A qualification assessed and awarded by ifs University College, a registered charity incorporated by Royal Charter.

Level 3: Certificate in Financial Studies (CeFS) 600 / 8537 / X

Unit 1 – Financial Capability for the Immediate and Short Term (FCIS) T / 504 / 8100

Materials for the examination on: Monday 20 January 2014

January 2014 Examination

Pre-release Case Study Information and Data

Instructions to learners: This material has been designed to provide background information / research material for the examination. It is intended to help students familiarise themselves with the enclosed material prior to the examination. The information and data is made up of:

• Case study 1 information and data.

• Case study 2 information and data. Candidates are advised to read both sets of case study information and data prior to the examination. At the beginning of the examination, candidates are advised to review the case studies in conjunction with the question paper before committing to answering a particular case study. Please note:

• You may annotate the case study material. • The figures and products featured in the case study information and data were

correct at the time of writing. Learners are not expected to know current interest rates of specific products and services, nor to have detailed knowledge of changes to products and services.

• Although this material contains certain information relating to the examination scenarios and questions, the actual scenarios / questions are provided in the examination question paper.

JANUARY14/FCIS(CS)

Page 2 of 15

Case study 1: Information and Data begins on page 3

JANUARY14/FCIS(CS)

Turn over Page 3 of 15

Case study 1

Danny is out of love with his bank and thinks that it may be time to switch his

current account

Danny, aged 24, moved away from home when he was 20, starting a full-time job. He

has had a basic savings account and a current account with the same bank for a

number of years. He has, however, become disillusioned with the quality of the

service that he has been receiving and has even contemplated moving his current

account to another bank.

He has resisted this, until now, largely because he has a number of direct debits and

standing orders paid out of the current account each month. He has heard that it can

sometimes take three, or even four, weeks to change current accounts and he has

been concerned that a direct debit payment might not be paid on time, adversely

affecting his credit history.

In September, however, he heard that some changes had been made to make it

easier to move a current account from one bank to another. He was not sure exactly

what these changes involved, and so he asked for your help in giving him some

guidance on what was actually going to be different from 16 September 2013.

Danny also wants some advice on the factors to take into account when choosing a

new current account provider. He had rushed into choosing a current account when

he was 16 because he had got a part-time job at a local supermarket and needed to

open one quickly so that he could be paid. Now that he is older, and in the young

adult stage of the personal life cycle, he wants to give more thought to which current

account to open, if he does decide to switch accounts.

Danny is also concerned about his financial planning for the future, especially for the

next 16 years. During this time, there is the possibility that he might buy a property,

get married and start a family.

JANUARY14/FCIS(CS)

Page 4 of 15

THE RESEARCH

The new switching scheme

Neil Sedaka once sang a song called ‘Breaking up is hard to do’, but Leah Milner,

writing in The Times, has said that ‘breaking up is no longer so hard to do thanks to

the new switching rules’. She went on to state: ‘Most of us stay with the same bank

for 17 years, longer than the average marriage, which lasts 11 years, but now is the

perfect time to switch if your relationship with your bank is strained. From Monday 16

September 2013, the time it takes to move your account will be cut from 18–30 days

to just seven under a new scheme that almost all banks and building societies have

signed up to with the Payments Council. You can also take advantage of the cash

handouts and other perks that some are offering to lure customers away from their

rivals, but make sure the account behind the gimmicks is right for you. If you always

have a positive balance it makes sense to choose a bank that pays a decent rate of

interest, but if you sometimes go into the red, securing a deal with a good overdraft

should be your priority.’ (Source: Milner, L. (2013) Say goodbye if you’re out of love

with your bank. The Times, 14 September 2013.)

Dan Plant, of moneysavingexpert.com, has stated: ‘The real beauty of the new

switching guarantee is that it is the banks that are now formally responsible for

moving all payments made and received, so I hope to see this give more people the

confidence to find a better account for them, even though switching hasn’t been the

nightmare it’s been painted as for some time now.’ (Source: Milner, L. (2013) Say

goodbye if you’re out of love with your bank. The Times, 14 September 2013.)

David Budworth, writing in The Times, has stated: ‘Monday 16 September marks the

launch of a new industry guarantee that will mean that if you want to switch current

accounts you can do so in just seven days. The creditable aim is to encourage more

of us to vote with our feet by moving to a better current account. Until now, changing

banks has often felt like wading through treacle. It has taken up to a month to

complete and even then direct debits and standing orders have gone astray. Now we

are promised we will be gliding on air. Not only will it all be over in seven working

days but if things go wrong, interest and charges will be refunded. Opinion is divided

about whether it will work. However, the introduction of the seven day service has

already sparked competition in a market that has, up until now, offered very little

JANUARY14/FCIS(CS)

Turn over Page 5 of 15

financial impetus to switch.’ (Source: Budworth, D. (2013) Happy to take bribe to

switch. The Times, 14 September 2013.)

Teresa Hunter and Ali Hussain, writing in The Sunday Times, have stated:

‘Disgruntled customers have a new opportunity to vote with their feet and ditch their

banks with the launch of a switching service designed to take the pain out of moving

current accounts. There are 33 banks and building societies signed up to the Current

Account Switch Service, operated by the Payments Council. Customers will be able

to move their accounts, including all standing orders and direct debits, in just seven

working days. The process previously took up to a month.’ (Source: Hunter, T. and

Hussain, A. (2013) Why it’s time to switch current accounts. The Sunday Times, 15

September 2013.)

Patrick Collinson, writing in The Guardian, has stated: ‘Britain’s 46 million current

account holders will be bombarded … with offers to switch banks thanks to the formal

introduction of “seven-day switching”, after a £750m systems overhaul to ensure

direct debits and payments can be transferred between providers in a week. Fears of

payments going awry have discouraged most customers from moving, even if they

have endured poor service. A recent survey found that one in five people would

rather go to the dentist than try to switch their current account.’ (Source: Collinson, P.

(2013) Banks launch seven-day account switch. The Guardian, 16 September 2013.)

Martin Lewis, creator of MoneySavingExpert.com, has said: ‘Far too many people

whinge … about their bank …, but then do nothing about it. A whole swathe of the

country still has the same bank account they set up as a child on the back of being

given a piggy bank. Don’t whinge, ditch and switch.’ (Source: Collinson, P. (2013)

Banks launch seven-day account switch. The Guardian, 16 September 2013.)

There are a number of factors that need to be taken into account when considering

different current accounts. These are outlined in Table 1.

JANUARY14/FCIS(CS)

Page 6 of 15

Table 1: Factors to take into account when considering different current accounts

Factor Explanation

Monthly payment Some financial services providers pay a

monthly amount if the account stays in

credit, a minimum amount of money is paid

in each month and a certain number of direct

debits are set up.

Overdraft fees Providers allow you to go into ‘the red’, but

the fees and charges on overdrafts can vary

a great deal from one provider to another,

especially in the case of unauthorised

overdrafts.

Cashback Some providers have a cashback scheme

where spending can earn points at

participating retailers.

Interest A few current accounts pay interest on

balances that are in credit, but, increasingly,

these are now in the minority.

Fees Some providers charge fees to operate

current accounts.

Quality of customer service Banks and building societies can vary a

great deal in terms of the quality of customer

service that is provided.

Online provision Many customers prefer online banking, and

current accounts vary in terms of the online

provision.

Joining incentive / switching gift / cash

incentive

Some providers offer a joining incentive to

entice you to switch a current account from

one institution to another.

Charges for the use of debit cards abroad Most providers charge for using a debit card

abroad, but some do not impose extra fees

on their use abroad.

Additional services Some providers offer account holders

additional ‘free’ services such as breakdown

cover and travel insurance.

Source: Various leaflets and websites of financial services providers

JANUARY14/FCIS(CS)

Turn over Page 7 of 15

Source: Santander advertisement for 123 current account

Some people, however, are critical that the new switch system has not gone far

enough. Andrea Leadsom, a Member of Parliament who sits on the Treasury Select

Committee, has said that customers who switch current accounts will be given new

sort codes and new account numbers. She is calling for full number portability, in the

same way as customers of mobile phone networks can retain their telephone number

when they switch provider. She has stated: ‘Seven-day switching is well worth doing,

but if we really want to take away all the hassle of moving provider, if we really want

the kind of competition that keeps bank managers up at night wondering if they will

have any customers in the morning, we need full number portability just like in the

mobile phone market.’ (Source: Collinson, P. (2013) Banks launch seven-day

account switch. The Guardian, 16 September 2013.)

JANUARY14/FCIS(CS)

Page 8 of 15

Case study 2: Information and Data begins on page 9

JANUARY14/FCIS(CS)

Turn over Page 9 of 15

Case study 2

Hannah wants to go contactless!

Hannah, aged 18, often buys items that do not cost very much, such as cups of

coffee, sandwiches, stamps and newspapers. She always needs to carry some loose

change to pay for these items, which she finds inconvenient. She is also concerned

that she might lose this money or have it stolen.

She would prefer to use a card for such transactions and has seen advertisements

on television for contactless bank cards. In one of them, the ‘Feel Faster, Flow

Faster’ advertisement by Barclaycard, the man seems to be getting increasingly

younger as he uses his card. She thinks that a contactless bank card is a wonderful

idea, but doesn’t know very much about them. She asks you to carry out some

research on her behalf and to give her some advice and guidance on contactless

bank cards.

She has recently passed her driving test and has been allowed to use her parents’

car on occasion. She thinks, however, that she might buy a second-hand car

sometime in the future when she has enough money. She saved very diligently in

order to pay for her driving lessons, although her parents and grandparents also

contributed.

She has ‘got into the savings habit’ and has carried on paying regularly into a savings

account. She only earns £240 net a week as a trainee hairdresser in the town centre,

but she is very disciplined in terms of being able to regularly save £200 a month.

THE RESEARCH

Cards and cash

The Money Advice Service has stated: ‘The use of cards will rise by 75% from nearly

10 billion payments in 2012 to nearly 17 billion in 2022, predicts the latest UK

Payments Market 2013 report. The rise of cards will be driven primarily by increased

use of debit cards and online shopping. Meanwhile, the number of cash payments

will fall from 21 billion in 2012 to around 14 billion in 2022, as people increasingly use

JANUARY14/FCIS(CS)

Page 10 of 15

alternatives such as cards and automated payments.’ (Source: Money Advice

Service (2013) Card use set to rise as cash payments fall [online].

www.moneyadviceservice.org.uk, 20 August 2013.)

Graph 1: The rise of card transactions and the fall of cash transactions in the UK

9

13

17

21

25

2012 2022

Nu

mb

er

of

pa

ym

en

ts (

bil

lio

ns)

Year

Cash

Card

JANUARY14/FCIS(CS)

Turn over Page 11 of 15

Contactless bank cards

Sam Dunn, writing on the thisismoney website, has stated: ‘Contactless cards are

being touted by banks and retailers as the most convenient way to pay for goods

worth £20 or less. They are credit or debit cards which have a special chip and an

antenna which sends out a weak radio wave. If you’ve had a new bank card in the

past year, you’ve probably got one already, and you can spot a contactless card by

the radio wave symbol on the front.

You pay for your goods by waving this card over a special reader next to the till which

picks up the radio signal and takes money from your account in an instant. The card

will not be registered if it is waved too quickly or the scanner is more than 5cm away.

There is no need to enter a PIN and the money can be docked even if your card is

inside a purse or wallet.

Most banks now send out cards enabled with contactless technology whenever an

account is upgraded, or a card is replaced. There are 232,000 contactless terminals

in the UK in retailers including M&S, the Post Office, Starbucks, Boots, Pret a

Manger, McDonalds, Waitrose, Caffè Nero and Subway. Although they were first

launched in 2007, major banks have only just started sending out these cards en

masse. There are 32.5 million contactless cards now in circulation, and 70 million

payments will be made using them this year.

However, there are fears that many people have been charged twice and simply not

noticed the duplicate payment on their bank statement. Concerns over the security of

these cards have been raised by customers of Marks & Spencer who claim payment

was taken from their contactless debit or credit cards when they didn’t try to use

them. An urgent investigation has been launched into the new generation of

contactless bank cards amid fears thousands of shoppers could be hit with phantom

charges.’ (Source: Dunn, S. (2013) They’re the latest high-tech way to pay – but

shoppers blame them for phantom charges, so how safe are the new contactless

bank cards? [online], thisismoney.co.uk, 23 May 2013.)

Table 1 outlines the main advantages and disadvantages of these contactless bank

cards.

JANUARY14/FCIS(CS)

Page 12 of 15

Table 1: The advantages and disadvantages of contactless bank cards

Advantages Disadvantages

A very convenient way of paying for

goods when the cost is £15 or £20

(depending on provider) or less.

Concern over the security of these

cards.

Very quick – no need to enter a PIN. Errors have been made in transactions.

Contactless terminals in many places –

over 232,000.

No technology is immune to problems;

the position of the contactless card

readers could be a problem.

Makes it easier to keep track of

spending.

Consumers are more likely to use a

card if it has contactless capacity; a

survey by MasterCard in 2012

discovered that customers with such

cards spent one-third more using their

account once it had contactless capacity

on it.

A safer means of carrying money.

Source: Adapted from Dunn, S. (2013) They’re the latest high-tech way to pay – but

shoppers blame them for phantom charges, so how safe are the new contactless

bank cards? [online]. thisismoney.co.uk, 23 May 2013

JANUARY14/FCIS(CS)

Turn over Page 13 of 15

Source: thisismoney

Adam Uren, writing on thisismoney.co.uk, has stated: ‘Ever heard of ATM amnesia?

No, neither had I, until I read a press release from the contactless payments team at

Barclaycard. Apparently it exists, and afflicts some 30 million of us who have the

debilitating affliction of taking out cash from an ATM, then losing track of how they’ve

spent it when they come to find an empty wallet.

The contactless payment lobby has been aggressive in its campaigning for greater

use of contactless cards, and it seems urging people to avoid a vaguely serious

sounding, if completely fabricated, mental condition is the latest marketing strategy.’

(Source: Uren, A. (2013) Say hello to ATM amnesia, the latest reason to use

contactless debit cards [online]. thisismoney.co.uk, 22 July 2013.)

JANUARY14/FCIS(CS)

Page 14 of 15

Source: www.thisismoney.co.uk

The number of businesses going cashless is likely to increase in the years to come.

For example, in an article on BBC News, it was stated that: ‘Cash might not be

welcome on the bus network for much longer. Instead, Oyster cards and contactless

bank cards would be used instead.’ (Source: BBC News (2013) Are London buses

set to be cashless [online], www.bbc.co.uk, 14 April 2013.)

Sophie Curtis, writing in the Daily Telegraph, has stated: ‘People in Britain are

becoming increasingly comfortable with using contactless payment technology,

according to new figures from Visa Europe. In the last 12 months, UK consumers

have made 51 million contactless purchases, amounting to a total of £338 million.

Visa partly attributes this growth to its advertising campaign starring Usain Bolt. This

tied in with Visa’s contactless and mobile phone showcase during the London 2012

Olympic Games. There are currently more than 28 million Visa contactless cards in

circulation across the UK. These allow users to make purchases of less than £20

without a PIN or passcode, by simply touching their card to a payment terminal. Visa

Europe said that the average purchase value over the past 12 months was £6.65.’

(Source: Curtis, S. (2013) UK contactless spending grows five fold in a year. Daily

Telegraph, 19 August 2013.)

JANUARY14/FCIS(CS)

Turn over Page 15 of 15

Mark Austin, Head of Contactless at Visa Europe, has said: ‘A year ago we launched

the Contactless 2012 Campaign to raise public awareness of contactless technology

and the convenience and flexibility it brings to day to day payments. We are delighted

to see the technology now being used so frequently on the high street as consumers

become confident in making every day contactless payments and we’re excited

about the number of new shops due to roll out contactless payment in the remainder

of 2013.’ (Source: Curtis, S. (2013) UK contactless spending grows five fold in a

year. Daily Telegraph, 19 August 2013.)