Impact of ATM intensity on cost efficiency: An empirical evaluation in Taiwan

Although the use of ATMs in the U.S. is approaching saturation, ATM deployment is still increasing in other parts of the world, such as Australia, China, Canada, Germany, and the United Kingdom. The relationship between IT investment and firm performance has been extensively studied, but few researchers have examined the impact of self-service technology (SST) in general and ATMs in particular on a firm's cost efficiency. Given the growing importance of SSTs in the banking industry, it is thus surprising that few studies have examined the impact of SST on banking cost efficiency. We therefore empirically examined the cost efficiency effects on ATMs.Several prior studies tried to determine the value of ATM investments, These, however, failed to provide actual ATMs investment data that measured the intensity of its deployment and, as a result, used a dummy variable to indicate whether or not the ATM investment was made. This practice has made it impossible to assess the true value of ATM investment. To improve this imperfect measure, we utilized actual ATM numbers and bank operating and financial data to measure the extent of ATM investment. Our results suggested that ATM investments were associated with positive cost efficiency in the banking industry. To this end, we added new insights into cost effects of SST in general and ATM in particular.