O-LevelCommerceBanking7100/22 · May/June 2016 · Q720 Marks

Orion Bank is a large retail bank. It has over 100 branches. Each branch has an ATM.

(a)(i)Identify two types of bank account that Orion Bank might provide for its customers.[2]
(a)(ii)Explain two benefits to customers of using an ATM.[4]
(b)(i)Explain what is meant by a direct debit.[2]
(b)(ii)Why do many companies use direct debits?[2]
(c)Should the customers of Orion Bank use internet banking? Discuss the advantages and disadvantages of using internet banking for the customers. Give reasons for your opinion.[6]
(d)Orion Bank wishes to introduce a new savings scheme for its customers. Should it use informative advertising? Give reasons for your answer.[4]

Mark scheme

Marking points from the official mark scheme (May/June 2016). The mark or mark type is shown in brackets.

[2] 7 (a) (i) 1 mark for each of 2 types identified
Savings/Deposit account
Current/Cheque account
Accept any other relevant point
[4] (ii) Two benefits stated (1 mark each) with explanations (1 mark each)
ATM (Automated Teller Machine) can be used for withdrawing cash (1) 24 hours per day (1)
No need to visit bank (1) and stand in queues (1)saving time/money (1)
ATM can be used to find out balances of accounts (1) change PIN (1)
ATM's can usually be used in different countries (1) even when ATM is owned by a different bank (1)
They are found everywhere (1) eg shopping malls (1)
Accept any other relevant point
[2] (b) (i) Any two points
Direct debits are used to pay variable amounts (1) at variable times (1)
The transaction is initiated by the payee/creditor (1) after authority is given by the debtor/account holder (1) payment is taken from debtor's account (1)
Accept any other relevant point
[2] (ii) 1 mark for a reason plus one mark for development
Reduces the chance of bad debts (1) because company has authority to debit customer's account (1)
Takes payment on set date (1) which improves cash flow (1)
Automated/no need to remember dates (1) less administrative costs/clerical work (1)
Saves time/money of visiting bank (1) to pay in cheques (1)
Accept any other relevant point
[6] (c) Level 2 (4-6 marks) Has discussed whether or not Orion Banking should use Internet banking for its customers and has given a reasoned opinion (If a candidate has presented a one-sided argument, award 4 marks max.)
Level 1 (1-3 marks) Has commented on the use of Internet banking with/without an opinion
Advantages of Internet banking include:
Accounts may be accessed 24 hours per day without going to the bank
Provides detailed information on bank services
Allows customers to transfer money between different accounts
Allows customers to make payments to other businesses or individuals by direct credit
Disadvantages of Internet banking include:
Cannot pay in cash or cheques without a visit to the bank
Fraud is a continuing danger and holders of Internet accounts must ensure confidentiality, authentication and integrity in their dealings with the bank
The customer should only use Internet banking if he is satisfied with the security of his transactions and needs the additional ease of use given by Internet banking
Accept any other relevant point
[4] (d) Up to four marks for reasons that Orion should use or not use informative advertising
Informative advertising provides facts/details/information (1) e.g. rate of interest (1)
For a new product informative advertising should be used (1) but it could be argued that it should only be used in the initial stages (1) and be replaced by persuasive advertising (1) once the public has been made aware of the product (1)
Might consider using competitive advertising (1) so as to stop consumers going elsewhere (1)
Accept any other relevant point