Question

Think about depositors lending money to banks and banks lending that money to loan customers. Why do we have financial intermediaries like banks? What is the future of banking?

Answer 1

Answer:

Bank acts as financial intermediaries because they stand between savers and borrowers. Savers place deposits with banks and then receive interest payment and withdraw money. Borrowers receive loans from band and repay the laons with interest. Financial intermediaries exists because they improve on unintermediate markets in which the ultimate parties (such as borrowers and savers of firm and investors) deals directly with each other without the use of any intermediary.

Financial intermediaries are an imporant source of external funding for coporates unlike capital market where invetors contract directly with corporate creating maketable securities. Banks are safe mode for lending and depositing money. If bank not exist then savers need to put money at their home with risk and borrowers have to find lenders who can lend them money, in this scenario their is no safety precaution of money from both the side. Bank is safest.

The future of banking is digital. People are incresingly enjoying the simplicity of managing all their finance in one place, setting up automatic payments or making deposits, any time and anywhere without the need to queue in a bank.