data was analyzed using descriptive statistics and inferential statistics, while qualitative data was analyzed using manual coding. The results of the study indicated that actual ease of use of the ATM system significantly and positively affect the service quality of the commercial banks by a variance of 27.8% (R2=0.278, p=0.000). The study found out that transaction cost significantly and positively affected the service quality of the commercial banks by a variance of 24.4% (R2=0.244, p=0.000). The study revealed that security services of the ATM system significantly and positively affect service quality by a variance of 33.2% (R2=0.332, p=0.000). The study concluded that ATM system is a prerequisite for service quality among commercial banks. The study made the following recommendations among others: the management of commercial banks should ensure that they install ATM systems that are easy to use by incorporating both audio and graphical guidelines in the local languages on how to do transaction using the ATM system; the government should ensure that all commercial banks charge the same rates for depositing, and withdrawing money from the ATM system at any time and any amount of money; the management of commercial banks should ensure that they invest in the latest technology since ATM fraud is becoming a global problem and needs frequent upgrade of the system to remain relevant in the market. This study adds to the body of new knowledge using actual ease of use, transaction cost, and service security as predictors of service quality in the banking sector. The study found that both actual ease of use and service security of ATM systems are significant predictors of service quality except transaction cost. 

TABLE OF CONTENTS

DECLARATION .......................................................................................................................................... ii

APPROVAL ................................................................................................................................................ iii

DEDICATION............................................................................................................................................. iv

ACKNOWLEDGEMENT ............................................................................................................................ v

LIST OF ABBREVIATION........................................................................................................................ vi

LIST OF TABLES........................................................................................................................................ x

ABSTRACT................................................................................................................................................. xi

CHAPTER ONE...........................................................................................................................................1

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

1.1 Background to the Study.........................................................................................................................1

1.1.1 Historical Perspective ..........................................................................................................................1

1.1.2 Theoretical Perspective ........................................................................................................................2

1.1.3 Conceptual Perspective ........................................................................................................................4

1.1.4 Contextual Perspective.........................................................................................................................4

1.2 Statement of the Problem........................................................................................................................5

1.3 Purpose of the Study ...............................................................................................................................5

1.4 Objectives of the Study...........................................................................................................................6

1.5 Research Questions.................................................................................................................................6

1.6 Scope.......................................................................................................................................................6

1.6.1 Geographical Scope .............................................................................................................................6

1.6.2 Content Scope ......................................................................................................................................7

1.6.3 Time Scope ..........................................................................................................................................7

1.7 Significance of the Study ........................................................................................................................7

1.8 Operational Definition of Terms.............................................................................................................8

CHAPTER TWO ..........................................................................................................................................9

LITERATURE REVIEW .............................................................................................................................9

2.0 Introduction.............................................................................................................................................9

2.1 Theoretical Review.................................................................................................................................9

2.1.1 SERVQUAL Model.............................................................................................................................9

2.1.2 The Theory of Assimilation ...............................................................................................................11

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2.1.3 Transaction Cost Theory....................................................................................................................12

2.2 Conceptual Review...............................................................................................................................13

2.3 Review of Related Literature ................................................................................................................13

2.3.1 ATM System......................................................................................................................................13

2.3.2.1 Actual Ease of Use..........................................................................................................................15

2.3.2.2 Transaction Cost .............................................................................................................................16

2.3.2.3 Service Security ..............................................................................................................................16

2.3.2 Service Quality...................................................................................................................................17

2.3.2.1 Tangibles.........................................................................................................................................19

2.3.2.2 Reliability........................................................................................................................................20

2.3.2.3 Assurance........................................................................................................................................21

2.3.2.4 Responsiveness...............................................................................................................................21

2.3.3 Empirical Review...............................................................................................................................21

2.4 Research Gaps.......................................................................................................................................26

CHAPTER THREE ....................................................................................................................................27

METHODOLOGY .....................................................................................................................................27

3.1 Introduction...........................................................................................................................................27

3.2 Research Design....................................................................................................................................27

3.3 Study Population...................................................................................................................................28

3.4 Sample Size...........................................................................................................................................28

3.4.1 Response Rate....................................................................................................................................29

3.5 Sampling Procedure ..............................................................................................................................29

3.6 Data Source...........................................................................................................................................30

3.7 Data Collection Method........................................................................................................................30

3.7.1 Survey Method...................................................................................................................................30

3.7.2 Interview Method...............................................................................................................................30

3.8 Research Instruments............................................................................................................................30

3.8.1 Questionnaire .....................................................................................................................................30

3.8.2 Interview Guide .................................................................................................................................30

3.9 Validity and Reliability.........................................................................................................................31

3.9.1 Validity ..............................................................................................................................................31

3.9.2 Reliability...........................................................................................................................................32

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3.10 Data Collection Procedure ..................................................................................................................33

3.11 Techniques for Data Analysis.............................................................................................................34

3.12 Ethical Consideration..........................................................................................................................35

CHAPTER FOUR.......................................................................................................................................36

PRESENTATION OF FINDINGS, ANALYSIS AND INTERPRETATION...........................................36

4.1 Introduction...........................................................................................................................................36

4.2 Demographic Characteristics of the Respondents.................................................................................36

4.3 Automated Teller Machine System.......................................................................................................37

4.4 Service Quality of Selected Commercial Banks in Kigali, Rwanda .....................................................43

4.5 The Effect of Actual Ease of Use of ATM System on the Service Quality of Commercial Banks in 

Kigali ..........................................................................................................................................................48

4.6 The Effect of Transaction Cost of ATM System on the Service Quality of Commercial Banks in 

Kigali ..........................................................................................................................................................49

4.7 The Effect of Security of ATM System on the Service Quality of Commercial Banks in Kigali ........50

CHAPTER FIVE ........................................................................................................................................54

DISCUSSION OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ..................................54

5.1 Introductory Section..............................................................................................................................54

5.2 The Discussions of the Major Results...................................................................................................54

5.2.1 The Effect of Actual Ease of Use of ATM System on the Service Quality of Commercial Banks in 

Kigali ..........................................................................................................................................................54

5.2.2 The Effect of Transaction Cost of ATM System on the Service Quality of Commercial Banks in 

Kigali ..........................................................................................................................................................55

5.2.3 The Effect of Security of ATM System on the Service Quality of Commercial Banks in Kigali .....56

5.3 Conclusions...........................................................................................................................................57

5.4 Recommendations.................................................................................................................................58

5.5 Contribution to New Knowledge ..........................................................................................................59

5.6 Limitation of the Study .........................................................................................................................60

5.7 Areas for Future Studies .......................................................................................................................60

Reference ....................................................................................................................................................61

APPENDIX I: CUSTOMER QUESTIONNAIRES ...................................................................................72

APPENDIX II: KEY INFORMANT INTERVIEWS.................................................................................75