BANKS and BANKING

Banks and Banking Banks safeguard money and valuables and provide loans, credit, and payment services, such as checking accounts, money orders, and cashier’s checks. Banks also may offer investment and insurance products, which they were once prohibited from selling. In spite of these changes, banks continue to maintain and perform their primary role in the financial system — accepting deposits and lending funds from these deposits. There are several types of banks, which differ in the number of services they provide and the clientele they serve. Although some of the differences between these types of banks have lessened as they begin to expand the range of products and services they offer, there are still key distinguishing traits. In recent years, online banks—which provide all services entirely over the Internet — have entered the market, with some success. However, many traditional banks have also expanded to offer online banking, and some formerly Internet-only banks are opting to open branches. The money to lend comes primarily from deposits in checking and savings accounts, certificates of deposit, money market accounts, and other deposit accounts that consumers and businesses set up with the bank. These deposits often earn interest for the owner, and accounts that offer checking provide an easy method for making payments safely without using cash. Deposits in many banks are insured by the Federal Deposit Insurance Corporation, which ensures that depositors will get their money back, up to a stated limit, if a bank should fail. Technology is having a major impact on the banking industry. Electronic banking by internet allows customers to pay bills and transfer money from one account to another. Through these channels, bank customers can also access information such as account balances and statement history. Some banks offer online account aggregation, which makes available in one place detailed and up-to date information on a customer’s accounts held at various different institutions. Checks can even be ordered conveniently online. Special Edition Personal Checks, Free Custom Lettering, Free Upgrade, Free 4th Box! Other fundamental changes are occurring in the industry as banks diversify their services to become more competitive. Many banks now offer their customers financial planning and asset management services, as well as brokerage and insurance services, often through a subsidiary or third party. Others are beginning to provide investment banking services that help companies and governments raise money through the issuance of stocks and bonds, also usually through a subsidiary. As banks respond to deregulation and as competition in this sector grows, the nature of the banking industry will continue to undergo significant change.