What Is A Bank? How Does A Bank Differ From Most Other Financial-Service Providers?

1. What is a bank?
How does a bank differ from most other financial-service

providers?
- A financial institution licensed to receive deposits and make loans.
- The principal source of credit (loanable funds) for millions of individuals and
families and for many government units.
- A bank can be defined in terms of the following:
+ Economic functions it performs
+ Services it offers its customers
+ Legal basis for its existence
- Provide related services such as Individual Retirement Accounts (IRAs),
certificates of deposit (CDs), currency exchange, and safe deposit boxes.
- Historically, banks offer various financial services such as checking and debit
accounts, credit cards, and saving plans.
- Expand service offerings to include investment banking (security
underwriting), insurance protection, financial planning, advisory service for
merging companies, risk-management services, and numerous other
innovative financial products.
- Some financial-service providers offer some of the similar financial services
offered by a bank but not all of them within one institution.
- Some are trying to be as similar to banks as possible in the services they offer.
2. Why are some banks reaching out to become one-stop financial-service

conglomerates? Is this a good idea?
One-stop financial service conglomerates is a financial institution that simultaneously
engages in multi businesses such as banking, insurance, and securities. Recently,
banks are increasingly becoming one-stop financial service conglomerates because of
two main reasons.
First off, the profit margin banks make from conventional services like providing
checking accounts and savings deposits, as well as making loans, is being squeezed by
increased competition from other financial institutions. Thus, finding new sources of
income is necessary. Second, a bank can effectively diversify its risks by adding more
services to its menu. For instance, fee revenue from rising sales of other financial
services like stock underwriting, insurance policy selling or financial counseling,
equipment leasing and cash management can cover bank losses from loans and
investments when the market rate swings.
From my perspective, banks may want to consider creating a one-stop financial
services conglomerate to maximize profit while minimizing risk. The bank must first
prepare a number of things before venturing into new markets with a new service
offering to customers. A significant amount of capital is necessary to boost consumer
trust, reassure creditors and regulators of the company's financial stability, and
provide funding for the purchase of new facilities, employee training, and the
marketing and sale of services. Also, it explains why the government has recently
increased the minimum capital requirements for banks.
3. Which businesses are banking’s closest and toughest competitors? What

services do they offer that compete directly with banks’ services?
Not only do banks compete with each other, but also with a variety of other financial
service providers, including saving institutions, credit unions, money market funds,
security brokers and dealers, investment banks, finance companies, insurance
companies, etc. All of these financial service providers are converging and embracing
each other’s innovations. The Financial Services Modernization Act has allowed many
of these financial service providers to offer the public one-stop shopping for financial
services.
Moreover, considering the current situations when E-wallets and internet banking
(PayPal, ShopeePay, MoMo) are becoming more and more popular, traditional
banking services such as investment, insurance, and savings are also affected.
4. What is happening to the bank’s share of the financial marketplace and why?
Lately, banking's financial market share frequently has fallen for traditional banks as
other financial institutions have moved in to fight for the same turf.
Financial-service providers are converging in terms of the services they offer and
embracing each other's innovations.
Legislation, such as the U.S. Financial Services Modernization (Gramm-Leach-Bliley)
Act of 1999, has allowed many of the financial firms to offer the public one-stop
shopping for financial services.
Thanks to relatively liberal government regulations, banks with quality management
and adequate capital can now truly become conglomerate financial-service providers.
The same is true for security firms, insurers, and other financially oriented companies
that wish to acquire bank affiliates.
5. How have banking and the financial services market changed in recent
years? What powerful forces are shaping financial markets and institutions
today?
a. How have banking and the financial-services market changed in
recent years?
- Financial markets have experienced many changes during the last two
decades. Technological advances in computers and telecommunications, along
with the globalization of banking and commerce, have led to deregulation.
➔ As a result, banking is becoming a more volatile industry due, in part, to

deregulation which has opened up individual banks to the full force of the
financial marketplace. And this has also increased competition throughout the
world.
- While these developments have been largely positive, they have also created
problems for policy makers. This leads to the fact that the government
tightened the financial-services sector due to crises and market collapse in the
previous few years.
- At the same time, the number and variety of banking services has increased
greatly due to the pressure of intensifying competition from nonbank
financial-service providers and changing public demand for more conveniently
and reliably provided services and increase in returns on their money invested.
- There has been service proliferation and greater competitive rivalry among
financial firms that has led to a powerful trend— convergence. The trends of
convergence, consolidation, geographic expansion, and technological change
will continue to proliferate in the future years.
- The latest banking technology trends allow banks to provide faster, more
efficient, and more personalized services to customers. Banks can offer 24/7
customer service, personalized investment advice, and customized products
and services while minimizing financial losses with AI.
➔ To sum up, increased competition has led to a fluctuation in the bank 's share
of the financial service marketplace. Technological advances have significantly
lowered the per-unit costs associated with high-volume transactions, but they
have also depersonalized financial services.
b. What powerful forces are shaping financial markets and institutions
today?
In our group perspectives, Technological advancements, Globalization, Regulatory
changes, Demographic shifts and Economic cycles are powerful forces which would
shape financial markets and institutions today.
Of these forces, Technological advancements and Globalization are likely to continue
shaping financial markets and institutions in the future. The use of technology will
only increase, leading to greater efficiency and innovation, while globalization will
continue to drive competition and risk.

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1. What is a bank?

How does a bank differ from most other financial-service

2. Why are some banks reaching out to become one-stop financial-service

3. Which businesses are banking’s closest and toughest competitors? What

➔ As a result, banking is becoming a more volatile industry due, in part, to

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