The past decade has already seen a lot of industry structures being redefined with leaders going bust and new age companies taking their place. One of the industries that seems to be on the cusp of going through a similar upheaval seems to be the banking industry.
If you look at what a bank does at its core, it is only two things:
- Collect money from parties (individuals, businesses and governments) and keep them safe and pay them whenever they need the same back. Banks in most economies pays a simple interest (and in some countries, charge a fee to safeguard the money for the party) on the money that it holds for the parties.
- Invest the money that they collect in the form of loans (home loans, education loans, vehicle loans, business loans, credits) to people/businesses who need money and charge a fee (interest) for trhe same. They could also invest the money in other forms of equity or investment vehicles which gives them a better return than the interest that they pay out to their customers to collect money.
I think that the current model, is dependent on them being able to have enough cash that come inside the bank so that they can invest the same and make a profit on that.
For more on this story visit the following link: The Future of Banking – Potential and Threats