topic two- unit four finance
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- Created by: cliodhna mccaffrey
- Created on: 29-01-19 14:33
what is a competitive market?
one in which there's large numbers of sellers and in which no single one of these is so big it dominates market
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why is the balance of power in favour of the supplier rather than customer?
customers are individuals and small to medium sized enterprizes (SMEs)- no power to influence decisions by large corporations
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what is a pressure group?
group that tries to influence public policy in interest of a particular cause
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what is effective competition?
situation in which banks compete to serve customers rather than exploiting lack of customer awareness or regulation
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what are 3 features of good competition?
1. firms supply well designed products which meet customer needs. 2. all products are charged at interest rates and fees that reflect price of providing them. 3. providers dont sell products which arent suitable for customers and no pressure to buy
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what is transparency?
customer is given full info on product- terms and conditions explained clearly and customer understands what they're buying
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what are 3 features of bad competition?
1. each firm copies each other's products so there's very little differentiation. 2. products designed more to bring about profit than meet customer needs. 3. providers give customers superficial info abour products- hide disadvantages
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what is the purpose of PPI?
sold to custoemrs who have taken out loans, cover repayments if they cant due to unemployment or illness
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what are 3 ways PPI was mis sold to customers?
1. sold to those on low incomes who couldnt afford them. 2. others sold PPI they couldnt claim on e.g. self employed. 3. thought taking out PPI was obligation
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what is wasteful competition?
where providers spend more moeny on marketing of product only slightly different from competitors- money might be saved and used to reduce price of product
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what is product complexity?
the accusation that products are too complex for ordinary customers to understand
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how can a customer demonstrate they are well informed and financially capable?
1. by comparing products. 2. by switching providers
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what is the role of the financial services consumer panel?
independent statutory body thats an independent voice for consumers of fianncial services
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what is the role of the centre for social justice?
independent think tank that seeks to put social justice at heart of British politics
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what are barriers of entry in relation to competition in market place?
the features of market that make it difficult for new firms to enter and compete
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what are the financial services consumer panel's areas of interet?
supervision of customer credit sector, effective consumer represntation at EU level, price transparency and product accessibility
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what is concentration ratio in terms of competetition in markets?
the percentage of a particular market accounted for by a certain number of firms
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what are the features of an oligopolistic market?
1. all firms are well known and have large market presence. 2. each has good knowledge of products offered by competitors and prices being charged. 3. compete more on product differences than on price
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what are 3 barriers to entry identified by CMA?
strong customer loyalty to existing banks and customer preferenvce for banks with extensive branch network
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what is genuine competition?
increased competition- more providers that are independent of each other, designing products that are useful to customers and which can be adapted to different situations and prices differently
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what are the 3 main ways competition can be improved?
1. encouraging challenger banks and reducing barriers to entry. 2. consumer choice and current accounts. 3. regulation
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how can the governmnet encourage the emergence of more challenger banks?
if financial regulators were to treat them with more leniency in terms of rules on capital and liquidity. they couls also stop large banks from becoming bigger by putting a cap on their market share
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what are 3 main barriers to entry for small banks according to European Commission?
1. prudential capital requirements- new bank might not be able to raise it. 2. access to cash handling facilities- small bank wouldnt have large branch network and couldnt offer customers locations to deposit. 3. access to payments system-no clearing
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how does the current account switching service benfit competition in the market place?
customers can choose accounts that best suit their needs
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what percentage of car insurance policies are purchased online compared to home insurance?
40% car insurance and 25% home insurance
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Other cards in this set
Card 2
Front
why is the balance of power in favour of the supplier rather than customer?
Back
customers are individuals and small to medium sized enterprizes (SMEs)- no power to influence decisions by large corporations
Card 3
Front
what is a pressure group?
Back
Card 4
Front
what is effective competition?
Back
Card 5
Front
what are 3 features of good competition?
Back
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