topic 2 Flashcards
Bad competition
where there is a small number of large, powerful providers on the market that only aim to maximise their sales, which may result in mis-selling and a lack of differentiation in products.
Barriers to entry
The features of the market that make it difficult for new firms to enter and compete.
Barriers to expansion
the features of the market that make it difficult for new firms to grow
Challenger banks
Any new bank that challenges the ‘big four’. For example, Virgin Money, Metro Bank, Monzo Bank and Starling Bank
Competition
The number and size of sellers supplying products to a particular market
Competition and Markets Authority
(CMA)
The body responsible for strengthening business competition and preventing and reducing anti-competitive activities.
Competitive market
A market where there is a large number of sellers and where no one of these is so big that it can dominate the market
Concentration ratio
The percentage of a particular market accounted for by a certain number of firms
Customer inertia
The idea that customers are reluctant to change their financial services provider and therefore tend not to challenge poor service
Effective competition
When the providers on the market compete to provide the best product, rather than taking advantage of lack of customer awareness or poor regulation
Financial Conduct Authority (FCA)
The organisation that regulates financial firms providing services to consumers, and maintains the integrity of the UK’s financial markets
Genuine competition
Where there are several providers, who are independent of each other, that design a range of clearly differentiated products for consumers to choose from
Good competition
Where there are a good number of providers on the market so that consumers have a variety of firms to choose from
Market share
The sales that a company makes as a proportion of the total market for the products and services it provides, or the sales of a specific product as a proportion of the total market for that product
Oligopoly
A market dominated by a few large firms, eg the financial services sector
Payment protection insurance (PPI)
An insurance product intended to ensure repayment of loans should a borrower face unexpected events that prevent them from repaying the debt
Pressure group
A group who act together to try to bring about change. In the case of financial services, they try to pressure financial services providers into making changes to the way they develop, market and deliver their products
Transparency
When customers are given full information on the products available, the terms and conditions are clearly explained, and customers understand what they are buying and the financial implications involved
Wasteful competition
Where providers spend huge amounts of money on designing, branding and marketing a product that is only slightly different from those of its competitors
Which of the following has the largest amount of influence in the retail banking sector?
commercial banks
A benefit of effective competition is that:
customers have more choice
the Financial Services Consumer Panel aims to:
represent the interests of consumers and aid effective regulation
A market which is dominated by a small number of very large firms is called
an oligopoly
An example of wasteful competition is
developing and marketing a product almost identical to that offered by competitors
