How do people make money doing banking

Business model bank: this is how banks make money

To National economy all households, businesses and institutions in a country are paid. Austria is also an economy.

A bank takes care of that Banking business and offers their customers Banking services at. By working with money, she ensures that the money is constantly moving. Because every business with money is part of one Circulatorywho keeps the economy going and who Economy cranks. 🎒Read our blog post about what the economy means.

But how does a bank work with money? The banking business is divided into three major ones Areas of responsibility divided: asset management, lending business and payment transactions. Now let's take a closer look at what that is. πŸ‘‡

Cash Deposits, Loans, and Interest: The Basics of Banking

The lending business and asset management are closely related connected. ♾️ Because the bank uses them Cash deposits of customers in order to pass this money on to other customers or companies in the form of loans.

Lending business - borrow money and lend money

The bank has money at its disposal thanks to the credit in the customer's accounts. This money is called Deposit money and is part of the Money creation. What is that? In our Blog post on money creation we will explain it to you in detail! πŸ’Ά

in the Lending business the bank lends this money to other customers. These are mostly people or companies who want to buy something or invest in a project, but don't have the money to do it. πŸ‘€

When the bank gives you money in the form of a Credit makes available, you only borrow this money. You assure the bank that you will repay the borrowed money within a certain period of time. 🀝 That's what you pay for Lending rates to the bank.

How does the bank make money with it? It receives higher interest from borrowers than it has to pay savers on their deposits. That's because they are a higher one risk Has. It is possible that a customer or company cannot repay the loan and the bank then on the Debt remains seated. When that happens, the bank has to use its own money on it. That will too Equity called. πŸ’° In this way, it ensures that the risk of loan defaults is not passed on to customers.

The bank does not only lend you money in the lending business. Because even if you should come into the red on your account, the bank jumps within the framework of the Purchase reserve a. And you can spend more money than you actually have in the account. πŸ™Œ You then pay interest to the bank for this. In our Blog article on the purchase reserve you can read how it works exactly.

Asset management - the bank takes care of your money

In addition to managing the accounts, asset management also includes Investment. If you want to increase your money, you can invest it in securities at the bank.

Securities are the smallest parts of companies. So you take a little stake in a company. πŸ“ˆ

The bank will advise you which one Investment form is right for you. And you manages your wealth - So she makes sure that all your money is invested in exactly the way that suits you best. πŸ‘Œ You usually pay a fee for this service.

By the way: We don't have any securities yet. But we are working flat out so that you can soon invest your money with us. πŸ’ͺ

Payment transactions - your orders to the bank

Everything you have in your Online banking, at the counter or at the self-service device with your money is part of the Payment transactions the bank. These are, for example, transfers, direct debits or standing orders. Also when you deposit or withdraw money, this is a assignment to your bank. πŸ“

Your bank requires certain services for all of these services fees. With this money she then pays the office rent or the salaries of the employees, for example. πŸ’Έ Or it compensates for the resulting minus in the event of a loan default. And because a bank is also a company, it naturally wants to generate a profit with its services.