We all know what banks are, those financial institutions that keep our hard earned money in a safe place. They are the receivers of our deposits. There are two type of banks: commercial/retail banks and investment banks, some of which are a combination of traditional brick-and-mortar and online presence. Our banks in South Africa are regulated by our National Government and the South African Reserve Bank.
Let’s differentiate
Commercial/retail banks are mainly concerned with managing withdrawals and deposits as well as supplying short-term loans to individuals and small businesses. Consumers primarily use these banks in South Africa for basic checking and savings accounts, deposits and sometimes for home loans. Investment banks place their focus on providing services such as underwriting and corporate services to institutional clients.
Why use banks in South Africa and not your mattress?
Security and Convenience
Storing all your money under your bed might not be the best option for you. Unless you’re staying in the north pole and the only thing you have to worry about are polar bears. Otherwise, storing all your money in cash at home just isn't safe. Your home could be burglarized, flood, or catch on fire. In the event of a burglary, most of those places you thought were great for hiding your money will probably be found. So, it’s really best to secure your money in a bank account. When you have money in the bank, you can access it from anywhere. A checking account also makes it much easier to pay bills - thus you no longer have to pay bills in person, you can transfer money online, often for free. Managing finances are easier with a bank account. Looking at your bank statement makes creating a budget easier. Bank accounts also make getting paid simpler and you can arrange for your employer to direct deposit your paycheck automatically into your bank account.
Saving and Investing
Once you have enough money, you'll want to go beyond a checking account and start saving and investing your money to elevate your future financial prosperity. You can't take advantage of the opportunity to earn returns in the stock market or earn interest on deposits if you're not willing to keep your cash anywhere except your mattress.
So do people need Banks or Banking?
The world of business and technology are changing faster than ever and old economic assumptions are starting to crack. Foolish is the organization that believes that things will remain constant - Change is the only constant. That has never been more true than today. The most progressive organizations are embracing risks and thinking different. In South Africa, we see the same, our big banks are very innovative and are embracing the ways of technology and how that changes the way we as consumers look at managing, sending, and receiving our money. There are many tools available online and even mobile apps that allow you to send money to various places. There’s a fleet of upstart companies with new offerings such as virtual currencies. Sounds futuristic, but it’s here now. Bitcoin is a bank alternative using an experimental digital currency. One of Bitcoin’s best uses is for making peer-to-peer payments because transferring bitcoins to someone is usually free. Companies like Mastercard, Visa, and PayPal are also offering very innovative financial solutions and are well worth looking into if you run a small business or other venture.
In Closing
To bank or not to bank? This doesn't have to be the question. It’s not an all-or-nothing situation. You can choose to keep just some of your funds in a bank account. Meanwhile, you can either stuff the rest under your mattress (not recommended) or do what many financial advisors recommend – invest!
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