Topic 7 - Providers

Question 1

How do banks raise money?

Answer 1

By selling shares

Question 2

Advantages of banks

Answer 2

• customers have easy access to different products and services
• size of the bank means it can afford to invest in new products and services

Question 3

Disadvantages of banks

Answer 3

• customer service may be less efficient that in smaller organisations

Question 4

What are building societies?

Answer 4

Mutual organisations owned by customers called members.

Question 5

Advantages of building societies

Answer 5

• all customers are members how have a say in how the society is run
• building societies have no shareholders and don’t need to pay dividends
• all the profits made are used to benefit the members
• customer service tends to score higher than that of banks

Question 6

Disadvantages of building societies

Answer 6

• unlikely to spend the same money as banks on research and development
• need to rely on partners to offer certain services

Question 7

Why are building societies smaller than banks?

Answer 7

• they tend to operate only in the UK and have a local focus
• legal restrictions are placed on their business activities
• there are restrictions on the amount of unsecured loans that societies can make

Question 8

Define demutualisation

Answer 8

Where the mutual status of a building society changes to a bank.

Question 9

What are credit unions?

Answer 9

Mutual organisations run and owned by members that share a common bond.

Question 10

What are the potential common bonds that members in a credit union might share?

Answer 10

• living and working in a certain area
• working for a specific employer
• belonging to a specific organisation

Question 11

What products do credit unions offer?

Answer 11

• loans
• savings
• insurance
• prepaid payment cards
• life assurance
• the Credit Union Current account

Question 12

What products do building societies offer?

Answer 12

• savings accounts
• mortgages
• current accounts
• credit cards
• insurance

Question 13

What are the advantages of credit unions?

Answer 13

• lower operation costs
• profits made benefit members
• provide local and community focused service
• inspire customer loyalty through the common bond

Question 14

Disadvantages of credit unions

Answer 14

• may offer a limited product range depending on size

Question 15

What is NS&I?

Answer 15

An executive agency of the Chancellor of the Exchequer

Question 16

What products does NS&I offer?

Answer 16

• cash ISAs
• savings account
• investment accounts
• income bonds
• premium bonds

Question 17

How do premium bonds work?

Answer 17

Every month 2 premium bonds are selected at random to win £1 million, and there are over a million cash prizes.

Question 18

What products do the post office offer?

Answer 18

• savings accounts
• mortgages
• credit cards
• loans
• cash ISAs
• home and care insurance policies
• travel insurance
• life cover
• pet insurance

Question 19

What are the advantages of branches?

Answer 19

• customers can have face to face conversations with staff
• branches can advertise all products
• branch staff offer personal services

Question 20

Disadvantages of branches

Answer 20

Branches are expensive to run

Question 21

Advantages of online banking

Answer 21

• 24/7 access
• banking transactions are made immediately
• customers can research products and make calculations using online tools
  easy to spoil for products online
• low cost compared to branches

Question 22

Disadvantages of online banking

Answer 22

• security issues
• lack of personal contact makes it hard to ask specific questions

Question 23

Advantages of telephone communication

Answer 23

• customers can contact banks 24/7
• call centres have longer opening hours than branches
• call centres are less expensive than branches to operate
• customers can receive specialist advice that may not be available from a branch
• Customers can get tailored advice

Question 24

Disadvantages of telephone communication

Answer 24

• potential fraud
• quality of customer service isn’t always good

Question 25

Advantages of mobile banking

Answer 25

• quick and convenient for customers and providers to use

Question 26

Disadvantage of mobile banking

Answer 26

requires sophisticated security to ensure data remains safe

Question 27

Advantages of using post

Answer 27

Delivers a physical message that can be kept for future reference

Question 28

Disadvantages of using post

Answer 28

• Takes time for info to arrive
• risk of documents being lost in transit