IntroductionSay no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Bank, according to Wikipedia, is a financial institution that accepts deposits from the public and creates credit. Banking began with the first prototype merchant banks of the ancient world, which made grain loans to farmers and traders who transported goods between cities and this system is known as the barter system. This began around 2000 BC in Assyria and Babylon. Later, in ancient Greece and during the Roman Empire, temple-based lenders made loans and added two important innovations: they accepted deposits and exchanged money. Archeology from this period in ancient China and India also shows evidence of money-lending activity. Banking in its modern sense evolved in the 14th century in the prosperous cities of Renaissance Italy, but in many ways it was a continuation of ideas and concepts of credit and lending that had their roots in the ancient world. Modern banking practices, including fractional reserve banking and the issuing of banknotes, emerged in the 17th and 18th centuries. The banking sector underwent a major transformation during the first half of the 20th century with the First World War, followed by the severe financial crisis of the 1930s. Many technological innovations such as MICR code (magnetic ink character recognition) and ATM (Automated Teller Machine) have expanded the reach of the banking sector. During the second half of the century, intense competition forced the innovation of exotic products such as mortgage-backed securities (MBS)/collateralized debt obligations (CDOs) to be sold to investors which are a type of securitization as well as a form of credit insurance called Credit Default Swap (CDS). The 21st century has undergone immense structural and operational changes. A dominant pressure arises from new technologies regarding information, trade and the provision of financial services. The innovations and financial complexity of recent times make the sector very different from the traditional system of deposits and loans. The first decade of the 21st century also saw the culmination of technical innovation in banking over the past 30 years and saw a major shift from traditional banking to internet banking. The aim of this project is to bring out all the technological nuances in banking products and the risks deriving from those of the modern banking system. Literature Review In 1914 an economist named William A. Scott, director of the commerce course and professor of political economy at the University of Wisconsin, wrote a book on banking entitled "Banking." It is quite noteworthy to keep the concept of cooking in this era as a reference point and compare it with how the modern era has changed this orthodox perception of the industry. According to the book, the terms "bank" and "banking" are applied to institutions and enterprises that differ greatly in character, functions and methods, but which nevertheless have some common characteristics that justify their grouping. We can best prepare the way for a discussion of these differences and common characteristics by describing the services these institutions perform in modern society. Services performed by banks From the point of view of their customers these services can be grouped into the following groups: - Safekeeping of money and other valuables: it is a common practice everywhere and in some countries, especially in the United States, almost a universal practice for people to entrust their money to banks for safekeeping. In a certain sense,hoarding, in the sense of locking money in private safes and other containers and keeping it under the control and personal care of the owner, is still practiced, but is undoubtedly in decline in all civilized countries. . The practice of entrusting banks with the custody of other valuables, such as important documents, jewellery, license plates, etc. is also widespread and growing. Making payments The money custody service naturally leads to the second, making payments. When we entrust our means of payment to a bank, it is natural that we also make it our treasurer and dispenser, and so we do. If we have payments to make to people at home, in other cities in our country, or in other countries, we usually order our bank to carry out the service for us. The Granting of Loans Almost all types of loans are granted by banks, and some types, namely, those to businessmen for the day-to-day conduct of trade and industry, are granted almost exclusively by them. For the most part these are also a major short-term stay location, but in some countries they are not as monopolized by them as the short-term variety. Making Investments For the investment of people's surplus funds, banks are the main agencies. This function primarily takes the form of selling stocks, bonds and mortgages and sometimes promoting new businesses. An article written by Jon Ogden, the director of content marketing at MX Banking Compare at www.MX.com that points out exactly what has changed over the last hundred years. The services Scott outlines are much the same as in modern banking. But the methods for performing each of these services have changed, and as a result, everything has changed. In short, the 20th century was about paper and location, while the 21st century is about data and networks. Bankers should ask themselves whether they are too wedded to 20th century methods in a 21st century world. The implications of the changes in the banking sector are enormous. As evidence, let's look at each of the four services outlined by William Scott in 1914 and how they have changed in 2017. The safekeeping of money and other valuables. The custodial method in the 21st century bears almost no resemblance to traditional methods. Money is mostly made up of a handful of digits over a network, and safekeeping that data doesn't require big, old physical vaults. It only requires secure digital storage, which can be hosted entirely outside of a bank branch. Furthermore, the need for a bank to store “other valuables” is virtually non-existent. 45% of safes are empty and new branches often don't even offer this service. Documents are stored digitally or in a home safe without the monthly expense of a safe deposit box. Young people especially have difficulty understanding the value of this service. Making payments. Something similar is happening with payments. Square Cash, an app that lets users send payments via email or phone, just added the ability to send cash via text message. In other words, what technology writer Walt Mossberg called “the quickest and easiest way I've ever seen to send money from one person to another” just got easier. And with other companies like PayPal, Dwolla, and Venmo at the forefront of this space, payments are sure to be released from banks and credit unions more and more frequently. This point was amplified in an article by Jim Marous earlier this month titled “Google, Apple, Facebook and Amazon should terrorize the banking industry.” The argumentMarous' main point is that bankers are stuck in the traditional mindset and don't realize that tech giants could easily slide into banking through fringe activities like payments. All it will take is for one of these tech giants to gain mass adoption of their payment method (which is increasingly likely to happen as people accept the concept of transferring money via phone) and the revenue of payments at banks and credit unions will dry up. At that point, financial institutions will not only say goodbye to checks, but they will also say goodbye to paying bills. Banks need to anticipate this problem now and look for new solutions. Lending Overall, this banking industry is largely the same as it was in 1914. Credit is certainly still the stronghold of banks. However, as we explained in our post on tech giants and P2P lending, this too could change . With the advent of the Internet it is easier than ever for people to obtain loans with a diverse set of individuals, all without the intermediation of banks. Indeed, the rise of lenders like Prosper, Lending Club, and Fundera is proof that person-to-person lending works, especially as the largest P2P lenders have collectively gone from $1.2 billion to $3. $5 billion in loans outstanding from 2012 to 2013. A trifle compared to the total amounts of loans at banks and credit unions, the growth should be in the banking sector (in addition to the fact that Google invested in Lending Club and the fact that Lending Club announced its IPO). If this trend continues, P2P lending could become a major force within a decade, eating away at financial institutions' profits. Making Investments The popularity of automated investing has started to make active fund managers irrelevant. An article in the Wall Street Journal this week puts it bluntly: “Active fund management is obsolete, and many stock pickers will have to find something else to do for a living.” The article continues: "The debate over whether to hire an 'active' fund manager who tries to beat the market by buying the best stocks and avoiding the worst, or a 'passive' index fund that simply adapts to the market by holding all the actions... it's over." Sooner or later investments will tend towards automation. It's cheaper and, in virtually all cases, the returns are better in the long term. The economic functions of banks Seen from the point of view of the nation rather than that of individuals, the functions of banks can be described as those of intermediaries in the exchange and investment of capital. In the first capacity they provide the world with most of its medium of exchange and serve as distribution agents for that portion of the supply that comes from other sources. They create a medium of exchange through a worldwide accounting process, through which the mutual indebtedness of individuals, cities and other subdivisions of countries and nations, determined by purchases and sales on credit, are compensated. without the use of money. The practice of depositing surplus funds with banks for safekeeping and consequently everyone's dependence on banks for currency in any form, and has therefore thrown upon them the responsibility to directly utilize all sources of money supply. Thus, while the mints of the United States and most other countries mint gold bullion and supply subsidiary silver, copper, and nickel coins to individuals on the same terms as banks, in realityfew private individuals take advantage of this privilege. , finding it more convenient and profitable to obtain the currency they want from banks. The same applies to government notes in countries where such notes constitute a part of the currency. The accumulation of a nation's capital and its investments require the cooperation of numerous entities, of which banks are the main ones. They collect people's savings, combine them into amounts of sufficient size for investment purposes, and invest them temporarily and sometimes permanently. Bodies that cooperate in this work are insurance companies, savings promotion companies of various kinds, stock exchanges, promoters, etc. Some of these replace banks in the provision of these services, while others complement and help them. Classification of banking institutions Banks differ from each other mainly by the nature and degree of specialization, by their legal status and by the place they occupy in the system to which they belong. Some banks devote most of their efforts to dealing with trades and are called commercial banks, others to investment banking and are called investment banks. The most common subclasses under the latter title are savings banks, land or mortgage banks, and bond companies. Savings banks specialize in collecting and investing small savings; land banks are primarily intermediaries between capitalists and people who wish to invest capital in land, construction operations and agriculture; and bond companies are intermediaries between capitalists and those who wish to invest capital in industrial, commercial, and transportation enterprises, or lend it to states, cities, or other public entities. Commercial banks rarely limit themselves exclusively to trade management. Most of them also run savings departments and invest the funds entrusted to them through these departments in agricultural, industrial or public enterprises. Commercial banking, however, is their primary concern, the other departments being secondary matters of greater or lesser importance depending on the circumstances. Investment banks often also perform commercial banking as a secondary matter. These two sectors of activity are sometimes mixed in proportions that make classification difficult. From a legal point of view, banks in almost all countries can be classified as private or unincorporated and incorporated, sometimes also called joint-stock banks. Private banks are started by individuals or companies, like any other private enterprise, without formalities of requesting authorization from some public official and without compliance with a set of rules prescribed by law. They are subject to the laws of the country that regulate all types of private businesses and sometimes to special laws that apply specifically to them. In some US states such banks are prohibited by law. Chartered banks usually arise through private initiative, but they owe their actual legal existence and status to a special law, the requirements of which they must comply with before they can operate. Their right to carry out the business is usually attested by a document known as a charter, signed and delivered by a public official legally endowed with the necessary authority, or approved in the form of law by the legislative bodies of the State. Cards of this last type are called special cards and are rarely used today, except in the case of institutions of a peculiar nature, equipped with special functions. The European central banks owe their existence to such charters, as do the first and second banks of the United States. At the dawn of history,.