A2 Business

• Financial Institutions


  • Bank of England
  • Banks
  • Building Societies
  • Credit Unions
  • National Savings & Investments
  • Insurance Companies
  • Pension Companies
  • Pawnbrokers
  • Payday Lenders
• Bank of England


  UK's Central Bank with responsibility for maintaining a healthy level of financial stability for the UK as a whole. Responsible for issuing legal tender, setting interest rates, & controlling national debt.
• Bank of England


  • Responsible for protecting the financial stability of the economy as a whole
  • Sets interest rates at a level designed to help achieve a stable economy
  • Not a bank for members of the general public
  • Can raise interest rates making borrowing more expensive
• Banks


  Organisations that handles financial transactions & stores money on behalf of their customers. Services include holding deposits, making payments & supplying credit.
• Banks


  • Offer a range of services & account types
  • Provide a secure place to store money
  • Pay interest on credit balances on most types of account
  • Savings are only protected up to the value of £75,000, so if a bank goes bankrupt savings above this would be lost
  • Profit-making organisations owned by shareholders, therefore costs to individuals may be higher than necessary in order to fulfil shareholder objectives
• Building Societies


  Organisations that handle financial transactions & store money on behalf of members. Members are part owners & have a right to vote & receive information on the society.
• Building Societies


  • Offer a range of services & account types
  • Provide a secure place to store money
  • Pay interest on credit balances on most types of accounts
  • Savings are only protected up to the value of £75,000, so if a society goes bankrupt savings above this would be lost
  • May lack the business drive of a commercial bank
• Credit Unions


  Not-for-profit organisations that handle financial transactions & store money for their members. Often a responsibility to support a community made up of its members who have voting rights.
• Credit Unions


  • Offer a range of services & account types
  • Provide a secure place to store money
  • Owned by members & therefore costs can be kept down allowing for higher interest payments
  • Often offer additional benefits to the community or a good cause
  • Savings are only protected up to the value of £75,000, so if a credit union goes bankrupt savings above this would be lost
  • May lack the business drive of a commercial bank
• National Savings & Investments


  A government backed organisation that offers a secure saving option. It offers a range of options including ISAs, premium bonds & gilts & bonds.
• National Savings & Investments


  • Government-backed, therefore offering security on 100% of savings with no upper limits
  • Offers additional services/ methods of savings e.g. premium bonds
  • Rates are variable
  • Not as easy to access due to a lack of high st presence
  • Often required to give notice on withdrawals
• Insurance Companies


  These are businesses that protect against the risk of loss in return for a premium. Profit-making organisations.
• Insurance Companies


  • Protect against unexpected losses or financial expenses
  • Easy & regular monthly payments make planning easy
  • Wide range of services & levels of cover to suit the needs of individuals
  • Premiums are assessed on estimated degree of risk which may be seen to penalise some members or groups of society too harshly
  • Profit-making organisations, therefore premiums will be charged to ensure shareholder needs are met
• Pension Companies


  Businesses that sell policies to individuals, either privately or through employers, to allow them to save now to fund retirement in the future.
• Pension Companies


  • Provides a structure to plan for financial security in retirement
  • Deductions can be taken directly from pay & be fully or partially matched by employer's contributions
  • Experts make investment decisions
  • Poor investment decisions by the pension company may result in a disappointing return
  • Money already invested in a pension cannot be released prior to the dates agreed in the policy
• Pawnbrokers


  Businesses or individuals who loan money against the security of a personal asset, for example an item of jewellery. If it is not bought back within a specified period of time it will be sold on.
• Pawnbrokers


  • A quick way of acquiring cash needed for a short period of time
  • The asset can be brought back within a set period of time
  • Interest is not charged
  • The amount given for the asset is often substantially lower than its actual worth
  • If the money is not repaid within the agreed period the asset will be sold on
• Payday Lenders


  Organisations that offer short term source of finance used to
• Payday Lenders


  • A quick way of acquiring cash needed for a short period of time
  • Interest charges are likely to be very high
• Methods of Communicating with Customers


  • Branch
  • Online Banking
  • Telephone Banking
  • Mobile Banking
  • Postal Banking
• Branch


  Physical places where the customer will visit to carry out transactions via ATMs or over the counter.
• Branch


  • Opportunity to build a relationship developing trust & brand loyalty
  • Gives the customer a high level of confidence
  • Additional services such as advice can be offered
  • Need to travel to a branch which is likely to incur travel costs e.g. parking or fares
  • Restricted to bank opening hours
  • May be long queues plus travel time, making the process time consuming
• Online Banking


  The use of the internet to carry out banking transactions.
• Online Banking


  • Available 24/7
  • High degree of privacy
  • Convenient
  • Takes time at the beginning to set up or apply for
  • Not suitable for cash withdrawals
  • Increased risk due to cyber crime
  • If just an online account, the facilities may be limited
• Telephone Banking


  When transactions are carried out over the telephone.
• Telephone Banking


  • Convenient, especially to access basic functions such as checking a balance
  • No additional charges
  • Full access may be limited to set hours
  • Call centres & automated telephone systems can frustrate customers
  • Higher risk of fraud & identity theft
• Mobile Banking


  The use of mobile devices such as mobile phones & tablets to conduct financial transactions.
• Mobile Banking


  • Convenient
  • Available 24/7
  • No additional charges
  • May need to download specific apps to access
  • Higher security risk due to increased risk of loss or theft of mobile devices
  • Can be prone to hackers sending texts asking for bank details
• Postal Banking


  The use of the postal service to carry out paper-based financial transactions.
• Postal Banking


  • Traditional method that many customers will feel comfortable with
  • Does not require any additional technology or devices
  • Can be slow due to the postal system
  • Post can get lost
• Types of Consumer Protection


  • Financial Conduct Authority (FCA)
  • Financial Ombudsmen Service (FOS)
  • Financial Services Compensation Scheme
  • Office of Fair Trading (OFT)
  • Legislation (Laws): Consumer Credit
• Financial Conduct Authority (FCA)


  The FCA is an independent organisation with a remit to regulate the actions of providers of financial services
• Financial Conduct Authority (FCA)


  • Funded by membership fees charged to financial services providers
  • Authorisation – permitting financial service providers to trade
  • Supervision – ensuring procedures & practices are in the interest of the consumer
  • Enforcement – using powers to ensure standards are maintained
• Financial Ombudsmen Service (FOS)


  Appointed by the government to represent the interests of the consumer in disputes with financial services providers.
• Financial Ombudsmen Service (FOS)


  • Funded by compulsory fees charged to all regulated financial institutions plus additional fees when actions are taken against an institution
  • Involved in disputes only if they cannot be satisfactorily sorted between the consumer & the financial institution prior to involving the FOS
• Financial Services Compensation Scheme

  Organisation that will pay compensation to a consumer of the financial services if the service provider is unable to.
• Financial Services Compensation Scheme

  • Government funded
  • Protects all savers in banks & building societies up to £5,000. i.e. if the financial institution goes bankrupt the savings will be refunded by the FSCS
• Office of Fair Trading (OFT)


  Government organisation that was established to regulate all markets, including financial markets.
• Office of Fair Trading (OFT)


  • Government funded
  • The OFT's aim was to encourage fair practices & healthy competition between financial institutions
  • Since 2014 responsibility for financial institutions has been passed to the FCA
• Legislation (Laws): Consumer Credit

  Laws passed by the UK government to enforce the regulation of any firm offering credit to consumers.