essay about banking industry

Industries Overview

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The banking industry is in a much healthier place now than it was after the financial crisis of 2008.
As a result of the increasing complexity of the banking ecosystem, financial giants and disruptive startups are navigating challenges and opportunities daily.
Do you work in the Banking industry? Get business insights on the latest tech innovations, market trends, and your competitors with data-driven research .

Banking Industry Overview

The banking industry is in a much healthier place now than it was after the financial crisis of 2008. Total global assets climbed to $154,211 in 2022, up 3.79 percent YoY from 148,583 in 2021, according to The Banker’s Top 1000 World Banks Ranking for 2022.

With so much money to manage, major banks such as JPMorgan Chase, Bank of America, Wells Fargo, and more are releasing new features to attract new customers and retain their existing ones. On top of that, startups and neobanks with disruptive banking technologies are breaking into the scene, and traditional financial institutions are either competing with them or merging with them to improve their customer experience.

So let’s dive into the banking industry, the challenges it faces, and the road ahead.

Banking Industry Trends

The most prevalent trend in the financial services industry today is the shift to digital, specifically mobile and online banking (more on each of those in a bit). In today’s era of unprecedented convenience and speed, consumers don’t want to have to trek to a physical bank branch to handle their transactions. This is especially true of Millennials and the older members of Gen Z , who have started to become the dominant players in the workforce (and the biggest earners).

This digital transformation caused increased competition from tech startups, as well as the consolidation of smaller banks and startups, contributing to a record-breaking 2021. However, global fintech funding has cooled this year as funding conditions have become more challenging across most of the world. In Q3 2022, overall fintech funding dropped 38% quarter-over-quarter (QoQ) to hit $12.9 Billion—comparable with Q4 2020 funding, according to CB Insights.

Looking ahead, startups and scale up firms alike must demonstrate profitability and growth potential to earn back the trust of investors.

Mobile Banking

To be frank, mobile banking is all but a requirement for consumers at this point. In Insider Intelligence’s Mobile Banking Competitive Edge Study in 2020, over 45% of respondents said they identify mobile as a top-three factor that determines their choice of FI, up from 38.0% in 2019—making it the second most important factor behind fees.

When broken down by generation, 91% of millennials use it, 95% of Gen Xers, and 60% of Baby Boomers. Critically for the banks themselves, 64% of mobile banking users said that they would research a bank’s mobile capabilities before opening an account, and 61% say they would change banks if their bank offered a poor mobile banking experience.

Critically for the banks themselves, 74% of mobile banking users said that they would research a bank’s mobile capabilities before opening an account, and 49% say they would change banks for better mobile banking capabilities, per Insider Intelligence’s The US Mobile Banking Competitive Edge Report 2020. But we’ve now reached the point where simply having a mobile app isn’t enough for banks to attract and keep customers. Additional tools and features – such as the ability to put temporary holds on cards, view recurring charges, or scanning a fingerprint to log into an account – are becoming increasingly necessary.

Online Banking

Online banking is extremely convenient, and is understandably one of the two main ways that consumers interact with their banks (along with mobile banking). But there is still a significant contingent of banking customers who want physical branches.

Despite an overwhelming reliance on digital banking channels and services such as chatbots and mobile banking apps, and the resulting decline in branch visits, consumers have maintained a preference for depositing checks in-branch, according to a recent Fiserv study. More than half (53%) of respondents said their top reason for visiting a branch in the past month was to deposit a check, compared with 41% who went to withdraw cash, and 36% who went to deposit cash.

Still, there’s no denying the rising prevalence of online banking, which has led to other innovations such as open banking. This system, implemented in the U.K., involves sharing customers’ financial information electronically and securely, but only under conditions that customers approve.

Open banking forces lenders to offer a digital “fire hose” of data that any third party can use to get standardized access — provided the startup is registered with the UK Financial Conduct Authority (FCA) and the customer agrees to share their data.

Investment Banking

Investment banking is a type of financial service in which a person or company advises individuals, businesses, or even governments on how and where to invest their money. For decades, this has been a human-to-human process that led to a mutually beneficial relationship.

But now, with the rise of robo-advisors, artificial intelligence (AI) and robotic process automation are starting to infiltrate the money management space. Predictive analytics can help investors make wiser and more profitable decisions in real-time—while saving on costs. AI can, in some cases, also help identify M&A targets. Lastly, AI can help validate an investment banker’s hypothesis and lead to more informed future decisions.

Like what you’re reading? Click here to learn more about Insider Intelligence’s leading Financial Services research.

Banking as a Service (BaaS)

Because of tight regulations (particularly in the U.S.), not everyone can just open a bank. This is where banking as a service ( BaaS ) comes in to fill the gap.

BaaS platforms enable fintechs and other third parties to connect with banks’ systems via APIs to build banking offerings on top of the providers’ regulated infrastructure. So, launching BaaS platforms helps banks benefit from fintechs entering the finance space, as it turns them into customers rather than just competitors.

While BaaS technically falls under the umbrella of open banking, it shouldn’t be confused with the aforementioned Open Banking system in the U.K. Open banking encompasses all actions in which a bank opens its APIs to third parties and gives those players access to data or functionality. The UK’s Open Banking focuses on providing third parties with data from incumbent banks, while BaaS looks at how these players can get access to banks’ services.

Banking Regulations

Banking is involved in almost every aspect of American life, from consumers to businesses to stocks. Because of this, the federal government has instituted numerous regulations on the banking industry, though the severity of those restrictions has waxed and waned in the last decade.

After the financial crisis of 2008, the Obama administration enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010. Dodd-Frank overhauled the U.S. financial regulation system in the aftermath of the crash. The most sweeping and impactful changes from the act included:

The elimination of the Office of Thrift Supervision
The creation of the Consumer Financial Protection Bureau (CFPB) to protect consumers against abuses and unfair practices tied financial services and products such as credit cards and mortgages
The reassignment of responsibilities for agencies such as the Federal Deposit Insurance Corporation
The creation of the Financial Stability Oversight Council and the Office of Financial Research to analyze potential threats to U.S. financial stability
The expansion of the Federal Reserve’s powers to regulate particular institutions

In 2018, President Donald Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA), which rolled back some of the Dodd-Frank changes. Specifically, EGRRCPA raised the threshold under which the federal government deems banks too important to the financial system to fail from $50 billion to $250 billion.

It also eliminated the Volcker Rule (a federal regulation that largely forbade banks from conducting particular investment activities with their own accounts and restricted their dealings with hedge funds and private equity funds) for small banks with less than $10 billion in assets.

Despite the rollbacks, it’s still difficult in the U.S. to get a banking license, which has hampered some banking startups. On the other hand, this has increased mergers and acquisitions activity. As a result, regulation will be a key focal point for the banking industry in the coming years.

Banking Industry Analysis

With so many different facets of the banking industry undergoing change, it’s crucial for those connected to the banking industry to be informed and stay ahead. That’s why Insider Intelligence covers it all with our Banking vertical to keep you up to date on the latest banking trends and shakeups.

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Essay on Banking Sector

Students are often asked to write an essay on Banking Sector in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Banking Sector

What is the banking sector.

The banking sector is a part of our economy that provides financial services. It includes banks, credit unions, and other institutions. These places help us save money, get loans, and make payments. They play a big role in our daily lives and the economy.

Types of Banks

There are different types of banks. Commercial banks help businesses and individuals. Investment banks help companies raise money. Central banks control a country’s money supply. Each type of bank has a unique role and helps in different ways.

Banking Services

Banks offer many services. They keep our money safe in savings and checking accounts. They give loans for homes, cars, or businesses. They also provide credit cards, which let us borrow money to buy things and pay it back later.

Importance of the Banking Sector

The banking sector is very important. It helps us save and invest money. It makes it easy for us to buy things and pay bills. It also helps businesses grow by giving them loans. Without banks, managing money would be much harder.

Challenges in the Banking Sector

The banking sector faces challenges too. They must protect our money and personal information from theft. They also need to follow rules set by the government. These challenges make it important for banks to be careful and responsible.

250 Words Essay on Banking Sector

The banking sector is an important part of our society. It includes banks, which are places where people can keep their money safe. Banks also give loans to people and businesses, so they can buy things like houses or start new companies. This helps our economy grow.

There are different types of banks. Some are big and have branches all over the country, like State Bank of India. Others are small and only have a few branches, like local co-operative banks. There are also foreign banks, which come from other countries but have branches in our country.

Services Offered by Banks

Banks offer many services. They let us save our money in savings accounts. They also let us borrow money through loans. Banks even help us send money to other people through services like online banking and money transfers. These services make our lives easier and help us manage our money better.

Role of Banks in Economy

Banks play a big role in our economy. They help businesses grow by giving them loans. They also keep our money safe and help us save for the future. Without banks, it would be hard for our economy to grow and for people to manage their money.

In conclusion, the banking sector is a key part of our society and economy. It provides important services like savings accounts and loans, and helps businesses grow. It makes our lives easier and our economy stronger.

500 Words Essay on Banking Sector

The banking sector is a part of the financial system that provides different types of services. It includes banks and other financial institutions. These services can be things like saving money, giving loans to people or businesses, and offering investment options.

There are different types of banks that provide different kinds of services.

1. Commercial Banks: These are the most common type of banks that we see around us. They provide services like accepting deposits, giving loans, and basic investment products.

2. Investment Banks: These banks help businesses and governments to raise money by selling stocks and bonds. They also give advice about mergers and acquisitions.

3. Retail Banks: These banks deal directly with people rather than businesses. They offer services like savings and checking accounts, mortgages, personal loans, debit/credit cards, and certificates of deposit.

4. Central Banks: These are not like other banks. Every country has one central bank that manages the country’s money supply and keeps the economy stable.

Roles of the Banking Sector

The banking sector plays a very important role in the economy of a country. Let’s look at some of these roles.

Safekeeping of Money: Banks provide a safe place for people and businesses to keep their money. This money is also insured, so even if the bank goes out of business, people don’t lose their money.

Loans for Growth: Banks give loans to people and businesses. This money helps businesses to grow and create jobs. People use loans to buy homes, cars, or pay for education.

Managing the Economy: Banks, especially the central bank, help to manage the country’s economy. They control how much money is in the economy. Too much money can cause prices to go up very fast (inflation). Too little money can make the economy slow down.

Banking Sector and Technology

Technology is changing how banks work. Now, we can do most of our banking from a computer or a phone. This is called online banking or digital banking. We can check our account balance, transfer money, pay bills, and even apply for loans on the internet. This makes banking easier and faster. But it also needs good security to keep our money safe.

The banking sector is very important for our daily life and the economy. It helps us save money, gives loans for growth, and keeps the economy stable. With the help of technology, banking is becoming easier and faster. But we also need to remember about the safety of our money.

That’s it! I hope the essay helped you.

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Good Essay About Banking Industry:

Type of paper: Essay

Topic: Banking , Industry , Government , Inflation , Economics , Politics , History , Economy

Published: 12/20/2021

ORDER PAPER LIKE THIS

Effect of inflation of 1960’s and 1970’s

Effect of inflation of 1960’s and 1970’s Economic system of free enterprise has contributed to economic success of United States. Success or failure of business enterprise or individual is determined on merit in free and competitive market with least government intervention. Most of the banks operate to make profit. However, unlike other industries banking industry plays a central role in country’s economy. Its performance affects the economic wellbeing of the society. Since 1930’s, the government has devised regulations to control operations of banking industry (U.S. Department of State, n.d.). In the wake of great depression and nationwide failure of commercial banks, Glass-Steagall Act was enacted in 1933 that separated investment and commercial banking activities, set up Federal Deposit Insurance Corporation and regulated interest rate on deposits (Sylla, n.d.). In 1956, the Congress passed the Bank Holding Company Act that further separated financial activities between insurance and banking. These rules prevented banks from operating in the insurance and the securities businesses. These banking reforms brought in stability in the banking but at the cost of innovation and competitiveness. These measures insulated the banking industry from risk. Inflation rate from mid-60’s started rising and 1970’s saw inflation skyrocketing. The Fed increased interest rate with rising inflation. This led to a disintermediation process to occur. Many depositors withdrew their savings from banks and invested in market funds and non-bank assets seeking higher returns. This adversely affected health of banking industry. The banking industry reacted and called for deregulation. Limitations posed by GSA were stifling banking industry. In 1980s, the government gradually phased out interest ceiling on bank. This helped banks to attract deposits again. In 1999, the Congress passed Gramm-Leach-Bliley Act in an attempt to modernize financial industry. This act repealed the Glass-Steagall Act. Based on the above observations, we can infer that a higher inflation rate in the 1960s and 1970s adversely affected the health of the banking industry. Since then the financial sector along with the banking industry has evolved and gone through reforms. Further, rate of inflation is cyclic in nature. It periodically rises and falls. It cannot be said with certainty that banking industry might be healthier today if inflation had not risen in the 1960’s and 1970’s. However, it can be said with certainty that the lessons learnt since 1960’s with banking regulation has made the government, the federal reserve system‍ and the banking industry wiser. The banking industry today has emerged stronger and its future looks healthier.

Sylla, Richard. (n.d.). The US Banking System: Origin, Development, and Regulation. The Gilder Lehrman Institute of American History, New York. Retrieved January 25 2016, from https://www.gilderlehrman.org/history-by-era/economics/essays/us-banking-s ystem-origin-development-and-regulation. U.S. Department of State. (n.d.). The Role of the Government in the Economy. Retrieved January 25 2016, from http://countrystudies.us/united-states/economy-6.htm “What is Fed: History”. (2015). Education, Teachers Resources. Federal Reserve Bank of San Francisco. Retrieved January 27 2016, from http://www.frbsf.org/education/teacher-resources/what-is-the-fed/history.

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