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Thursday, June 02, 2016

Four Types of Banks..! 

Four Types of Banks..!

When you think of a bank, the first thing that comes to mind is that of a place where you can deposit or borrow money.

But, with competition and advancement of technology, things are rapidly changing and banks are offering specialised services and products to stay ahead in the race.

In India, banks offer a gamut of services, but Reserve Bank of India (RBI) is looking at differentiated banking after it gave licences to payment and small finance banks, and may soon release a framework for wholesale & custodial banks.

ET talks you through the different banking genres.

1. Retail Banks

Popularly called “High-Street Banks“, these banks have branches where ordinary customers can open their accounts.

A concept pioneered in the United Kingdom, retail banks make most of their money from interest payment on loans to individuals and small businesses.

They also earn from selling mortgages and insurance to customers. Major high street banks in the UK include Barclays, Royal Bank of Scotland, Llyods TSB Bank and HSBC Bank.

2. Investment Banks

These are banks that offer investment advice, and buy and sell stocks and bonds.

They also analyse financial markets for clients, and provide funding advice for corporate takeovers.

You can not deposit money in an investment bank like you can in a retail bank.

Investment banks make their money by taking a percentage of their clients' profits on investments, or /  by selling them advice.Some of the biggest full-service global investment banks include JP Morgan Chase, Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley , etc.

3. Online Banks..!

They operate entirely online, and there are no physical branches where you can talk with a teller or personal banker.

The best internet-only banks usually offer higher interest rates and friendlier fee structures than brick-and mortar banks because they save on costs from not owning branches or /  ATMs.

With the onset of digital revolution in India, many brick-and-mortar banks are also offering online services, including money transfers and bill payments.

Ally Bank, Discover Bank, Nationwide Bank are some of the largest players in this space.

4. Mobile Banks..!

All major banks have apps that allow customers to check their balances, transfer money, set up direct debits and so on. But, over the past two years, a new generation of mobileonly banks has emerged to challenge the universal banks.

They offer mobile banking with no branches and everything's done through an app. Recently , Atom Bank became UK's first digital-only bank.

With no branches or call centers, all contact is through this app. Others operating in this space are Hello Bank, run by BNP Paribas group, US-based Bank Mobile, and Number 26, a German bank that was launched by two Austrians.

Credit Unions

Mostly found in the US, these are non-profit cooperative financial institutions, and are owned and controlled by their members. Credit unions offer many of the same financial services a bank would, although often under different names. US has 92 million credit union members.

Src: Saloni Shukla, ET 


Four Types of Banks..!  Reviewed by S. Chitra on June 02, 2016 Rating: 5 Four Types of Banks..!  When you think of a bank, the first thing that comes to mind is that of a place where you can deposit or borr...

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