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LIBF Unit 1 > Topic 7 - Providers > Flashcards

Topic 7 - Providers Flashcards

1
Q

Give examples of providers of financial services?

A
  • banks
  • building societies
  • credit unions
  • post office
  • national savings and investments
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2
Q

What is a bank?

A

A public limited company that sells financial products and services to businesses and individual customers

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3
Q

What is retail banking?

A

The part of the banking business that deals with individual customers

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4
Q

What does retail banking enable people to do? (5)

A
  • spend -make transactions
  • save
  • invest
  • borrow
  • insure - protect themselves
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5
Q

What is a public limited company?

A

The shares of the company can be bought and sold on the stock exchange

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6
Q

How do public limited companies work -e.g. bank? (6)

A

-Banks raise capital by selling shares on the stock market
- buyers of the shares are known as shareholders
- shareholders are part owners of the companies
- shareholders of the bank can receive a proportion of the profits in the form of dividends
- banks thus need to satisfy shareholders by providing a dividend which means they must make profit
- shareholders can also gain if the share price increases
- this is more likely if demand for the shares is high which is likely to follow from high profits

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7
Q

How do banks operate?

A
  • The main uK banks are very large organisations that operate in all aspects of financial services globally.
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8
Q

How are banking groups formed?

A

When financial services providers merge or acquire other providers.

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9
Q

How do banks make money?

A
  • charging fees
  • interest rate margin
    • difference between interest the banks pay to savers (AER) and the interest they charge to borrowers (APR)
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10
Q

What should be considered when choosing a financial provider?

A
  • How they wish to operate their accounts and communicate with their provider
    • visiting a branch, via the internet, by the. phone
  • how safe the funds are
    • they must be authorised by the prudential regulation authority
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11
Q

What are the PRA and FCA?

A

Financial conduct authority work together to ensure financial service providers work appropriately

Providers can be checked if they are the regulated by looking at the Financial services register

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12
Q

What are the 5 biggest banks in the uk in terms. Of assets?

A
  • Barclays
  • hsbc
  • Lloyds banking group
  • standered chartered ( uk based but doesnt conduct retail banking in the uk)
  • royal bank of Scotland group
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13
Q

What are advantages of banks?

A
  • customers have easy access to a large range of financial products
  • banks can invest in new products and services
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14
Q

What are disadvantages of large banks? (2)

A
  • customer service may be less efficient than smaller organisations
  • events in other countries can have an impact on UK banks
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15
Q

What were the original function of Building societies?

A

To provide savings accounts and mortgages

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16
Q

What is a Building Society?

A

Mutual organisations owned by their customers, called members.

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17
Q

Why are building societies smaller than banks?

A
  • 75% of their assets must be mortgages
  • 50% of their total funding must come from members deposits
  • restrictions on unsecured loans a building society can make
18
Q

What are advantages of building societies? (4)

A
  • all customers are members
    • they do not have shareholders so don’t need to maximise profits to give shareholders dividends
  • All profits made are used to benefit its members
  • Customer service tends to score more highly than banks due to mutual status, and because they’re smaller than banks
  • tend to only operate within the uk
19
Q

What does mutual mean in terms of banking?

A

A bank owned and run for the benefit of the members, a building society.

20
Q

What is demutualisation?

A

When a building society becomes a bank.

21
Q

What are disadvantages of building societies?

A
  • smaller sizes thus less likely to invest in research and development for innovative products or services
  • rely on partners to offer a range of services
22
Q

What happens when demutualisation occurs? (4)

A
  • building societies are free of restrictions
  • largest building societies can become banks
  • members are typically offered shares
  • don’t demutualise know their original form but taken over to be part of larger banking groups
23
Q

What are credit unions?

A

Similar to building society in terms of them being a mutual organisation though all members must share a common bond,

24
Q

What are the common bonds members of a credit union may have? (4)

A
  • live and work in a certain area
  • work for a specific employer, co-op, police, Royal Mail
  • work in specific industry
  • belong to a specific organisation; church or housing association
25
Q

What do credit unions offer? (5)

A
  • savings and loans mainly
  • life insurance
  • credit union current account
  • credit or debit card
  • Pre paid payment card
26
Q

What are advantages of credit unions?

A
  • lower operating costs than providers, such as banks
    -profit used for benefit of the members
  • provide local community focussed service
    -inspire customer loyalty through the common bond
27
Q

What is the disadvantage of credit unions?

A
  • offer a limited product range, dependent on their size
28
Q

What does NS&I stand for?

A

National savings and investments

29
Q

What products do NS&Is offer?(4)

A
  • cash ISA
  • Investment account
  • income bonds
  • premium bonds
30
Q

What happens when customers buy NS&I products?

A
  • they are lending money to the government
  • all of this money is 100% safe
31
Q

How do customers purchase NS&I products?

A

All products must be applied for online, telephone or by post
- not face to face

32
Q

What is the AER on NS&I products are set to achieve a balance between the interests of who?

A

Customers, taxpayers, financial services sector

33
Q

What services do the post office offer? (7)

A
  • savings account
  • loans
  • Cash ISA
  • home and car insurance
  • travel insurance
  • life cover
  • pet insurance
34
Q

Why are the post office financial services popular?

A

Very accessible to customers in the UK

35
Q

What are the 5 ways banks can communicate with customers?

A
  • branches on the high street
  • online
  • telephone banking
  • mobile banking (apps)
  • Post
36
Q

What are the advantages of Bank Branches?

A
  • Face to face communication
  • personal customer services
  • the branch can advertise all of its products
37
Q

What are the disadvantages of bank branches?

A

-cost of running the branch to the provider
- may be inconvenient for customers to have to go into a store

38
Q

What’s the advantages of online banking?(4)

A
  • websites are open 24/7 thus convenient
  • banking transactions can be carried immediately - fast
  • research online to apply for products online
  • Low cost to provider compared to branches
39
Q

What are the disadvantages of online banking?(2)

A
  • security issues
  • lack of personal interaction, perhaps leading to inferior customer service
40
Q

What are the advantages of telephone banking advantages? (3)

A
  • long opening hours so more convenient
  • cheaper to run than a branch
  • customers can speak to staff directly with knowledge of their enquiry
41
Q

What is the main advantage of postal banking communication?

A

Delivers a physical message that customers can spend time reviewing or documenting messages.
Convenient for signatures

42
Q

What must a customer consider when choosing a provider? (3)

A
  • identifying the product they need
  • research the best rates
  • consider how safe the product is
    -how they want to communicate with the provider
    -check the financial services register to see if it’s regulated

LIBF Unit 1 (13 decks)

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