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What is Banking System and Its Types

Nowadays, the banking System has become indispensable to both individuals and institutions. Is the economy on which any country is based. Banking system plays the role of an intermediary between the ones saving and the ones who borrow money for investments.

What is Banking System

Banking system refers to a chain of financial institutions that provide financial services like deposits, loan, money transfer, etc. to individuals and institutions with interest as the determining factor of the transaction.

Types of Banking System

1- Private Banking

it refers to complete asset management of the client. It serves all the financial dealings of the client namely investment, tax planning, securities, etc. with a high amount of equity.

2- Home Banking

it refers to all the services, technology and tools which the banking institutions are continuously developing. It provides banking services to the people at the press of a button, removing the hassles of making errands to the bank for minor services.

3- Wholesale Banking

it refers to the provision of banking services big corporations or institutions thus involving personalized and major scale operations.

4- Mixed Banking

banking institutions which perform both the functions of commercial i.e. retail as well as the wholesale functions or corporate banking are called mixed banking systems.

Banks

Types of Banks

1- Commercial banks

A Banking System that focuses on business customers. Businesses need checking and savings accounts just like individuals do. But they also need more complex services, and the dollar amounts or the number of transactions can be much larger. They might need to accept payments from customers, rely heavily on lines of credit to manage cash flow, and they might use letters of credit to do business overseas.

2- Retail banks

This type of Banking System focuses on consumers (or the general public) as customers. These banks give you credit cards, offer loans, and they’re the ones with numerous branch locations in populated areas.

3- Investment banks

Investment banks help businesses work in financial markets. If a business wants to go public or sell debt to investors, they’ll often use an investment bank.

4- Central banks

Central banks manage the monetary system for a government. For example, the Federal Reserve Bank is the US central bank responsible for managing economic activity and supervising banks.

5- Online banks

Banking System operates entirely online—there are no physical branch locations available to visit with a teller or personal banker. Many brick-and-mortar banks also offer online services, such as the ability to view accounts and pay bills online, but internet-only banks are different: they often offer competitive rates on savings accounts and they’re especially likely to offer free checking.