Topic 7 - Providers Flashcards
1
Q
Purpose of providers
A
- usually offer financial products + services enabling ppl to make transactions, save, invest, borrow + protect themselves (insurance)
2
Q
How are recent financial service providers specialised?
A
- using only some communication channels
- offering certain types of product
- allowing certain types of ppl to be customers
3
Q
Types of financial services providers
A
- banks
- building societies
- credit unions
- national savings + investments (NS&I)
- post office
4
Q
How do banks make money
A
- charging fees + from interest rate margin
- margin = diff. between interest charged to borrowers (APR/EAR) + interest rate banks pay to savers (AER)
- fees allow banks to pay their costs (rent/premises,staffing, administration, utilities) + make a profit
5
Q
Considerations when choosing a financial services provider
A
- advantages + disadvantages of type of provider
- how they wish to operate their accounts + communicate w provider
- how safe their funds are
6
Q
Why should PRA be considered when choosing a provider
A
- financial providers must be checked + authorised by PRA (Prudential regulation authority)
- PRA + FCA (financial conduct authority) work together ensuring providers work appropriately e.g. manage risk well + treat customers fairly
- providers can be checked if they are regulated by looking at financial services register
7
Q
Usual characteristics of banks
A
- public limited companies: shares of bank can be bought + sold on stock exchange
- services offered to individuals = retail banking
- offers wide range of financial services
8
Q
Products + services offered by banks
A
- make transactions
- save
- borrow
- invest
- protect themselves
9
Q
7 e.g. of how ppl can make transactions
A
- transfer by current account
- direct debit
- standing order
- credit card
- debit card
- cash card
- cheque
10
Q
3 ways/accounts in which customers can save
A
- ISA
- personal account
- bonds
11
Q
4 diff. e.g. of loans
A
- overdraft
- personal loan
- credit card
- mortgage
12
Q
How to invest
A
- buy stocks + shares
13
Q
Banks ways to protect themselves
A
- home insurance
- car insurance
- life assurance
14
Q
Meaning of banks being public limited companies
A
- raise capital by selling shares on stock market
- buyers of shares = shareholders: part owners of company
- shareholders can receive a proportion of profits in form of dividends
- banks need to satisfy shareholders by providing a dividend so have to make profits
- shareholders also gain if share price inc. (more likely if demand for shares is high: follows from high profits)
15
Q
Banks as global businesses
A
- operate on global scale
- banking groups = when providers merge/acquire other providers
16
Q
Advantages of banks
A
- easy access to diff. products + services
- banks can invest in new products + services
17
Q
Disadvantages of banks
A
- customer service may be less efficient than smaller organisations
- global nature of financial services market means events in other countries may have impact on UK banks (e.g. financial crises + domino effect)
18
Q
What is a building society
A
- mutual organisations owned by their customers (members)
19
Q
Original function of building societies
A
- provides saving accounts + mortgages
- now provide wider range of financial services (e.g. current accounts, credit cards + insurance)
20
Q
Advantages of building societies
A
- all customers are members
- no shareholders so don’t need to maximise profits to give shareholders dividends
- all profits a building society makes are used to benefit its members
- building society’s customer service tends to score more highly than banks: mutual status + smaller than banks
- demutualisation means building society becomes a bank
- tend to only operate within UK + some have local focus only
- < banks = more personalised service
21
Q
Disadvantages of building societies
A
- smaller = unlikely to invest in research + development for innovative products or services
- need to rely on partners to offer a range of services (e.g. insurance policies)
22
Q
Why are building societies smaller than banks?
A
- 75% of assets must be mortgages
- 50% of total funding must come from members’ deposits
- restrictions on unsecured loans a building society can make
23
Q
Demutualisation
A
- process of building society changing mutual status to banks
- no building society restrictions
- means largest building societies can become banks
- receive shares + cash
- no building societies that demutualised are operating as individual providers now
24
Q
What are credit unions
A
- mutual organisations owned + run by members
- members must share a common bond
25
Q
common bonds members of credit unions can share
A
- live + work in certain area
- work for specific employer
- work in particular industry
- belong to specific organisation (e.g. church)
26
Q
Membership of credit unions
A
- smaller than banks + most building societies
- after jan 2012, law changed allowing credit to offer memberships to >1 group of ppl
- could include organisations (community groups, businesses, social enterprises + individuals)
27
Q
Products offered by credit unions
A
- 2 main products: savings + loans
Also offer:
- life assurance
- credit union current account
- credit card or debit card
- pre-paid payment card
28
Q
Advantages of credit unions
A
- lower operating costs than other providers (banks)
- profits used for benefits of members
- provide local, community-focused service
- inspire customer loyalty through common bond
29
Q
Disadvantages of credit unions
A
- offer limited product range
30
Q
National Savings + Investments (NS&I)
A
- when customers busy it’s products they’re lending money to gov.
- all money in NS&I products is 100% safe
- premium bonds + all products must be applied for online, telephone or post
31
Q
Products offered by NS&I
A
- cash ISA
- savings account
- investment account
- income bonds
- premium bonds
32
Q
The Post office
A
- financial services very accessible to customers: many post office within UK
- provides full range of financial services, provided by partner banks + insurance companies
- sells foreign currency w/o charging fee 
33
Q
financial services offered by post office
A
- savings accounts, mortgages + a credit card
- loans
- cash ISA
- home + car insurance policies
- travel insurance
- life cover/free new parent life cover
- pet insurance
34
Q
What are the ‘Big five’ banks in the UK
A
- Barclays
- HSBC
- Lloyds banking group
- Standard Chartered
- Royal Bank of Scotland Group
35
Q
Communication methods
A
- branches
- online banking
- telephone
- mobile banking
- post
36
Q
Advantages of branches
A
- customers can talk to someone in person (face to face communication)
- branch can advertise all its products
- more personal customer service
37
Q
Disadvantages of branches
A
- may not be convenient to visit them (e.g. maybe at work)
- expensive for provider to run the branch
- metro bank have inc. opening times to react to this
38
Q
Advantages of online banking
A
- website open 24/7: convenient
- carry out banking transactions immediately: fast
- can research products
- apply for products online
- low cost for providers compared to branches
39
Q
Disadvantages of online banking
A
- security issues
- lack of personal contact: inferior customer service
Banks have addressed these issues
- antifraud issues, security measures (passwords)
- customers can contact staff by email for individual issues
40
Q
Advantages of telephone
A
- customers can contact from wherever
- longer opening hours than a branch
- cheaper costs than a branch
- customers can access specialist advice + speak to staff w specific knowledge
41
Q
Disadvantages of telephone
A
- potential fraud
- quality of customer service
42
Q
Mobile banking
A
- combines advantages + disadvantages of online + telephone banking
- uses software (apps)
- quick + convenient
- requires sophisticated security
43
Q
Post advantages
A
- delivers a physical message
- most convenient method for customers needing to return a signed contract
44
Q
Post disadvantages
A
- takes time for info. to arrive
- risk of documents being lost in transmit
45
Q
Choosing a provider
A
- identify types of product needed
- research best rates
- consider safety of products, level of customer service, values of organisation
- how they want to communicate w provider
- check if provider is regulated
