Digital

Banking
What is banking? Masterclass

LECTURE
What did we cover in this lecture? SUMMARY

How to define banking and the core concepts

that underpin banking.

• Banking is old. Really old. The Babylonians are

considered to be the first civilization to have
banking - 1,800 B.C Taught by:
Rian Chapman
• Banking can be defined as: a medium for
financial exchange

• The overall business model for banks is focused

on two core activities – receiving deposits and
providing lending.

• Depositors expect interest on their deposits,

which banks provide by charging interest and
fees on lending.

• Banks make their profit through the

difference between the interest they charge
borrowers and what they pay depositors –
known as interest margin. In addition, they
also charge fees.

• There are 3 high level banking business

models: Retail banks, Commercial banks and
Investment banks.

• Banks can focus on one model or they might

operate all models.

• Liquidity is important for banks – the ability

to repay depositors should the need arise

Next page!
 Digital
Banking
What is banking? Masterclass

LECTURE
SUMMARY

• Banks are important for a few reasons:

• They empower individual and family wealth Taught by:

and happiness (for example home Rian Chapman
purchases, stocks, investments)

• They enable businesses to start and grow

• They are essential for the payments eco-

system

• Banks actually make money – borrowers will

use lending to spend, and this spending results
in the income multiplier effect

See you next lecture!