Banking systems are important because they play a vital role in facilitating the flow of cash into an economy. This function helps to support the healthy functioning of any nation.
Banking systems ensure that financial resources are channelled between savers and borrowers. Banks provide interest earning potential for depositors and they also charge borrowers a certain amount of interest in exchange for providing access to funds.
Banks provide an ongoing monitoring function that ensures that borrowers meet their obligations. By setting up a debit order service for customers, banks ensure that funds are transferred to the right creditors on behalf of customers.
Banks provide payment services for households and businesses to settle day-to-day transactions. Debit card and online banking facilities are available to make this process much easier.
What else banks do:
Offers a service for people wishing to save – Customers can rely on banks to save their money on their behalf in savings or cheque accounts. Banks offer interest on deposits, helping to protect against money losing value against inflation. Banks provide a secure place to store money. People don’t have to save their hard-earned money under the mattress. Bank accounts exist for this.
Offers finance to businesses looking to invest or expand – Banks have business loans which are designed to provide funds for various business needs.
Offers financial advice – banks have a range of financial experts who are adept at providing advice and guidance on handling money matters.
Offers various financial services, such as insurance – While there are various financial institutions offering insurance services, banks also have tailored solutions for their clientele.
Offers loan services – Banks have a number of loans and advances which offer various amounts.
Having an understanding of why banking systems are important is a good way to making the best use of their service offerings.
