A bank is a financial entity that facilitates the flow of money, be it from one person to another, from a business to another, or among all entities involved in the bank’s network. Banks offer a huge variety of financial products and services.
Banks allow individuals, businesses, and countries to deposit and protect their money. Bank accounts are insured up to a certain amount, so a depositor can always be sure that a certain amount will always be available, even in the event of theft.
It provides depositors with the convenience that would be impossible to have if we were had to keep all of our savings in our pockets and in our homes, where they would be much more susceptible to loss or theft. At the same time, banks give depositors the chance to increase their assets as the balance earns interest over time.
Banks also allow companies to distribute wages in an orderly manner, and with the proper documentation. Companies usually distribute salaries using a payroll system linked to a certain bank. Employees need not line up outside the office of the finance officer at work, as their accounts already contain their salary, which may be easily accessed through a cash machine or with the use of a debit card.
Aside from ensuring that money is kept safe, banks also serve as lending institutions. They can approve and issue loans, which must be repaid with interest. In turn, this interest helps banks make a profit while also helping the money stored in savings accumulate interest. The amount that may be loaned is limited, though, as banks need to keep a portion of their money in reserve. This is to ensure that depositors will always be able to withdraw money whenever necessary.