There are more than hundreds and thousands of different banks across the globe. Each of it holds an unbelievably large amount of assets. According to data, the top ten banks in the world alone have a sum of roughly 25 trillion dollars. In this generation, banking seemed to be a little bit complex. However, the original structure was to make every people’s lives simpler.
A Look Back In History
The means of transaction way back in centuries ago was through trade of goods. But since there are too many currencies that circulate in each country, some of them had to exchange different money to use on a specific product. The constant changing becomes a hassle, and it adds complication to the trading industry. The business exchange becomes unsafe to the extent that it started to counterfeit money, hinder traveling, and raise the difficulty in getting a loan. From there, people began to think of a way on how to keep assets without physically carrying it with them. And that’s where the time of a new business model becomes needed – banking.
The Current State Of Banking
Networks of banks spread all over the world and are now in the risk of management business. One simplified version of how it works is through people who keep on putting their money in the bank. In return for allowing banks to hold and use the money, they receive a small amount of interest. While it’s on guard, the bank lends the money to others who need it but with a much higher rate of interest. It’s a calculated risk, but it is essential for the economic growth in the system. That’s because of the provided resources that banks give to people such as houses and cars. It even makes way for business expansion and industrial growth. In a much economic explanation, the banks use the money of the savers to turn it into funds that can use to create things like houses, roads, buildings, and many more.
Though banking is widely acceptable, the main problem with it nowadays is the abandonment of traditional roles. They are once the provider of long-term financial products that allow short-term gains in lower risk. However, in today’s current situations, major banks already adopted economic constructs that are hardly understandable. All of which focuses on pursuing their specific trading in a bid to create fast-moving money. Somehow, banks are demoralized due to the perception of earning millions of bonuses only for its executives and traders alike. From there, bankers became one of the least professionals that people don’t trust anymore.
Today, even though banks are still described as a negative industrial commodity, there are tons of rising financial models in the market that gains a fast ground. Some models encourage investment and charge yearly commission on sales. It somehow provides a positive approach to people due to the given best interest of the clients. There is also a credit union model that focuses on shared value rather than maximizing the profit. It helps in creating opportunities such as small business to its members and other people.