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1.1 Background of the Study

Information and communication technology (ICT) has increasingly stimulated expansion of the banking networks and range of the offered services during recent years. All banking services, such as electronic payments, loans, deposits, or securities have become heavily dependable on information and telecommunication technology Adewoye, (2013). This is the main reason why banks are the biggest users of modern technology equipment. Due to the complexity of banking services, every opportunity to speed up their performance or to make them more accessible for customers is very well welcomed by banks. However with improvements of the quality of services, the important question appears if this process can provide the economic values for banks? Unfortunately not every increase in the customers’ satisfaction transfers into the higher bank profits, especially in the case of very expensive investments in technology like automated teller machines (ATMs). Although every banking operation requires some technology applications, researchers vary on the subject of the relationship between the level of employed automated teller machines, and the value of the banking efficiency increase see for example, Adeniran (2014). All researchers agree on the importance of ATMs for the further developments of the banking industry, but some of them have found lack of proportionality between the increase in the scale of technology utilization and the increase in banks profitability. Okoro (2014), for example, concludes that the automated teller machine (ATM), Point of Sale (PoS) terminals and Internet services are the major instruments used by the customers of the deposit money banks in Nigeria. Following the introduction of electronic banking and internet automated teller machines (ATMs) which are the initial cornerstones of electronic finance, the increased adoption and penetration of mobile banking and Internet banking has added a new distribution channel to retail banking: Internet/Online-banking.  Nigeria historically operated a cash-driven economy particularly in the consumer sector; however the economy has witnessed improvements over the years with the introduction electronic payment systems. This current state of sophistication in electronic banking system is comparable to other economies at the same level of development and has increased the move to cashless economy. The ATM payment system which, according to Oboh (2005), ATM was first introduced into the Nigerian financial service sector in the late 1980s by Societe Generel Bank, First Bank and Equity Bank has in no small measure enhanced the electronic payment system. In addition, the Central Bank of Nigeria (CBN) has recently engaged in series of reformations aimed at both making the Nigerian financial system formidable and enhancing the overall economic performance of Nigeria so as to place it on the right path in tune with global trends. One of the major reforms is the Cashless Policy. The cashless policy is a new policy on cash-based transactions which stipulates a ‘cash handling charge’ on daily cash withdrawals or cash deposits that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. The policy aims at reducing not eliminating the amount of physical cash circulating in the economy, and encouraging more electronic-based transactions in Nigeria (CBN 2012). The aim of this paper is to analyze the impact of ATM on banking services delivery in Nigeria. The study concentrates on the one stakeholder – the bank customer. The analysis will not only be useful to the depositors and the bankers in Nigeria, but also to banking system regulators and future researcher. The depositors for instance, will understand the impact of ATM transactions on deposits. The findings of this work will be useful to the commercial banks in Nigeria will be embodied in this project work, will assist them evaluate their investments in the Nigeria as well expose the dynamic interrelationship between various types of deposits and ATM transactions. It will also aid commercial banks in making policies relating to ATM transaction. The study will also be useful to the regulators to the banking system in Nigeria as it will help in formulation of e-banking policies in Nigeria. Academics will equally find this workshop paper useful as it will serve as reference material for future research.


The ATM (Automated Teller Machine) as it is called, is a computerized technological device built and programmed that is incapable of accepting in cheques (paper bills) and accurately paying (dispending) cash to customers, at the push of buttons with the right and acceptable commands.

This magic device called ATM is installed monitored and regulated by banks. Most ATM machines are installed within bank premises, while in some cases, they are strategically positioned in locations like supermarket, club houses, eatery houses and serve as means for customers to collect their money anytime, anywhere, any day, provided the link is available.

At the issuance of the ATM card, which is built with security features customers are advices to activate the card (change the pin) before use. It is at this point that the customer, for the first time replaces the initial pin that came with the card, to his/her so desired personal and confidential number of security purposes.

The Automated Teller Machine (ATM) is an unattached electronic machine in a public place connected to the data system and related equipment and activities by Bank customer to obtain cash withdrawals from other banks. The automated teller machine system which integrates all licensed banks into a net-work, thereby reducing or eliminating the limitations of traditional branch-based nature of banking and making the promised real-time-online concept of globalize banking reality.

Automated Teller Machine (ATM) is mechanical devices that can provide a variety of routine banking services without the aid of a human teller. ATMs are the most immediately visible type of retail banking technology. They play a key role in any retail bank-efforts to use technology as a quality weapon to defect competition.

The Automated Teller Machine was introduced into the Banking system to solve the problem associated with late night or Banking hour withdrawal of money. This facility plays a major role in offering convenience, speedy and round the clock services.

Barna and Mukgopadhyay (2002), with the advents of ATM, banks are able to serve customers outside the banking hall. It is operated by a plastic card which has some special features. The plastic card is replacing cheque, personal attendance of the customers, banking hour’s restrictions, and paper based verification. ATM has made hard cash just seconds away all through the day. While the specific services that ATMs can provide are determined by the institutions that own them and any applicable legal restriction, make ATMs typically allow customers to withdraw cash from their accounts, make balance inquires, magnetic-stripe card and personal identification number. Some banks have experimented with multifunction, ATM that allows users to pay bills and purchase certain items.

The post-consolidation era in the Nigerian banking sector has brought with it a proliferation of various and differentiated electronic features for doing business between a customer and a bank; ATMs represent the single largest investment in the electronic channel services for banks in Nigeria. In spite of this development, to some persons, the use to ATMs as a means of e-banking had remained elusive and confusing E-banking requires a certain literacy rate. Most Nigerians who have access to financial resources are not literate enough to be able to operate ATMs. It has also been argued that the criminal activities of scammers also make the use of ATMs unattractive to many Nigerians.


The challenges of automated teller machine facing Nigeria banking are multi-dimensional and the problems ranging from banking administration to fluctuation in the system and all these problems pose some perennial disturbances to the banking institutions.

To tackle problems of this nature, Nigerian banks have been adopting various strategies one of such strategies that has been adopted by the bank in recent time have been automated teller machine. This is done in order to ensure that easy access is created for valid customer to their money anytime, anywhere, any day, even while on their journey provided the link is available.

Despite the use of automated teller machine in the country by the banks there are about several constrain in the way of services imbalance inherent in the banking sector and the economy. Such imbalance include Network problems, loss of card, card-damage, unauthorized withdraws poor infrastructure and system failure, in the banking sectors, these and other related issue lead to the fundamental problems of this study.


This research work intends to assess the extent to which ATM banking activities affects bank performance, it specific objective includes;

1) To ascertain the impact of ATM banking on the performance of ATM transactions access and profit before tax

2) To ascertain the extent to which ATM banking can impact on the performance ATM volume and net income interest

3) To examine the impact of ATM on performance of commercial banks in Nigeria

4) To determine the benefits of the use of ATMs in Nigerian banks

5) To examine the challenges encountered in the use of ATMs in banks

6) To recommend ways of improving the services rendered by ATMs in commercial banks


The following research questions were asked in course of this study:

1)To what extent does ATM banking impact on the performance of ATM transactions access and profit before tax?

2)To what extent does ATM banking impact on the performance of ATM volume and net income?

 3)what is the impact of ATM on performance of commercial banks in Nigeria?

4)what art the benefits of the use of ATMs in Nigerian banks?

5)what are the challenges encountered in the use of ATMs in banks?

6)what are the ways of improving the services rendered by ATMs in commercial banks ?


For effective and meaningful deduction out of the questions raised these hypothesis has been formulated for testing.

Ho: There is no significant relationship between ATM transaction access and profit before tax

H1:       There is a significant relationship between ATM Transaction and profit before tax


The value of any study depends on its usefulness to the society. In view of this fact therefore, this study which focuses on the automated teller machine practicing and operation in the Nigerian banking institution is very useful to banking officers, management of the financial institution, business owners and working class individuals.

Apart from that, this study is useful generally in order to avoid working with bulk of money from place to place and to enable the central bank of Nigeria as an effective tool for its working of cashless policy in the system.

This study is of immeasurable importance to deposit money banks (DMRs) and to customers that don’t like to waste time in the bank or on the counter line-up for cashier as a result of cheques, another is that the amount charged for minimal per withdrawals on the counter. The ultimate significance of this study could be that the card affords the customer not to be carrying bulk cash around, like most business moguls transacting across state would lodge in cash in a particular bank, but could withdraw from any other place courtesy of inter-switch and inter banking services. Even weekends when banks are not transacting, the ATM services is always there to serve the customer 24 hours.


The study is concentrated on the impact of ATM banking on banks performance in Nigeria. The study covers deposit money banks in Nigeria from the period of 2006 to 2015. This period has been chosen because it was the period that actually witnessed major development in ICT investment in banks as indicated by the increased level of ATM deployment Fasan (2007).

Some limitation that may reduce its reliability and accuracy are already envisaged some of them are as follows:

Time is a major factor to the researcher as research of this kind requires enough time in gathering of data, but it was not given to carry out the research, distribution, collection and analysis of questionnaire.

Also, some banks hoard information from students who desire such information in other to maintain the banks secrecy thereby making it difficult for students to gather information for their research.

Finally, finance was infact the most limited factor, inspite of this, the researcher had to travel out to the sampled organization to interview some of the managers and supervisors.


Chapter 1 of this study introduced the background of the study, problem statement and described the specific problem addressed in the study as well as objective of the study.

Chapter 2 presents a review of literature/theoretical framework and empirical review of this study.

Chapter 3 presents the methodology, research design, data analysis and model specification.

Chapter 4 contains data presentation and analysis of result as well as discussion of findings.

Chapter 5 offers a summary conclusions and recommendations for future research.


Most terms used in this project are used in their conceptual and general usage and therefore, requires no further definition. However, a few of them require some explanations or qualification as to give room for better understanding, some of these include:

Automated Teller Machine (ATM): Are mechanical devices that can provide a variety of routine banking services without the aid of human teller (e.g.) the ATM replacing cheque, personal attendance of the customers, banking hours restriction, and paper verifications.

Technological Infrastructures: This is the scientific knowledge use in practical way in developing and designing new machine as equipment

E-payment: the electronic devices that can post and transfer money and to serve and pay bank customers outside the banking hall.

(DMBs) Deposit Money Bank: Are those banks licensed to carry on banking businesses. It is also called commercial banks or retail banking Sector

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