Banks are not that different from any other businesses. What sets them apart is that they work with money: looking after it, lending it, and helping you pay for things with it.

Looking after your money

Cash is very dangerous to walk around with. It’s fine to walk with small amounts of cash but if you carry huge amounts of cash, its very dangerous and criminals might rob you. So the safest place to put the money in, is a bank.
Really good banks around the world, do not charge you to use your account e.g. safekeep your money. So when you make a deposit into the bank, you are telling the bank to hold the money safe until you need it.

Lending Money

Because banks have many people telling them to hold their money, they can lend it to other people who need the money. A person might want a loan to get a roof for their house, buy a business or get married etc.
Banks lend money. Borrowers people spend the money on the economy, which makes the economy grow. Banks lend this money and get paid interest, which is just another way of saying they make a profit.

Because the bank is lending your money to someone else, the big bank in your country, which is the regulator, and in Zambia, is the Bank of Zambia, makes sure that all banks have sufficient financial resources (money) in case they lend to bad people who can’t afford to repay.

Payments

In the future, people will rely less and less on cash. This is because paying for things in cash, is expensive and keeps poor people, poor.
Banks around the world have to abide by global trends and help people to adapt to new environment. So they provide debit and credit cards to help you pay for things in shops or online.

When you use a card to buy, say, food, the money is transferred from your bank account to the bank account of the shop. Exactly the same thing happens when you pay for things using your debit or credit card online.

If these payments stopped working, then the entire economy would grind to a halt. This is why the Central Bank oversees these payments, to make sure they operate smoothly every day.

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Categories: News

Perseus

Perseus is the founder and CEO of Zazu. He can be reached on perseus@ilovezazu.com

6 Comments

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