Question

What are two of the most important payment services provided by financial institutions? To what extent do these services efficiently provide benefits to the economy?

a) Online banking and check-cashing, providing moderate benefits
b) Wire transfers and mobile payments, providing minimal benefits
c) Electronic funds transfer and credit card transactions, providing substantial benefits
d) Currency exchange and money orders, providing limited benefits

Answer 1

Electronic funds transfer and credit card transactions are the most important payment services provided by financial institutions, offering substantial benefits to the economy by reducing transaction costs and enabling efficient exchanges in financial markets.

Step-by-step explanation:

The most important payment services provided by financial institutions are Electronic funds transfer and credit card transactions. These services facilitate the efficient movement of money, reducing the need for physical cash handling and making transactions both safer and more convenient. Electronic funds transfer (EFT) allows for the quick and secure exchange of money between accounts, both domestically and internationally. EFT encompasses a variety of transactions, including direct deposits, online bill payments, and electronic checks.

Credit card transactions enable consumers and businesses to make purchases and defer the actual payment until a later time. This service contributes to economic growth by allowing for more immediate consumption and providing short-term credit. Both EFT and credit card transactions help in lowering transaction costs and act as efficient financial intermediaries by connecting savers and borrowers, which is integral to the functioning of financial markets and the overall economy. Hence, their impact on the economy is substantial, as they provide the framework for countless daily transactions across numerous sectors.