2.2 The Competition Situation in the UK

Question 1

Why are pressure groups necessary?

Answer 1

Because the level of financial capability among some consumers is low

Question 2

Ways the demand side of the market could demonstrate becoming more powerful:

Answer 2

• Comparing products

- Switching providers

Question 3

Are younger people increasingly or decreasingly willing to switch provider?

Answer 3

Increasingly

Question 4

Examples of pressure groups:

Answer 4

• Save Our Savers
• The Financial Services Consumer Panel
• The Centre for Social Justice

Question 5

What is Save Our Savers?

Answer 5

A pressure group that believed that savers must be ‘supported and rewarded for saving’.

Question 6

What did Save Our Savers campaign against?

Answer 6

• Devaluation of savings through inflation
• Unfair legislation and taxation
• Artificially low interest rates

Question 7

What did Save Our Savers want?

Answer 7

• Higher interest rates for savers
• More transparent products
• All fees for managing investments and pensions to be made transparent

Question 8

What is the Financial Services Consumer Panel?

Answer 8

An independent body that is an ‘independent voice for consumers of financial services’

Question 9

What are the main areas of interest of the Financial Service Consumer Panel?

Answer 9

• Supervision of the consumer credit sector
• Consumers’ ability to obtain compensation
• Provision of products and services that ‘do what they say on the tin’

Question 10

The Financial Services Consumer Panel researched pension scams resulting in a response that supported what?

Answer 10

• Strengthening cooling-off periods

- Restricting elements of marketing of ‘boiler-room’ scams

Question 11

What is the Centre for Social Justice?

Answer 11

An independent think tank that seeks ‘to put social justice at the heart of British politics’

Question 12

The Centre for Social Justice produced a report entitled ‘Maxed Out: Serious personal debt in Britain’ which looked at what?

Answer 12

• Social and medical consequences of problem debt
• Calls for improvement in financial education
• Improved access to alternative finance

Question 13

What are the two main aspects to the degree of competition that exists on the supply side of the market?

Answer 13

• Degree of concentration

- Barriers to entry

Question 14

Why has the degree of concentration in the financial services sector increased since the financial crisis?

Answer 14

Stronger banks have taken over weaker ones

Question 15

Concentration ratio definition

Answer 15

The percentage of a particular market accounted for by a certain number of firms

Question 16

Oligopoly definition

Answer 16

A market that is dominated by a small number of very large firms

Question 17

How do firms operating in an oligopolistic market tend to compete?

Answer 17

Less on price than on product differences and heavy marketing

Question 18

Each bank tries to make its own products seem different by doing what?

Answer 18

• Using brand names
• Inserting special features
• Using slogans

Question 19

Main difficulties existing for new providers to the personal sector:

Answer 19

• Strong customer loyalty
• Customer preference for banks with an extensive branch network
• inertia