Topic: How do banks generate income? - page 7. (Read 1227 times)

Financial institutions, like banks, accumulate wealth through various means. They earn money through mortgage loans, real estate investments, service charges (such as SMS alerts and transfers), handling dormant accounts, currency exchange, and providing ancillary services like document preparation and safekeeping. Their ability to offer essential financial services and effectively manage these revenue streams contributes to their financial success.

Banks generate income in the following services that they are offering their depositors  such as interest on loans and on mortgages. The fees for services such as account maintenance overdrafts and ATM usage that is also their source of income. Investment income from securities and other financial products they usually offers. The generate income as well in Foreign exchange trading and other related activities. Another one is the interest, surcharges and fees from Credit card, If the client failed to pay on time the outstanding balance of their credit card the banks automatically charges them with interest plus other charges.

Banks money making patterns are deeper than we actually think. We here help bank in making a lot of money with the funds we make available to them but it is disguised as vice versa. Banks make money from one of the following ways:

• fee-based income
• capital markets income
• interest income

FEE BASED INCOME
 Banks can charge you for using their services which most of the time they term it maintenance services or tax. for examples:

• credit card fees
• checking your balance
• Account maintenance fee
• ATM maintenance fee

They charge you for virtually everything you do with them. when you buy shares from them, they make money by selling the shares to you, and also make more money from you by managing your investment. Literally, everything done with bank must find a way designed by them to attract more favour for themselves.


CAPITAL MARKETS INCOME
Capital markets are provisions where banks lure individuals to invest in one or two types of securities: EQUITY and DEBT securities. With EQUITY security funds being traded on various stock and exchange markets. You are entitled only to a "small" portion of the earnings in the nearest future
while DEBT securities are cast on bonds. A bond is still your money loaned by a bank with a standing agreement on the repayment patterns, often with good interests. these interests can be fixed or dynamic in nature. The monies are borrowed out to government agencies or organizations that need them.
the deal here is that banks still get the king share of your own money they borrowed from you.


INTERST INCOME
Commonest way banks make money. This is still the same money we deposit in the banks for safety and later retrieval. Banks trade with these money by lending it out to individuals at higher interest rates and return slim or insignificant profit to the depositors. Banks thrive from this means because people are readily available to deposit money as well as those waiting in their numbers to borrow money and repay at high interest margin. Banks are left to deal with the credit risk and ensure those debts are repaid.

There are still many other ways that they make money like Custodian fees, Private properties management, checking accounts, minimum balance fees, overdraft fees, remita fees. these all fall into one or more of the above broad categories

The function of the bank in the ecosystem is not only about making money or profit, there are even banks that are regulated for the main purpose, many of which return to the main core, besides profit. Yes, ensure that the economic circulation becomes more solid.

What banks do is not just funding and landing, banks are also regulated to create a strong community economic ecosystem, one of which is by supporting customers' financial literacy to make them healthier.

For me, it is the nature of banks to make money and profit because the basic purpose of having a bank is very positive for the community, so it's not as narrow as funding, collecting people's money and turning it over to the bank. If it's just that, how come many small banks have been destroyed because of the superficiality of their vision and mission in carrying out the basic role of their existence for the community.

My only suggestion is that the money that you keep in the bank is turned by the bank into debt/loans and you don't get the profit, only the numbers you see while the bank is circulating your money.

Meanwhile, you pay Admin and transfers per month. So I think it's better for your money to invest in gold, property or at least bitcoin investment than your money is idle in the bank.

This wouldn't be an a big issue if banks weren't rescued when they go under. Obviously the large banks get preferential treatment with bailouts and special rates. The banks sustain the country's currencies so there's an interest by the state to cover them if they fail. This type of relationship is dangerous for the reason that currency no longer becomes zero sum, and there's incentive by the state to generate new currency should the banking industry need it. Also causes reckless lending behavior if the banks know if there losses are covered.

Exactly. These banks can paint themselves whatever color they want to but it's not gonna stray us from the fact that most of their profit comes from shady deals and putting people who are none the wiser to immoral deals and debts. Just got of on reddit seeing a post where a gardener, who just wanted to take up a loan from a creditor/bank to buy themselves a washing machine for around 300 bucks, get swindled into paying almost 1500 all due to crazy fees that no regular person would be able to understand. This is where they get their money people, from abusing regular joes and kicking them in the shin when they're down. Get real and see banks for what they really are, a legal swindling center.

Op you have said all. But there are secret ways banks use to siphoned money from customers accounts to their private accounts. Bank workers thief money from customers from various ways. Bank take transaction fee everytime one make a transaction and also take again $2 to $3 every month end. There are some accounts that have been abandoned for some years probably the owner is dead or from one thing to the other the owner can't have access to the account so they siphoned the money to their accounts.

I can give an example of how they are supported by the state. For example, in some countries, the interest rate given to banks is lowered under the name of "policy rate". Even though the interest rate is lowered, the banks give loans to the public at a higher interest rate. They both buy the money they lend cheaply and sell it to the public expensively. This is not a positive side of the banks. In this way they are making the people poorer.

And what part of the cryptocurrencies stop them of still making it?

Man, i think a lot of you need some basic economic class, we LIVE in CAPITALIST system, and that system requires ever debt and other things to keep moving.

If you have a industrie and needs to change your equipment, you go to the financial system and take a loan, with that money the system put that money in work, in traditional one, with normal interest rate, assets , bonds ,etc, in crypto they can put in a pool who give them X %, so what its the diference?. Stop dreaming.

Or we dont have here in the forum a lending section?.

That is the actual reason why they are afraid of cryptocurrencies and find it a threat because they know how vulnerable the banking or traditional financial institutions have become lately with banks going bankrupt all around the world, even after earning so much money, they can't sustain their business and go bankrupt in no time.

They do have their own money, but they don't use their own money for bank transactions, loans, or anything else, they simply use the money of the people using the bank to keep their money safe and gain profit from that.

A very erroneous opinion. Or you are confusing it with another process.

Lending is a procedure when between a bank and a conditionally seller of a product or service, there is a buyer who does not have money. And the bank issues a loan, in a REAL amount of money (cash or non-cash, it doesn’t matter). Those. the seller, in return for his goods, receives real money from the bank. No other way. The seller does not need a promise to pay in the future!

But there is another process, when a bank can, for example, act as a "guarantor" of a certain "collateral". This is a completely different and more complex process, and there can really be “unsecured money”. But I repeat this again - a very specific process with which ordinary citizens do not intersect ...

Banks are the largest financial institutions, they are supervised by the central bank so they have strong capital strength, when there are financial problems the central bank will provide additional capital, actually banks get a lot of profit from the credit they disburse, and of course with a large amount of credit, many banks which became a giant corporation.

Exactly. When we talk about the banking industry, it's much broader than we think, it's not just about depositing and saving as many people discuss daily. So many times when we compare bitcoin to banks, it doesn't quite match. If we talk about safety, privacy, and profit, bitcoin is far superior. But regarding insurance and low-interest mortgage lending, bitcoin doesn't provide those services to us. Like it or not, banking will continue to dominate and be the backbone of the current economy, and that's not going to change or go away anytime soon.

Bank is a financial transaction institution where anyone can safely deposit their earned money by creating an account. These deposits are given as loans to different people either for business reasons or personal reasons. Each bank provides benefits to one type of people. The customer takes the required amount as a loan from different banks on the basis of a contract. And they repay the money they borrow as fixed interest along with the loan. A bank's main source of income is lending and making money through it. Bank earns by investing in various profitable sectors including shares, loans, and government securities.

As long as banks adhere to the applicable regulations, the flow of money will continue to circulate because people understand the importance of credit services from banks for their daily needs. In fact, the ongoing efforts in digitalizing currency have strengthened the position of banks even further. Many individuals now prefer to keep their money in digital form as account balances and opt for transfer services rather than cash transactions. This means that banks need not worry about preparing physical cash in an amount exceeding the balances held by their customers, as those funds are borrowed by other customers.

Consequently, banks can continue to generate money by seeking out more customers and seizing a percentage of their wealth. When this accumulation is considered across all customers, the result is significant.

Maintenances fees are the most blatant theft to all bank clients who have the disgrace to deal with them. Fortunately, here in my country they are not common.

At least, with the investment the banks do with others people's money they need to try to make good decisions and do their own research, that requires effort and skills.

Charging people for having an account with you it is ridiculous. Safe boxes fees make more sense.

I think that doesn't mean that we have to consider all banks as equals. Not all banks are considered the same and not all of them make the same ways and so forth. Which means that we are going to see some banks just do like loans and savings, some banks do investments, some banks are like brokers, some banks are more like insurance, and so forth. Which means that when you consider just the word "bank", that doesn't mean it covers them all and they all have different ways of making money. I believe the most common one is the bank that takes your money and loans it to others, but that is not the only way of making money by a bank, there are multiple different versions and ways of making money for any bank, it depends on the type of bank it is.

The easiest way banks will always make their money is from the so called maintenance fees for holding an account with them.

Other obvious sources of income can range from atm charges, bank transfers, subscriptions to be considered a VIP customer when using prestige accounts, charges on dormant accounts, offering a whle range of loans from mortgage to vehicle financing , foreign exchange  etc

Agreed!
People always thought the Swiss bank where the go to bank for some shedy anonymous accounts but forget our own local banks do all kinds of sketchy transactions just to remain in business and to keep their cash flows coming in.

Do you know that your explanation doesn't match with the content of your theory or composition, but nevertheless I will like to brief us concerning the way bank's generate their own money, to start with money deposit in your account I was Left in the bank for years, do you know that use some of the money for personal business such as loan to real estate management, and banks generate their income through little fraction deducted from each of the transactions made by the customers, so makes uses your money for transaction business that brings or return much money, and that's the reason while banks like fixed account so that before the stipulated time agreed with the own of the money will reach, they have gotten surplus money with interest with the money.

Banks make money ethically by providing financial services and products to customers and charging reasonable fees. Banks make money unethically by exploiting customers with hidden charges, unfair rates, fraudulent practices and risky investments.