A monetary entity delivers a spectrum of services concerning finances, such as banking, loans, investments, and insurance provisions. Commercial banks, credit unions, investment banking institutions, insurance firms, and mutual funds embody various types of such entities. Yet, identical features and advantages aren’t universally provided by all monetary entities. In this piece, we’ll touch upon typical characteristics of a monetary institution and single out the one that doesn’t commonly prevail.
Common Features of a Financial Institution
Some of the features that are commonly offered by most financial institutions are:
- Checking and savings accounts: Customers use these basic accounts to store their money and perform daily transactions like paying bills and shopping. Interest-earning savings accounts allow individuals to set aside funds for future objectives, such as purchasing a vehicle or a home, or planning for retirement.
- Direct deposit: This convenience lets clients receive their earnings, pensions, or benefits directly in their bank account, avoiding the hassles of cash or check handling. This method provides security and speed, reducing risk of loss or theft and shortening check clearance times.
- Access to investment advice: Institutions provide expert advice on diverse financial products such as stocks, bonds, and mutual funds, or retirement plans. This service assists clients in reaching their financial targets, broadening their investment range and limiting potential risks.
- Paper checks: These documents facilitate payments from a client’s bank account to another party. Banks or clients typically issue these documents, including essential details like date, amount, recipient’s name, and payer’s signature. Despite digital advancements, these physical payment slips remain in use for certain transactions like rent, tax, or utility payments.
Identifying the Feature That Is Not Common
In the array of characteristics listed, paper checks distinguish themselves as uncommon within numerous financial institutions. The popularity and availability of paper checks wane as the preference for electronic payment methods such as debit cards, credit cards, internet banking, mobile banking and digital wallets rise. Paper checks impose a burden of cost and time on both payer and payee, with requirements for printing, mailing, processing, and clearing fees.
Explanation of the Correct Answer
Paper checks see less use in financial institutions due to the rise of more streamlined, practical options. A 2019 Federal Reserve System report revealed a 7.2% annual decrease in the quantity of paper checks processed in the United States from 2015 to 2018. Simultaneously, electronic payments saw an annual 6.7% increase in this period. Further, the report highlighted that merely 8.4% of all noncash payments in 2018 came from paper checks.
Some of the advantages of using electronic payments over paper checks are:
- Speed: Electronic payments can be completed within seconds or minutes, while paper checks can take days or weeks to clear.
- Security: Electronic payments can be encrypted and verified using passwords or biometrics, while paper checks can be lost, stolen, forged, or altered.
- Convenience: Electronic payments can be made anytime and anywhere using devices such as smartphones or computers, while paper checks require physical delivery and presence.
- Environment: Electronic payments reduce paper waste and carbon footprint, while paper checks consume natural resources and generate pollution.
In conclusion, paper checks are not a common feature of a financial institution because they are outdated and inefficient compared to electronic payments. Most financial institutions offer other features that are more beneficial to their customers, such as checking and savings accounts, direct deposit, and access to investment advice. Therefore, if you encounter a question like “Which Of The Following Is Not A Common Feature Of A Financial Institution?”, you can confidently answer “paper checks”.