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)