What Is the Banking Industry? (With Terms, Trends, and Jobs)
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Banks provide vital access, protection, expertise, and lending of money. The banking industry is long-established, and also changes rapidly, meaning that to get the most of it, it's important to know how it works. Understanding who works in banking, what innovations impact the industry, and why to use banking can help you if you are interested in working in this field or staying up-to-date with its trends.
In this article, we define the banking industry, explain what banking professionals do, describe the types of banks and banking terms and trends, and provide a list of jobs in banking.
What is the banking industry?
The banking industry is the category of businesses, institutions, or organizations which operate as banks, helping individuals and companies store, invest, and manage their money. A bank helps its clients to open accounts for saving or investment purposes. Banking is essential to a functioning economy through the financial resources it offers organizations, families, and individuals. The resources they offer include their ability to give clients loans for starting businesses, purchasing property, or funding education.
What do banking professionals do?
There's a diverse range of professionals who work in banking, each of whom performs specific duties in managing people's money. For instance, those who work as bank tellers assist clients in making withdrawals and deposits, scheduling automatic payments, and opening and closing their accounts. Mortgage consultants are another type of banking professional who assists families or individuals to apply for mortgages so they can afford to buy property. Credit analysts in banks also help clients by analyzing their clients' credit and determining if they're suitable candidates for loans.
Types of banks
Below is a list of the various types of banks for you to review:
Investment banks help mostly larger institutions and corporations in managing their investments. These banking institutions assist their clients by confirming and organizing mergers and acquisitions and assisting other businesses in financing activities which require additional funding. Highly experienced financial analysts usually work in investment banks to guide clients with recommendations for beneficial investment opportunities they can take.
Central banks are the key source of liquid resources on which all institutions within the banking system rely. In most countries, there's a version of a central bank which supports the rest of the nation's banking operations. In Canada, the central bank is The Bank of Canada. This bank formulates the country's monetary policy and promotes safe and reliable financial systems in Canada.
Commercial banks are financial institutions which provide services to their clients, whether they're individuals or businesses in the public. They usually have physical branches in which bank tellers and financial consultants help customers and clients by performing banking tasks. These bank employees manage withdrawals and deposits, coordinate loans and implement protection for personal assets. Banks which operate commercially also help companies in securing business loans to fund their activity.
A community bank typically helps customers and clients in the specific local area in which they operate. Because of this, community banks usually only serve clients from their nearby communities. This means that these banks are commonly significantly smaller than other types of banks. In serving a particular community and directing their service toward its members, community banks offer personalized service in which they establish ongoing relationships with their customers.
Retail banks are similar to commercial banks in that they also offer financial services to the general public. They differ from commercial banks because, unlike those institutions, retail banks don't serve businesses in managing their money, focusing only on individual customers. The services that retail banks offer their clients include protecting their money, making deposits, and providing credit options. Retail banks also coordinate personal loans, open savings and checking accounts, and assist customers in gaining mortgages with which to buy real estate.
Current trends in the banking industry
As with many industries reacting to changes in society and technology, banking experiences trends. A common trend in banking currently is the implementation of online banking, which allows customers to access their accounts and control their finances through their personal computer. A similar trend in the modern industry of banking is the growth of mobile banking, allowing users to access their banking using their personal mobile devices. These trends relate to new technological changes which help the industry simplify, automate, and improve its processes.
Another common trend in banking is the increase in investment banking. This is the process when banking professionals advise their clients on the best ways to invest their funds. With the rapid development of automated banking systems and artificial intelligence, investment banking is gaining popularity because of how accessible the new tools make it. Those involved in investment banking can save the money they may otherwise spend on paying consultants by using investment software, which automates much of the process.
Common banking terms
Here are a few key terms in banking to know:
Savings account: A savings account is an account in which customers can keep money for extended times, and which sometimes limits how many withdrawals they can make within a defined period. Commonly, savings accounts accrue interest over time, which can benefit the clients by increasing their wealth.
Checking account: Checking accounts are those which customers use to make purchases and receive or withdraw money. People typically use checking accounts to pay their bills and receive payments.
Annual percentage rate (APR): An annual percentage rate is how much interest a customer may earn by maintaining a set amount of money in their account for a year. An APR doesn't include compound interest.
Compound interest: This is the interest which banks add to a customer's accounts over time, and helps them to accumulate additional funds. Compound interest commonly applies to savings accounts.
Routing number: Routing numbers are eight-digit values which connect clients with their bank accounts. These number sequences are important for money transfers, wiring funds, and payments customers make using bank accounts directly instead of cash or card payments.
Overdraft fee: Overdraft fees happen when a customer's checking account has insufficient funds to pay for a transaction which has processed. This usually occurs when their account goes into negative balance, which the bank lends up front before charging the client the amount plus a penalty fee.
Jobs in the industry of banking
Here's a list of jobs in banking, along with their average salaries and primary duties:
1. Bank clerk
National average salary: $16.25 per hour
Primary duties: Bank clerks, or tellers, are the primary customer service component of bank branches. They create and keep records of withdrawals, deposits, mortgage and loan payments, security sales, and cheques. These clerks manage most daily transactions which occur in a banking branch in customer-facing interactions. They may also process mortgage and loan payments and applications, contributions to retirement savings plans, and money orders.
National average salary: $46,204 per year
Primary duties: Banking advisors are similar to bank clerks in that they provide customer service to bank branch visitors and often do many of the same administrational tasks like cash handling and management. They differ in that they provide advice to clients on investment and credit options. These advisors hold more responsibility and require greater expertise than that of clerks or tellers.
National average salary: $118,367 per year
Primary duties: Banking consultants provide personal and informed advice to bank customers regarding their accounts and the bank services available to them. They communicate opportunities and risks to their clients, and advise them on their savings account or whether an investment account is a good option for them. Other daily duties include answering client questions and updating them on new account options that become available.
National average salary: $89,450 per year
Primary duties: Private bankers are experienced banking professionals who work in financial or banking institutions and serve clients with high or ultra-high net worths. They offer financial advice and recommendations and manage their customers' financial circumstances. Depending on the province they work in, they may possess a licence, and typically have earned at least a bachelor's degree.
National average salary: $46,714 per year
Primary duties: Branch managers oversee the daily operations of the bank branch they manage, including employees, banking procedures, and enforcing safety protocols. They lead their team of banking professionals and manage the branch's budget. Because their role can also be customer-facing, they also require customer service and interpersonal skills.
Salary figures reflect data listed on Indeed Salaries at time of writing. Salaries may vary depending on the hiring organization and a candidate's experience, academic background, and location. Please note that none of the companies, institutions, or organizations mentioned in this article are affiliated with Indeed.
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