How the Banking Industry Works

The banking industry plays a major role in the economy of a country. The bank has several functions in the industry. Aside from safeguarding the money it also offers credit, loans and other payment services.

They offer payment services such as cashier’s checks, debit cards and checking accounts.

The Nature of the Banking Industry

With all the different functions of banks it is necessary to understand how the banking industry works. There are several aspects to consider in order to clearly explain the functions of the banking industry. The first function of the banking industry is to provide goods and services. Generally, the banking industry is comprised of two parts such as the Depository Credit Intermediation and the Central Bank. Each of these two components has its own distinctive functions. The Central Bank supplies money and international reserves. On the other hand, the credit intermediation provides banking services to businesses and consumers.

Industry Organization

The banking industry is composed of the commercial banks, credit unions as well as savings and loan associations. There are key distinctions between these three types of banks. The commercial banks greatly dominate the industry as it provides full range of services to both local and international banking. Recently, the commercial banks introduce the online banking services that give financial services through the internet. Savings banks and loans associations are depository institutions that are designed to finance mortgages for people who have lending needs.

Recent Developments

The economic recession has caused many borrowers to stop their payment for home loans. This issue had made banks to suffer for great losses. In this sense, the banking industry had come up with the fundamental changes by diversifying the services and becoming more competitive. Likewise, due to the financial crisis stronger banks have the opportunity to purchase other banks that offer lower prices of financial services. Some of the services that grab the interest of banks include asset management services, financial planning, insurance services and brokerage services. In addition, the economic recession helped commercial banks to increase their investment share in the banking industry. Apparently, the banking industry will experience significant change in order to cope up with the regulatory changes and the financial crisis.

With regards to the working conditions the employees working in a bank usually during weekdays. However, the working hours is extended when the bank is located in malls and other grocery stores. In order to achieve the goal of providing quality customer service, many banks have detailed customer service representative as well as phone centers to ensure accessibility. This way, there is no reason that customers will be left unattended because of the improvement in the customer service. In other instances, loan officers from banks travel in order to meet clients and answer their financial needs. Indeed, the banking industry is doing the best thing possible to provide us efficient financial assistance.


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