Financial Institutions (Junior Cert Business Studies): Revision Notes
📚Revision Notes
Financial Institutions
What is a financial institution?
Note
Financial institution: An organisation that provides money-related services to customers, such as opening accounts and offering loans.
Financial institutions play a crucial role in helping people manage their money. They act as safe places to store your savings and provide ways to borrow money when needed. In Ireland, there are several different types of financial institutions, each offering various services to meet different customer needs.
Main types of financial institutions in Ireland
The four main financial institutions operating in Ireland are:
- Commercial banks (like AIB, Bank of Ireland)
- Credit unions
- An Post (the postal service)
- Building societies
Let's explore each of these in detail.
Credit unions
Note
Credit union: A cooperative financial organisation owned by its members who save with and borrow from it.
Credit unions work differently from regular banks because they are owned by the people who use their services. When you put money into a credit union, you don't just become a customer - you become a member and part-owner of the institution.
How credit union membership works
To join a credit union, you must have a common bond with other members. This usually means:
- Living in the same area
- Working in the same industry
- Belonging to the same community group
Example
Membership Example: Common Bonds in Action
- Midleton Credit Union serves people who live, work, or study in the local area
- RTÉ Credit Union is specifically for RTÉ employees and their families
- Teachers' Credit Union serves education professionals across Ireland
Ownership through shares
Note
Share: A unit of ownership in an institution that has a monetary value.
When you join a credit union, you buy shares rather than simply opening an account. Each share typically equals €1, so if you put in €100, you own 100 shares in the credit union. This makes you a part-owner with voting rights in how the credit union operates.
Key features of credit unions
Important
Credit unions are not-for-profit organisations. This means their main goal is to help their members rather than make money for shareholders.
Key benefits include:
- Annual returns: Members receive dividends based on the credit union's performance
- Community focus: Profits are used to improve services or help the local community
- Volunteer-run: Many smaller credit unions rely on volunteers to keep costs low
Services offered
Credit unions provide a range of financial services including:
- Savings accounts
- Personal loans at competitive rates
- Debit cards
- Insurance products
- Some now offer mortgages and current accounts
An Post
Note
State-sponsored body: An organisation owned and controlled by the government.
An Post is Ireland's postal service, but it's much more than just delivering letters. As a state-sponsored body owned by the Irish government, An Post operates over 1,100 post offices nationwide, serving 1.7 million customers weekly.
Financial services from An Post
Beyond postal services, An Post offers comprehensive financial services:
- Foreign currency exchange
- Credit cards and loans
- Savings accounts and deposit products
- Insurance policies
- Current accounts with online banking
Important
This makes An Post particularly valuable in rural areas where traditional bank branches may have closed. The widespread network of post offices ensures financial services remain accessible to communities across Ireland.
Building societies
Note
Building society: A financial institution that specialises in providing mortgage loans and savings services to customers.
Building societies are commercial institutions that focus on a narrower range of services compared to full-service banks. Their main specialty is helping people buy homes through mortgage lending.
Focus on mortgages and savings
Building societies concentrate on two main areas:
- Mortgage loans: Helping customers buy properties
- Savings accounts: Often offering competitive interest rates to attract savers
This focused approach allows them to specialise and often provide very competitive rates in these specific areas.
Building societies in Ireland today
Important
The building society sector in Ireland has contracted significantly:
- EBS (Educational Building Society) is the only building society still operating in Ireland
- Irish Nationwide closed in 2011
- Leeds Building Society stopped serving Irish customers in 2018
This reduction means fewer choices for consumers, but EBS continues to provide mortgage and savings services to Irish customers.
Online banking and modern services
All types of financial institutions now offer digital services to make banking more convenient. Online banking allows customers to:
- Check account balances
- Transfer money between accounts
- Pay bills electronically
- Apply for loans and services
- Manage savings and investments
This technological advancement has made financial services more accessible, especially for younger customers who prefer digital interactions.
Summary
Key Points to Remember:
- Financial institutions provide essential money-related services like savings accounts, loans, and payment methods
- Credit unions are member-owned cooperatives that require a common bond and focus on community benefit rather than profit
- An Post combines postal services with financial services through its nationwide network of post offices
- Building societies specialise in mortgages and savings but have become less common in Ireland
- Most financial institutions now offer online banking to provide convenient digital access to services