Substitutability of automated teller machines for tellers: with special reference to Bank of Ceylon

Thilini Saparamadu

doi:10.4038/sljer.v2i1.98

Abstract

Surrogating technology for human beings is a widely discussed topic in today’s turbulent environment that has its own advantages and disadvantages. This study empirically explores the impact of Automated Teller Machines on the employment of the Bank of Ceylon, Sri Lanka. The research has been conducted using annual secondary data from 1990 to 2011, gathered from the Bank of Ceylon. The study employs the Constant Elasticity of Substitution production function in identifying the degree of substitutability between tellers and Automated Teller Machines. The results of the study confirmed that there is a negative relationship between cost per Automated Teller Machine to the cost per teller and number of automated teller machines to the number of tellers. Further it is indicated that there is a substitutability of 26 percent between Automated Teller Machines and tellers. The research findings indicate that replacing human tellers by Automated Teller Machines has led to a reduction of job opportunities at the Bank of Ceylon and suggest policy recommendations regarding the efficient re-allocation of employees in the bank.

Highlights

Focusing on convenience and productivity, banks have transformed their traditional banking processes into technology intensive models that clearly depict the automation of the banking process by Information Technology (IT)
The specific objective of the study was to measure the degree of substitution of Automated Teller Machines (ATMs) for number of tellers by the Bank of Ceylon (BOC), Sri Lanka
One percent increase in the cost per ATM to cost per teller, have decreased the number of ATM to number of tellers by 1.36 percent. 81.31 percent of variation of the dependent variable is explained by the model

Summary

Introduction

Focusing on convenience and productivity, banks have transformed their traditional banking processes into technology intensive models that clearly depict the automation of the banking process by Information Technology (IT). Banks have made an effort to maintain customer friendly services and to thrive amidst competition. The concept of automated systems based on IT is expanding with the concept of ‘efinance’.14. E-banking is coming under the e-financial model of Business to Consumer and includes Automated Teller Machines, telephone banking, electronic fund transfers and credit cards. Gains from e-finance model include the reduction in the cost of transaction processing and improvement in the quality of services. In the context of Sri Lanka, there are three major technology based systems that have been applied by the banking industry. They are ATMs, Internet Banking and Mobile Banking

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Conclusion