Business Btec Unit B

• Advantages of the Bank of England

  - responsible for UK's financial stability

  - interest rate designed to achieve stable economy
• Disadvantages of the Bank of England

  - increase in interest leads to expensive borrowing

  - members of public cannot access it
• What is a bank?

  It is a financial institution licensed to receive deposits and make loans (owned by shareholders).
• Advantages of banks


  - offer a range of services and account types

  - provide a secure place to store money

  - pay interest on credit balances (and charge high rates on borrowing, leading to increased profits)
• Disadvantages of banks


  - savings only protected up to £85,000

  - may charge for certain accounts (premium account)

  - profit-making organisation (makes the cost to individual higher)
• What is a building society?

  It is a financial institution that provides banking and financial services to its members (account holders).
• Advantages of building societies

  - a secure place to store money

  - costs kept down (due to being owned by members)

  - pay interest on credit balances on most accounts
• Disadvantages of building societies

  - savings only protected up to £85,000

  - lack business drive (not for maximising profits, local, for the needs of people)

  - may not give quality deals compared to banks
• What are credit unions?

  They are financial cooperatives owned and run by their members.
• Advantages of credit unions

  - secure places to store money

  - not for profit organisation (cost kept down)

  - offers additional services
• Disadvantages of credit unions

  - savings only protected up to £85,000

  - lack of business drive (no profit interest)
• What is the National Savings and Investment (NS&I)?

  It's a state-owned savings institution in the UK.
• Advantages of NS&I (National Savings and Investment)

  - offers additional services (methods of savings)

  - government backed, therefore 100% security on savings
• Disadvantages of NS&I (national savings and investment)

  - rates are variable

  - required notice on withdrawals

  - not easy to access (lack of street presence)
• What are insurance companies?


  They are businesses that offer customers protection against loss in exchange for a premium (e.g. car insurance, travel insurance).
• Advantages of insurance companies

  - protect against unexpected losses

  - offer security and peace of mind

  - planning easier (regular monthly payments)

  - wide range of services (suit individual's needs)
• Disadvantages of insurance companies

  - premium assessed on estimated degree of risk (no guaranteed financial benefit)

  - profit-making organisation (premium charged)
• What are pension companies?

  Businesses that sell policies to customers allowing them to save into personal pension schemes in preparation for retirement
• Advantages of pension companies

  - structure to help plan for financial security (after retirement)

  - experts employed to make investment decisions
• Disadvantages of pension companies

  - poor investment may result in poor saving (for later life)

  - money invested cannot be repaid prior to the arranged dates
• What are pawnbrokers?


  Businesses (and individuals) that offer secured loans to people with personal assets used as collateral (e.g. jewellery)
• Pros of pawnbrokers


  - quick way of acquiring cash for a short period of time

  - no interest charged

  - asset can be bought back within a set period of time
• Cons of pawnbrokers


  - amount given substantially lower than the actual worth of the asset

  - if money not repaid within the time period the asset will be sold
• What are payday loans?

  Type of short term borrowing, where you borrow a small amount of money at very high interest rate
• Pros of payday loans

  - quick way of acquiring cash
• Cons of payday loans

  - very high interest rate

  - pay back higher amount compared to what initially borrowed

  - easier to get into a deeper debt
• Types of banking


  - Branch

  - Online banking

  - Telephone banking

  - Mobile banking

  - Postal banking
• What is branch banking?

  Customers visit the bank personally to carry out transactions
• Pros of branch banking

  - face-to-face contact, develop trust and security

  - transactions done immediately

  - can offer additional advice and services
• Cons of branch banking

  - time-consuming (e.g. travelling to the branch, queues)

  - restricted opening hours (difficult for people with busy lifestyles)
• What is online banking?

  A banking method that allows customers to manage their account electronically through internet.
• Pros of online banking

  - 24/7 (easy, quick, convenient)

  - access anywhere

  - higher privacy (due to no personal contact)
• Cons of online banking

  - initially it can be time-consuming (setting and applying for it)

  - no extra advice (due to no personal contact)

  - increased risk of cybercrime (hacking)

  - limited facilities (e.g. no cheques, cash withdrawals)

  - not suitable for everyone (e.g. no access to internet)
• What is telephone banking?

  A banking method which allows the consumer to conduct transactions by telephone
• Pros of telephone banking

  - talk directly with advisor

  - easily carry out simple transactions
• Cons of telephone banking

  - potentially time-consuming (e.g. on hold, waiting line)

  - not 24/7

  - limited service (e.g. no cheques)

  - risk of identity fraud (theft)
• What is mobile banking?


  Customers manage their accounts through mobile devices (e.g. smartphones or tablets).
• Pros of mobile banking

  - 24/7 (easy, quick, convenient)

  - instant transaction (time effective)

  - privacy maintained
• Cons of mobile banking

  - no extra advice (due to no personal contact)

  - need internet banking beforehand

  - hacked easily (if phone stolen)

  - not suitable for everyone
• What is postal banking?

  The provision of financial services via the postal service.